THE SHORT-TERM RELATIONSHIP BETWEEN CREDIT POLICIES AND AGRICULTURAL DEVELOPMENT IN NIGERIA

The purpose of study is to analyze credit policies on agricultural production in Nigeria. Ex-post facto research method was used to explore the relationship between credit policies and agricultural production in Nigeria. The data used was sourced from Central Bank of Nigeria Statistical Bulletin and other secondary sources from 1980 to 2022. The study employs Augmented Dickey-Fuller unit root (ADF), Johansen co-integration test and Vector Error Correction Model (ECM) as method of data analysis. The study reveals that the error correction term (CointEq1) plays a vital role in system dynamics, with a coefficient of -0.6462, a standard error of 0.1816, and a highly significant t-statistic of -6.3559. This indicates that deviations from the long-run equilibrium are corrected at a speed of -0.6462 units per period, underscoring a robust mechanism for achieving equilibrium over time. In the short-run error correction model, the lagged first differences of key variables exhibit varied impacts on their current values: a one-unit increase in Agricultural Production (AGP) results in a 0.2125 unit rise in current AGP, while the same increase in Bank Credit (BNK) causes a 0.0716 unit decline. For Credit by Government (CGV), a one-unit increase leads to a 0.7199 unit decrease, though this is statistically insignificant due to a high standard error. Conversely, a one-unit increase in Agricultural Credit Guarantee Scheme Fund (AGF) contributes to a 0.5904 unit rise, and for Interest Rate (INT), a similar increase results in a 0.1535 unit growth. These findings highlight the intricate balance of short-term adjustments and long-term equilibrium within the system. It was concluded that the dynamic interplay between financial support mechanisms and agricultural output, offers evidence for informed policy formulation and implementation to enhance agricultural productivity and short-term sectoral development. It was recommended among others that the negative short-run relationship between Bank Credit and current agricultural production indicates potential inefficiencies in how bank credit is utilized in the sector. Banks should reassess their lending conditions, tailoring them to meet farmers' needs effectively