Impulse Response analysis, Agricultural Financing and Economic Growth in Nigeria

Abstract

The study examined the impulse response analysis of the effects of agricultural financing on economic growth in Nigeria from 1981 to 2020, using time series data on Economic growth rate, Deposit Money Banks loans to agriculture, Government capital and recurrent expenditure, Bank of Agriculture loans, and interest rate on agriculture loan obtained from the Central Bank of Nigeria statistical Bulletin and Annual Reports, National Bureau of Statistics, and Bank of Agriculture. The methodology adopted in the study is the ARDL Bounds Cointegration Approach based on the fact that the variables were not all stationary at same order of integration. The findings revealed that given the major challenges facing the agricultural sector in Nigeria such as inadequate funding, economic growth was positively affected by Deposit Money Banks Loans and advances to Agriculture, Bank of Agriculture Loans, and Federal Government Agricultural Finance but negatively affected by Interest Rate on Agricultural Loans during the period under investigation. The study recommended that since the Federal Government Agricultural Expenditure positively affects agriculture, the federal government should initiate policies towards revolutionizing agriculture to make it more productive by investing more on agriculture and concluded that considering the fact that agricultural funding variables were found to impact positively on economic growth in Nigeria during the period under investigation, adequate agricultural funding is essential for economic growth in the Nigerian economy.