Journal of Finance and Accounting
ISSN (Print): 2333-8849 ISSN (Online): 2333-8857 Website: http://www.sciepub.com/journal/jfa Editor-in-chief: Apply for this position
Open Access
Journal Browser
Go
Journal of Finance and Accounting. 2016, 4(1), 1-10
DOI: 10.12691/jfa-4-1-1
Open AccessArticle

The Effect of Commercial Banks’ Credit on Agricultural Production in Nigeria

Chris O Udoka1, , Prof. D. O Mbat1 and Stephen B. Duke1

1Department of Banking and Finance, Faculty of Management Sciences, University of Calabar, Calabar, Nigeria

Pub. Date: October 14, 2016

Cite this paper:
Chris O Udoka, Prof. D. O Mbat and Stephen B. Duke. The Effect of Commercial Banks’ Credit on Agricultural Production in Nigeria. Journal of Finance and Accounting. 2016; 4(1):1-10. doi: 10.12691/jfa-4-1-1

Abstract

This study examined the effect of commercial banks’ credit on agricultural output in Nigeria. Four research hypotheses were formulated to guide and direct the study. The ex-post facto research design was adopted for the study. Data for the study were collected from published articles and the Central Bank of Nigeria Statistical bulletin. To estimate the specified equation, the ordinary least squares regression technique was employed. Based on the results obtained, the following result arose; the estimated results showed that there was a positive and significant relationship between agricultural credit guarantee scheme fund and agricultural production in Nigeria. This means that an increase in agricultural credit guarantee scheme fund could lead to an increase in agricultural production in Nigeria; there was a positive and significant relationship between commercial banks credit to the agricultural sector and agricultural production in Nigeria. This result signified that an increase in commercial banks credit to agricultural sector led to an increase in agricultural production in Nigeria. Again, there was a positive and significant relationship between government expenditure on agriculture and agricultural production in Nigeria and a negative relationship between interest rate and agricultural output also confirmed theoretical postulations. This is because an increase in the rate of interest charged farmers for funds borrowed discouraged many farmers from borrowing and thus less agricultural investment. The study recommended that the positive effect of agricultural credit guarantee scheme fund on agricultural production called for the proper funding of the scheme by the government. To this end, there was the need for the government to continue to guarantee loans lent to farmers as this would encourage the banks to lend more to farmers.

Keywords:
commercial bank credit agricultural sector agricultural production interest rate

Creative CommonsThis work is licensed under a Creative Commons Attribution 4.0 International License. To view a copy of this license, visit http://creativecommons.org/licenses/by/4.0/

References:

[1]  Abayomi, F. (2006). An overview of Nigerian agricultural sectors. Journal of Agricultural Economics, 8 (3): 7-16.
 
[2]  Acaravci, A., I. Ozturk, S. K. Acaravci (2007). Finance-growth nexus: Evidence from Turkey. International Research Journal of Finance and Economics, 11:30-40.
 
[3]  Afangideh, U. J (2006). Financial development and agricultural investment in Nigeria: Historical simulation approach. Journal of Economic and Monetary Integration, (l)9:75-97.
 
[4]  Aigbokhan, B. E. (2001). Resuscitating agricultural production for export. Proceedings of the 10th Annual Conference of the Central Bank of Nigeria’s Zonal Research Units.
 
[5]  Ajaiyi,S. & Ojo, O. (2006). Money and banking: Analysis and policy in the Nigerian context. Ibadan: Daily Graphics Nigeria Ltd.
 
[6]  Anderson, J. (1990). Does regulation improve small farmers? Access to Brazilian rural credit. Journal of Development Economics, 33:67-87.
 
[7]  Anthony, E. (2010). Agricultural credit and economic growth in Nigeria: An empirical analysis. Business and Economics Journal, 14:1-7.
 
[8]  Asabia, S.O. (1981). Financing institutions and agricultural finance: The role of commercial banks. Proceedings of a Seminar on Agricultural Credit and Finance, Problems and Prospects. Organised by Central Bank of Nigeria, 27-30 April, 403.
 
[9]  Beck, T. & Levine, R. (2004). Stock markets, banks and growth: Panel evidence. Journal of Banking and Finance, 28:423-442.
 
[10]  Beck, T., Demirguc – Kunt, A. & Levine R. (2000). A new database on financial development and structure.World Bank Economic Review, 14 (3):597-605.
 
[11]  Cameron, R. (1961). France and economic development in Europe. Princeton University Press, Princeton.
 
[12]  Central Bank of Nigeria (CBN) (2005). Agricultural development issues of sustainability. Contemporary Economic Policy in Nigeria, Central Bank of Nigeria 2003, 185-213.
 
[13]  Child, M. N. (2008). The effect of a depressed economy on agricultural sector. Journal of African Studies, 3 (2): 152-167.
 
[14]  Chimobi, O. P. (2010). The causal relationship among financial development, trade openness and economic growth in Nigeria. International Journal of Economics and Finance, 2(2):137-147.
 
[15]  Christopolulos, D. & Tsionas E. (2004). Financial development and economic growth: Evidence from panel unit root and co-integration test. Journal of Development economics, 73:55-74.
 
[16]  Cooray, A. (2008). The Financial Sector and Economic Growth. Economic Record Supplementary, 85:10-21.
 
[17]  Das A., Jenapati M. & John J. (2009). Impact of agricultural credit on agriculture production: An empirical analysis in India. Occasional Papers, 30(2): 75-107.
 
[18]  Dişbudak, C. (2010). Financial development and economic growth in Turkey. European Journal of Economics, Finance and Administrative Sciences, 23: 34-51.
 
[19]  Ekpenyong, D. B. & Acha, I. A. (2011). Banks and Economic Growth in Nigeria, European Journal of Business and Management, 3(4): 155-166.
 
[20]  Enoma A. (2001). Long run agricultural growth in Nigeria: An empirical analysis. Journal of Policy issues, 3 (7): 12-20.
 
[21]  Enya, V. & Alimba, J. (2008). Analysis of factors affecting the supply of commercial banks credit to the agricultural sector in Nigeria. Continental Journal of Agricultural Economics, 2: 74-77.
 
[22]  Favara, G. (2007). An empirical reassessment of the relationship between finance and growth. IMF Working Paper No: 123.
 
[23]  Hassan A. & Islam, M. (2005). Temporal causality and dynamics of financial development, trade openness and economic growth in vector auto regression (VAR) for Bangladesh, 1974-2003: Implication for poverty reduction. The Journal of Nepalese Business Studies 2(1): 1-12.
 
[24]  IPD (Initiative for Policy Dialogue), (2004). Report on Nigeria country dialogue. Notes by Rashid, H.; contributions by Limonic, L. and Spiegel, S., 6-10 May.
 
[25]  Ivie, M. (2008). Credit marikets and economic growth in the United States. Summer 2008 Internship Project Report, Department of Eoonomics, Andrew Young School of Policy Studies, Georgia State University.
 
[26]  Jingan, M. L. (2004). Monetary Economics. Delhi: Vrinda Publications Ltd.
 
[27]  Kar M. & Pentecost, E.J. (2000). Financial development and economic growth in Turkey: Further evidence on the causality issue. Loughborough University, Economic Research Paper No. 27.
 
[28]  Katiricioglu, S. T., Kahyalar N. & Benar, H. (2007). Financial development, trade and growth triangle: the case of India. International Journal of Social Economics 34(9): 586-598.
 
[29]  Levine, R. (1997). Financial development and economic growth: Views and agenda. Journal of Economic Literature, 35: 688-726.
 
[30]  Levine, R. (2004). Financial and growth: Theory and evidence. Carlson School of Management, University of Minnesota and the NBER. Prepared for the Handbook of Economic Growth.
 
[31]  Levine, R., Loayza, N. & Beck, T. (2000). Financial intermediation and economic growth: Causes and causality. Journal of Monetary Economics, 46:1-77.
 
[32]  Loayza, N. & RANCIÈRE, R. (2006) Financial development, financial fragility, and growth. Journal of Money Credit and Banking, 38:1051-1076.
 
[33]  Longe, J. B. (2008). Economics of agricultural production in Nigeria. Journal of Policy Issues, 1 (2): 2-10.
 
[34]  McKinnon, R. I., (1973). Money and capital in economic development. Washington, D. C.: Brookings Institution.
 
[35]  Mishra, P. K., Das, B. & Pradhan, B. B. (2009). Empirical evidence on India Stock market Efficiency in Contact of the global financial crisis. Global Journal of finance and Management, 1(2):149-157.
 
[36]  Nwanyanwu, O.J. (2010). An analysis of bank credit on the Nigeria economic growth (1992-2008). Jos Journal of Economics, 4: 43-58.
 
[37]  Okwocha, V., Asogwa, B. & Obinne, P. (2012). Evaluation of agricultural credit utilization by cooperative farmers in Benue State of Nigeria” European Journal of Economics, finance and Administrative sciences, 47:123-133.
 
[38]  Olaitan, M.A. (2006). Finance for small and medium enterprises: Nigeria’s agricultural credit guarantee scheme fund. Journal of International Farm Management, 3(2), 1-9.
 
[39]  Olowa, O. & Olowa, o. (2011). Issues, problems and policies in agricultural credit: A review of agricultural credit in Nigeria. Bangladesh e-Journal of Sociology. 8(2):87-108.
 
[40]  Patrick, H. T. (1966). Financial development and economic growth in underdeveloped countries. Economic Development and Cultural Change,14: 174-189.
 
[41]  Raham, M. W., Ahamed, M. R. & Sarwer, R. H. (2011). An investment of ground water irrigation and command and area management issues in Bangladesh. Journal of Knowledge Globalization, 4 (1). 93-114.
 
[42]  Rahman, J. & Sheereen, Z. (2011). Trends and composition of institutional credit to the agriculture sector during the post – perform period in India. African Journal of Business Management, 5(27):112-145.
 
[43]  Rahman, M. J. & Cheng, E. (2011). Policies and performances of agricultural / rural credit in Bangladesh: What is the influence on agricultural production. African journal of Agricultural Research, 6(31): 6440-6452.
 
[44]  Rahman, S. A. (2008). Woman’s involvement in agriculture in Northern and Southern Kaduna State. Journal of Gender Studies, 17: 17-26.
 
[45]  Ross, M. (2003). Nigeria’s oil sector and their paper prepared for the UK Dfid’s Nigeria: Rivers of Change Programe” Available at htt://wwwPolicy Ucla.edu/faculty/ross/Nigeria oil.pdf..
 
[46]  Saci, K., Giorgioni, G. Holden, K. (2009). Does financial development affect growth? Applied Economics, 41(13):1-19.
 
[47]  Saleem, M. A. J. A. Jan FA (2011). The impact of Agricultural credit on Agricultural productivity in Dera ismail Khan (District) Khyber Pakhtonkhawa Pakistan. European Journal of Business and Social Sciences, 2(13): 279-284.
 
[48]  Sanusi, L. S. (2010). Growth prospects for the Nigerian economy. convocation lecturre delivered at the Igbinedion University Eighth convocation ceremony, Okadou, Edo State, November 26, 2010.
 
[49]  Schumpeter, J. A. (1911). The theory of economic development. Cambridge, Mass: Harvard University Press.
 
[50]  Shaw, E. S. (1973). Financial deepening and economic development. New York: Oxford University Press.
 
[51]  Shaw, E. S. (1983). Finance and growth the case of Macau. Monetary Authority of Macau.
 
[52]  Siddiqi, M. W., Mazhar-ul, H., & Baluch, K. N. (2004). Institutional credit: A policy tool for enhancement of agricultural income of Pakistan. International Research Journal of Arts & Humanities, 37: 158-174.
 
[53]  Soukhakian .B (2007). Financial development, trade openness and economic growth in Japan: Evidence from granger causality tests. International Journal of Economic Perspectives, 1(3): 118-127.
 
[54]  Stightz, J. & Weiss, A. (1981). Credit rationing in markets with imperfect information. American Economic Review, 71: 395-410.
 
[55]  Udoka, C.O (2015). Bank loan and advances: Antidote for restructuring the agricultural sector in Nigeria. Internal Journal of Business Studies and Management 2 (3), 9-15.
 
[56]  Uniamikogbo, S. O., & Enoma, A. L. (2001). The impact of monetary policy on manufacturing sector in Nigeria: An empirical analysis. The Nigerian Journal of economic and Financial Review, 3 (2): 37-45.
 
[57]  Uniemikogbo, S. I. (2007). Industrial performance and the nigerian economy. 11th Inaugural lecture series, Ambrose Ali University.
 
[58]  Vazakidis, A. & Adamopoulos, A. (2009). The effect of stock and credit market development on economic growth an empirical analysis for Italy. International Research Journal of Finance and Economics, 41:33-42.
 
[59]  Yesufu, O.A. & Yesufu, T. K. (2006). Organic page information for international trade and finance. To appear In: Peltzer, L (ed.) (2006): New Developments in Macroeconomics Research, Nova Science Publishers, Inc., 101-121.
 
[60]  Yucel, F. (2009). Causal relationships between financial development, trade openness and economic growth: The case of Turkey. Journal of Social Sciences, 5(1), 33-42.
 
[61]  Zuberi, H. A. (1989). Production function, institutional credit and agricultural development ion Pakistan. The Pakistan Development Review. 28(11), 43-56.