Effect of Public and Private Financing on Agricultural Output in Nigeria

Abstract

This paper evaluated the effect of public and private financing on agricultural output in Nigeria. Data were collected from the CBN Statistical Bulletin and the World Development Indicator. The period of study spanned from 1981 to 2020. In the study, Agricultural output was proxied by agriculture’s ratio to GDP, public financing was proxied by Agricultural Credit Guarantee Scheme Fund and Federal Government’s budgetary share to the agricultural sector (Recurrent Expenditure) while private financing was proxied by loans disbursed to agriculture by commercial banks. To analyse the objectives, Auto Regressive Distributed Lags Bounds Test was used to test for the long run relationship while Error Correction Method was used to analyse the short-term association. Granger Causality was used to check the causal correlation between agricultural financing and agricultural output. The results showed that loans granted to agriculture by commercial banks and Agricultural Credit Guarantee Scheme Fund had a positive and significant influence on agricultural output while agricultural output can be said to granger cause government expenditure on agriculture. Therefore, the study concluded that public and private financing had a significant effect on agricultural output. From the findings recorded, recommendations were made for the government to boost its budgetary allocation to agriculture and make policies to bolster the agricultural credit guarantee scheme while encouraging private sector/ commercial bank lending to the agricultural sector.