Interest Rate Dynamics and Agricultural Sector Output in Nigeria: Evidence from 1993 to 2023

This study examines the dynamic relationship between interest rate fluctuations and agricultural sector output in Nigeria over the period 1993 to 2023. Given the significance of agriculture to Nigeria’s GDP, employment, and food security, understanding how monetary policy instruments like interest rate impact agricultural productivity is essential. The study employs time series econometric techniques, including Augmented Dickey-Fuller (ADF) tests for stationarity, Johansen cointegration tests for long-run relationships, and Error Correction Models (ECM) to assess short-run dynamics. The findings indicate that interest rates exert a statistically significant negative influence on agricultural output in both the short and long run. High lending rates appear to deter investment in agriculture, limiting access to capital for inputs, technology, and expansion. The study recommends targeted interest rate subsidies and enhanced credit access for smallholder farmers to foster inclusive growth in the agricultural sector.