THE IMPACT OF INSTITUTIONAL CREDIT ON AGRICULTURAL SECTOR OUTPUT IN NIGERIA: AN APPLICATION OF THE BOUND TEST APPROACH

Abstract

This study examines the impact of institutional credit on agricultural sector output in Nigeria. The investigation utilised time series data from 1986 to 2023, sourced from the Central Bank of Nigeria Statistical Bulletin and National Bureau of Statistics to affirm or reject the assertion that institutional credit can be used as part of concerted efforts aimed at increasing agricultural sector output in Nigeria. It was found that the variables for this study namely, agricultural sector output, commercial bank credit to agriculture, agricultural credit guarantee scheme fund, lending interest rate, and agricultural training expenditure had mixed order of integration, which informed the use of ARDL Bound Test Approach that is suitable for mixed order of integration I(1) and I(0) series. The investigation revealed that institutional credit is not significant to the growth of agricultural sector output (% contribution to GDP) in Nigeria. However, agricultural training expenditure had significant positive impact on agricultural sector output (% contribution to GDP) in Nigeria within the study period. The study therefore recommended the adoption of Agricultural Value Chain Finance (AVCF) that incorporates financial literacy training, savings, budgeting and cash flow management to help minimise default risk and improve the quality of agricultural loan portfolios at affordable rate.