IIARD International Institute of Academic Research and Development

IIARD INTERNATIONAL JOURNAL OF BANKING AND FINANCE RESEARCH (IJBFR )

E-ISSN 2695-1886
P-ISSN 2672-4979
VOL. 11 NO. 1 2025
DOI: 10.56201/ijbfr.vol.11.no1.2025.pg43.57

---

Effect of Deposit Money Banks Credit on Agricultural Output in Nigeria: An empirical Analysis

NYECHE, Ezebunwo PhD, CHINDA, Chidum Chibueze PhD

---

Abstract

This study investigated the relationship between deposit money banks credit and agricultural output in Nigeria from 1981 to 2023, using time series data from the CBN Statistical Bulletin. The dependent variable was agricultural output, while independent variables included credit to the agricultural sector (CAS), the Agricultural Credit Guarantee Fund Scheme (ACGFS), and interest rate (ITR). Data analysis techniques employed included descriptive statistics, unit root tests, bounds cointegration, the Autoregressive Distributed Lag (ARDL) estimation method, and residual diagnostic tests. The Augmented Dickey-Fuller (ADF) unit root tests revealed a mix of I(1) and I(0) series, indicating varying levels of integration among the variables. Evidence of cointegration found suggested a long-term equilibrium relationship among the variables. The ARDL results showed that deposit money banks' credits to agriculture had a positive but statistically insignificant effect on agricultural output, implying that increased credits do not significantly boost output. Interest rates had a negative yet statistically insignificant effect on agricultural output, suggesting that higher rates do not significantly reduce output. Additionally, the Agricultural Credit Guarantee Fund Scheme had a positive long-run relationship with agricultural output, though this effect is statistically insignificant, indicating that increases in the scheme do not significantly enhance output. Given these findings, this study concludes that deposit money banks' credits to the agricultural sector affects agricultural output in Nigeria. Recommendations include optimizing the allocation of existing credits by targeting high-potential agricultural value chains, promoting farmer cooperatives, and implementing smart subsidy programs to enhance credit utilization efficiency.

keywords:

Agricultural Sector Credit, Agricultural Credit Guarantee Fund Scheme, Interest

---

References:

Adegbite, O., & Alabi, M. (2021). Agricultural credit and its impact on productivity in

Nigeria: A sectoral approach. Journal of Development Finance, 19(3), 45-63.
Adegboye, A. (2018). Interest rate and agricultural output: An empirical analysis of Nigeria.

Journal of Financial Management, 12(3), 45-57.
Akanbi, S. O., & Olaniyan, A. O. (2023). Interest rates, foreign capital inflows, and

agricultural: Evidence from developing economies. Applied Economics Research,

32(2), 122-138.
Bagehot, W. (1873). Lombard Street: A description of the money market. Henry S. King and

Co.
Blanchard, O. (2020). Macroeconomics (8th ed.). Pearson.
Eboh, E., & Onwumere, J. (2016). Agricultural credit guarantee scheme: An evaluation of its

impact on agricultural growth in Nigeria. Journal of Development Finance, 9(1), 75-
Ekeocha, I., Nwaogu, U., & Chukwuma, J. (2023). Credit guarantees and agricultural

productivity: Lessons from Nigeria’s agricultural credit guarantee scheme. African

Journal of Economic Policy, 17(1), 78-95.
Falola, A., Olayiwola, O., & Ogundipe, A. (2021). The effectiveness of monetary policy on

agriculture: Long-run evidence from West Africa. Journal of African Agricultural

Studies, 15(4), 33-47.
Ibrahim, M. (2022). The impact of monetary tightening on sectoral outputs: Insights from

Nigeria’s agricultural sector. African Review of Economics and Finance, 13(2), 111-
Kareem, O., Arigbede, Y., & Akinrinde, A. (2021). Agricultural financing and economic

growth: Evidence from Nigeria. African Journal of Economic Studies, 14(2), 123-140.
Levine, R. (2005). Finance and growth: Theory and evidence. In P. Aghion & S. N. Durlauf

(Eds.), Handbook of economic growth (Vol. 1, pp. 865-934). Elsevier.
Mankiw, N. G. (2016). Principles of economics (7th ed.). Cengage Learning.
Olagunju, A. (2019). Deposit money banks, agricultural finance, and productivity in Nigeria.

Nigerian Journal of Economic Research, 23(1), 101-120.
Olayide, S., & Heady, E. (2020). Agricultural development in Nigeria: Challenges and

prospects. African Development Review, 28(4), 455-467.
Oluwatayo, I. B., & Olaniyan, F. (2022). Long-run effects of agricultural financing on output:

A regional analysis of Nigeria’s agricultural sector. Agricultural Finance Review,

82(3), 287-306.
Osuji, E., & Chigbu, I. (2019). The dynamics of agricultural credit in Nigeria: Challenges and

opportunities. Journal of Banking and Finance, 34(3), 72-85.
Oye, A., & Ajiboye, T. (2022). Lagging agricultural performance and its impact on output:

Evidence from developing economies. Journal of Agricultural Economics and Policy,

25(2), 56-70.

Uzunwanne, et al, (2015). Deposit Money Banks and Financing of Small and Medium Scale
Enterprises in Nigeria. Journal of Economics and Sustainable Development. Vol.6,
No.8, 2015, 185. Http/www.iiste.org



Udoka et el., (2016). The Effect of Commercial Banks’ Credit on Agricultural Production in
Nigeria Journal of Finance and Accounting, Vol. 4, No. 1, 2016, pp 1-10. doi:
10.12691/jfa-4-1-1 | Research Article. http://pubs.sciepub.com/jfa/4/1/1.
Okafor, C. A., (2020). Commercial banks credit and agricultural development in Nigeria. The
impact of commercial banks credit on agricultural development in Nigeria.
International Journal of Business & Law Research 8(3). Www.seahipaj.org
Onuegbu et el., (2022). Deposit Money Bank Credit and Agricultural Output in Nigeria.
International Journal of Innovative Finance and Economics Research 10(1):49-67,
www.seahipaj.org
Ekine & Onukwuru, (2018). Deposit money bank credit and Agricultural sector performance
in
Nigeria.
Greener
Journal
of
Agricultural
Sciences
Vol.
8
(3).
http://doi.org/10.15580/GJAS.2018.3.031218042
Agunuwa, et al, (2015). Impact of commercial banks’ credit on agricultural productivity in
Nigeria (Time Series Analysis 1980 - 2013). International Journal of Academic
Research in Business and Social Sciences, 5(11)
Adeola & Ikpesu., (2016). The empirical investigation of the impact of deposit money bank
credit on agricultural output in Nigeria. The Journal of Developing Areas, College
of Business, Tennessee State University.Vol. 50, No. 6, (2016), pp. 89-103
George-Anokwuru., (2018). Deposit Money Banks’ Credit and Agricultural Output in Nigeria.
Journal of Economics and Management Sciences.

DOWNLOAD PDF

---

Back