ABSTRACT

The study examined agricultural credit and the effect on agricultural output' in Nigeria (1978- 2013). To achieve the stated objectives of the study, secondary data were collected in form of annual time series data. The analytical techniques employed were Granger causality test, twostage least square (2SLS) and ordinary least square (OLS). The time series properties of the variables were examined with Augmented Dickey-Fuller (ADF) unit root test. Test of simultaneity and identification pçocedure were also conducted. The results show a unidirectional causal relationship that runs from total agricultural credit to agricultural output on one hand and unidirectional causal relationship that runs from total agricultural credit to government capital expenditure on agriculture. The disaggregated credits results show the same unidirectional causality. The result shows that the coefficients of estimated lending rate is significant and negative but the coefficients of agricultural investment and expected income are significant and positive in explaining agricultural credit demand. The result shows that the coefficients of estimated lending rate and total deposit are significant and positive in explaining agricultural credit supply while economic activity is not significant but positive. The result show that the coefficients of agricultural foreign direct investment, and total agricultural 'credit supplied, are significant and positive in explaining agricultural gross domestic 'product. The coefficients of government capital expenditure on agriculture, is significant and negative in explaining agricultural gross domestic product. The results show that the agricultural output-credit regressions for the two periods (pre SAP/SAP and post SAP) are different. The result shows that the coefficients of agricultural foreign direct investment, agricultural credit supplied by specialized banks, agricultural credit supplied by universal banks, are positive but agricultural credit supplied by specialized banks, and agricultural credit supplied by universal banks are significant and positive in explaining agricultural gross domestic produ'ct. The coefficient of government capital expenditure on agricultural is significant and negative in explaining agricultural gross domestic product. The results show' that the agricultural output-credit regressions for the two periods (pre SAP/SAP and post SAP) are different. However, it is recommended among others that government should discourage her type of spending that crowd out private investment in agriculture and support private investment through her policies and programmes. In conclusion, the' study has showed that provision of agriculture credit is an alternative financing source for agricultural sector in Nigeria. However, the increasing supply of agricultural credit does not translate to the increasing agricultural output that will maximize the sector's contribution to the overall economy in Nigeria as ,a result of the fact that supply of agricultural credit is crowded out by government agricultural spending.