Essays on Agricultural Finance, Financial Development, and Economic Growth in Nigeria

Abstract

This study examines essays on agricultural finance, financial development and growth in Nigeria. It focuses on investigating the individual and joint effects of agriculture finance and financial development indicators on growth. Also, the research computed the threshold of agricultural finance at which financial development indicators optimizes inclusive growth in Nigeria. To achieve these research objectives, we adopted both the Endogenous growth and Solow-Swan theoretical foundation; and employed the Autoregressive Distributed Lag (ARDL) and Quantile Autoregressive Distributed Lag (QARDL) techniques. The study utilized time series data from the Central Bank of Nigeria (CBN) Statistical Bulletin and World Bank World Development Indicators (WDI) covering 1980 to 2022. The results reveals that agriculture finance exerted significant negative impact on economic growth in the short-run; however, the long-run impact of agriculture finance on economic growth is positive. Also, it was observed from that financial development indicators (bank deposit, credit to private sector and market capitalization) have positive impact on economic growth. Although, bank deposits exerted negative impact on agricultural output growth, credit to private sector and market capitalization impacted positively on agricultural output growth. Furthermore, it was observed from the QARDL results that positive links exist between agriculture finance, financial development indicators and inclusive growth in the short-run. Also, the interactive effects of agriculture finance and financial development indicators on inclusive growth were positive in the short and long-run periods. Lastly, the threshold effects of agricultural finance suggest an optimal level that maximizes inclusive growth, indicating policymakers should consider an 11% to 14% allocation of GDP per employed person to the agricultural sector. Therefore, the study recommends as key access to agricultural credit, as well as ensuring proper monitoring to boost growth in Nigeria. Importantly, credit to the agricultural sector should be kept within the established threshold level, since agricultural finance might exert some adverse effects on inclusive growth when it exceeds the established threshold levels.