Central Bank of Nigeria agricultural finance options and food Security in Nigeria

Abstract

This study investigated selected agricultural finance options by the central bank of Nigeria using the Agricultural Loan Guarantee Scheme Fund, Commercial Bank Loans, and Interest Rates on Nigeria's agricultural production spanning the period from 1981 to 2020, utilizing the ARDL methodology. The primary challenge faced by the agricultural sector in Nigeria, is the lack of adequate funding. Many farmers are unable to provide collateral for loans and struggle to meet the stringent requirements associated with bank loans. Consequently, farmers often steer clear of these formal institutions and seek credit from sources with high-interest rates. The study's findings indicate that, in the long run, the Agricultural Loan Guarantee Fund, commercial bank loans, and interest rates all have a positive impact on agricultural production in Nigeria. Notably, the study also reveals that agricultural loan guarantees and commercial bank loans exert a robust positive influence on short-term agricultural production. Therefore, increasing the availability of these funding sources to farmers could substantially boost agricultural production in Nigeria. Furthermore, the study uncovers that higher interest rates have a negative and significant effect on agricultural production, implying that an interest rate hike hampers agricultural development.