ABSTRACT

The study evaluates credit policies and their effect on agricultural production in Nigeria from 1970 to i003. It relied on aggregate secondary data which were analyzed by the use of descriptive statistics and econometric methods. The result revealed that loans granted for sub sector of agriculture (crops, livestock and fishery) witnessed a fluctuating and a declining trend, both in nominal and real terms. It also revealed that more funds were allocated for crop production. The decline and fluctuation in funding suggested inadequate formal funding of agricultural sub sector. The determinants of agricultural credit supply from financial institutions were the size of rural savings mobilized the lending rate to agriculture, the level of credit guaranteed and reserve requirement. While rural savings mobilized and lending rate had a positive relationship, the level of credit guaranteed and the reserve requirement had a negative relationship with credit supply at 1% level of significance. The negative relationship of total level of credit guaranteed may be explained by the high default rate of even the credit guaranteed. The determinants of aggregate agricultural output were the credit supply to agriculture, real capital expenditure oil agriculture, weather condition, real exchange rate on agriculture, lending rate to agriculture, composite producer price for agriculture, relative income of agriculture to manufacturing an output lagged. The composite produce price to agriculture, real exchange rate to agriculture and output lagged have relationship at 1.0% level of significance, the credit supply to agriculture has a negative relationship at 5.0% level of significance with the aggregate agricultural output. The determinants of crop output were the credit supply to agriculture, total area of crop cultivated, real capital expenditure on agriculture, weather condition, real exchange rate on agriculture, lending rate to agriculture, composite producer price for crops, relative income of crop to manufacturing and output lagged. The composite producer price to crop, real exchange rate to agriculture and output lagged have a positive relationship at 1.0% level of significance and the credit supply to agriculture had a negative relationship at 1.0% level of significance with the crop output. The determinants of livestock output were the credit supply to agriculture, real capital expenditure on agriculture, weather condition, real exchange on agriculture, lending rate to agriculture, composite producer price for livestock, relative income of livestock to manufacturing and output lagged. The weather condition, lending rate to agriculture, relative income of livestock to manufacturing, credit supply o agriculture and output lagged had a positive relationship at 1.0% and 10.0% level cf significance with the livestock output. The determinants of fish output were the credit supply to agriculture, real capital expenditure on agriculture, weather condition, real exchange rate on agriculture, lending rate to agriculture, composite producer price for fish to manufacturing and output lagged. The credit supply to agriculture and output lagged had a positive relationship at 1.0% level of significance with fish output. It is therefore recommended that policy measures which will ensure sustained increase in the supply of agricultural credit should be employed, credit policies which will promote desirable financial technologies that will serve both the interest of farmers and institutional lenders should be adopted for sustainable agricultural growth, credit policie3 must be accompanied by economic policies guiding agricultural development. They are; the exchange rate policies.