ANALYSIS OF THE IMPACT OF BANK CREDIT ON THE GROWTH OF AGRICULTURALAND MANUFACTUR ING SECTORS IN NIGERIA

AIGBOMIAN EUNICE EFE, MAMUDU ZEBEDEE UDO

Abstract


Sustainable growth in any developing economy must not undermine the manufacturing and agricultural sectors. In the light of this, the study focused on the empirical analysis of bank credit to the growth of the agricultural and manufacturing sectors in Nigeria. Annual time series data were collected for a period of 36 years from various issues of the Central Bank of Nigeria Statistical Bulletin and Transparency International Worldwide. The series were tested for stationarity with the Augmented Dickey-Fuller unit root test, the Johansen co-integration test were employed to examine the long-run relationship among the selected variables. Error Correction Models were specified and estimated to determine the speed of adjustment in the short run. The empirical analysis revealed that all the selected indicators were stationary at first difference. The Johansen cointegration test revealed that there was a long-run relationship between bank credits, manufacturing output, agricultural output, total government expenditure on agriculture and manufacturing sector, interest rate, exchange rate, crude oil and corruption index. Based on the ECM result obtained, manufacturing credits from deposit money banks and total government expenditure on the manufacturing sector had direct and significant impact on manufacturing sector output in the short-run. Corruption index negatively relates with manufacturing sector in the short run. It was inferred from the ECM result that bank credits and other selected indicators were able to explain 70.85% of the systematic variations in manufacturing output in the short-run. In the short-run also, agricultural credit from deposit money banks and total government expenditure on agriculture had direct and significant impact on agricultural output in Nigeria. Corruption index was also found to have negative impact on agricultural output in the short run 89.38% of the systematic variations of agricultural output was explained by bank credit and other selected variables. It was recommended that the government should employ Central Bank of Nigeria's regulatory instruments in increasing bank credit to the manufacturing and agricultural sectors and since interest rate was under the control of monetary authority in Nigeria, efforts must be made to ensure interest rate stability in order to improve the Nigerian manufacturing, and agricultural sectors.

Full Text:

PDF

References


Adegoke, S. K. (1998). Data on Agriculture, wvrw,nigeriabusinessinfo.com/ agridata.

Adekanye F. (1982). Elements of Banking. United Kingdom: 2nd Edition, FazBurn Publishers

Adekanye, K. A. (1983). The Element of Banking. Ibadan: Mindex Publishers.

Adeleke, S.andF. A. Damilola, (2013). Empirical Analysis of Agricultural Credit in Africa: Any Role for

Institutional Factors? African Development Bank Group, Vol. 1, No. 192, pp. 1-27.

Agunuwa, E., L. Inaya, T. Proso, (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 Nov 2015, Vol.5, No. 11. pp 337-350.

Akinleye, S.O., K.A. Akanni, andM.A. Oladoja, (2003). An Appraisal of the Agricultural CreditGuarantee

Scheme in Nigeria. Department of Agricultural Economics, Olabisi Onabanjo University, Ago

Iwoye, Nigeria, Vol. 1, No. 1, pp. 1– 14.

Anyanwu, A.C., B. O. Anyanwu, and V, A. Anyanwu, (1979). Agriculture: Its Importance and Development.

Nigeria: Africana Educational Publishers.

Ashamu, E. O. (1981). Problems of Agricultural Finance in Nigeria. Paper No.7, Presented During the

Seminar Organized by CBN, April, 2006, Lagos, pp. 27-30

Balogun, E. D. and M. F. Otu, (1991). Credit Policy and Agricultural Development in Nigeria: CBN

Economic and Agricultural Review, Lagos.

Bello, S. (2003). Agriculture and Rural Development: The News, An Address at the launching in Bauchi of

the Daimina Project, August.

Brooks, C. (2002). Introductory Econometrics for Finance. London: Cambridge University Press.

Central Bank of Nigeria (2000). Annual Reports and Statement of Accounts. Abuja: CBN

Central Bank of Nigeria (2009). Statistical BullentinAbuja, CBN Vol.20.

Central Bank of Nigeria (CBN) (2005) Statistical Bulletin. Abuja, CBN.

Chisasa, S. (2015). An Econometric Analysis of Bank Lending and Agricultural Output in South Africa: A

Survey Approach. The Journal of Applied Business Research, Vol. 31, No. 1, pp. 163-174.

Enyim, O.B., E. N. Ewno, andO. T.Okoro,(2013). Banking Sector Credit and the Performance of the

Agricultural Sector in Nigeria. European Journal of Scientific Research, Vol. 23, No. 2, pp. 35 – 55.

Garba, P. K. (2000). An Analysis of the Implementation and Stability of Nigerian AgriculturalPolicies,

– 1993. AERC Research Paper 101, Nairobi: African Economic Research Consortium.

Golait, R. (2007). Current Issues in Agriculture Credit in India: An Assessment', RBI Occasional Papers

(Government of India, 'Economic Survey', various issues)., Vol. 28, No. 1, pp. 79-100.

Gujarati, D. N. (2003). Basic Econometrics. New York: McGraw Hill Inc.

Gurdenson, M., B.A.Glory andE. Due, (2003). Profitability and Agricultural Lending Relations. Paper

Presented During the Conference of American Association of Agricultural Economics, July 27 – 30,

Canada.

Ibe, O. (2013). The Impact of Commercial Banks' Credit onAgricultural Development in Nigeria: An

Econometric Analysis Sunny. International Journal of Business, Humanities and Technology. Vol. 3

No.1; pp 85-94.

Ijere, M.O. (1986). New perspectives in financing Nigerian Agriculture. Enugu: Fourth Dimension

Publishing Company

Imoughele, L. E. andM. Ismaila, (2014). Empirical Investigation of the Impact of Monetary Policyon

Manufacturing Sector performance in Nigeria (1986 –2012) International Journal of Education and

Research Vol. 2 No. 1.

Itodo, A.I., S.Apeh, andS. Adeshina, (2012). Government Expenditure on Agricultural Sector and

Economic Growth in Nigeria. Journal of Humanities and Social Science, Vol. 8, No. 4, pp. 62 – 67.

Johansen, S. (1991). Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector

Autoregressive Models. Econometrica, Vol. 59, pp. 1551–1580.

Kareem, K. R. O., H. A. Bakare, K. A. Raheem, S. E. Olagumela, O. O. Alawode, andG. R.

Ademoyewa (2013). Analysis of Factors Influencing Agricultural Output in Nigeria:

Macroeconomic Perspectives. American Journal of Business, Economics and Management, Vol. 1,

No. 1, pp. 9-15.

Lambe, O. (1983). Problems and Prospects of Agriculture in Nigeria: Nigeria Herald, Tuesday, March 29, pp.

-8.

Mohan, R. (2006). 'Agricultural Credit in India: Status, Issues and Future Agenda', Economic and Political

Weekly, Vol. 41, pp. 1013-1021.

National Bureau of Statistics (2005). Draft Poverty Profile for Nigeria. Abuja and Lagos: NBS.

Nwaigbo, E. C. (1981). Problems of Agriculture and Agricultural Finance in Nigeria: A Presented at a

Seminar Organized by CBN, Lagos, April, Paper No.6, pp. 27 - 30.

Nwankwo, O. (2013). Agricultural Financing in Nigeria: An Empirical Study of NigerianAgricultural Cooperative and Rural Development Bank (NACRDB): 1990 – 2010. Journal of Management

Research, Vol. 5, No. 2, pp. 28 – 44.

Nwosu, F. O., N.G.Oguoma, B. A. Chendo, andH. Ukoha, (2010). The Agricultural CreditGuarantee

Scheme: Its Roles, Problems and Prospects in Nigeria's Quest for Agricultural Development.

Agricultural Credit Guarantee Scheme, Vol. 2, No. 2, pp. 87 – 90.

Nzotta, S. M. (1999). Money, Banking and Finance: Theory and Practice (2nd Ed). Owerri: Hudson Jude

Nigerian Publishers.

Nzotta, S. M. (1999). Money, Banking and Finance: Theory and Practice. First Edition. Owerri: Hudson

Jude Nigerian Publishers.

Obilor, S.I. (2013). The Impact of Commercial Banks' Credit to Agriculture on AgriculturalDevelopment in

Nigeria: An Econometric Analysis. International Journal of Business Humanities and Technology,

Vol. 3, No. 1, pp. 85 – 95.

Obua, N. (2003). Nigeria's Agricultural Sector Business Investment Opportunities,

.

Ogar, A., S.E. Nkamare, and E. Charles, (2014). Commercial Bank Credit and Its Contributions

onManufacturing Sector in Nigeria. Research Journal of Finance and Accounting.Vol.5, No.22, pp

-196.

Ogbanje, E. C., M. A. Yahaya, and F. Kolawole, (2012). Effect of Commercial Banks' Loan

onAgricultural Gross Domestic Product (GDP) in Nigeria from 1981 –to 2007. (Online) Available:

http://www.patnsukjournal.net/currentissue (March 18, 2015)

Okoi, L. O. (2002). The Effects of Institutional and Policy Changes on Bank Lending to Agriculture - The

Farmers Perspective. CBN Biennial Conference, Calabar.

Okolo, D.A. (2004). Regional Study on Agricultural Support, Nigeria's Case. A study prepared for FAO.

Okwuosa, E. E. (1970). New Direction for Economic Development in Africa, African Books - a Division of

African Journal Ltd.

Oluwafemi,O., E.A. Akinlo and D. O. Elumilade (2014) Impact of Bank Credit on the Real Sector: Evidence

from Nigeria. Global Journal of Business Research, Vol. 8 , No. 3, pp. 39-47.

Osmond N. O., K. G. EgbulonuandF. M. Emerenini (2015). Monetary Policy and the Manufacturing Sector

in Nigeria. International Journal of Economics and Management Studies (SSRG-IJEMS). Vol.2,

issue1, pp 17-25.

Pandey, L. (1999). Financial Management. 3rd Edition. London: McGrraw-Hill Inc.

Qureshi, K. S., H. Akhtar, andF. Shan (1996). A critical review of rural credit policy in Pakistan. The

Pakistan Development Review, Vol. 31, No. 4, pp. 781 – 801.

Rahman, S. U., Hussah, A.and Taqi, M. (2014). Impact of agricultural credit on agriculturalproductivity in

Pakistan: An empirical analysis. Management and Social Sciences, Vol. 3, No. 4, pp. 125 – 139.

Ravid, S.A. and O.H. Sarig. (1991) Financial Signaling by Committing to Cash Outflows†The Journal of

Financial and Quantitative Analysi, Vol. 26, No. 2, pp. 165-180.

Roman, K. (2009). Financial Econometrics. Denmark; Roman Kozhan&Ventus Publishing.

Salami, A. and D.F. Arawomo (2013). Empirical Analysis of Agricultural Credit in Africa: Any role for

institutional factors? Tunis, Tunisia, Africa Development's Work Paper, Series 192.

Sanusi, L. (2010). Enhancing Flow of Credit to the Manufacturing Sector through Banking Reform.

Enchancing-Flow-of-Credit-to-the-manufacturing-sector-through-banking-reform/

Shutze, J. (1964). Transforming Traditional Agriculture, New Haven, Tele University Press.

Soyode, A. (1990). The Role of Capital Market in Economic Development. Security Market Journal in

Nigeria. Vol. 6, No. 2, pp. 321-336.

Terriba, R. and A. Kayode, (1977). Industrial Development in Nigeria. Ibadan: Mindex Publishers.

Thomas, H. Wonnacott and J. W. Ronald (1990). Introductory Statistics for Business and Economics 4th

Edition. New York, John Wiley & Sons.

Tomola, M.O., T. E. Adebisi, and F.K.Olawale, (2012). Bank Lending, Economic Growth and The

Performance ofthe Manufacturing Sector in Nigeria. European Scientific Journal. Vol. 8, No. 3. pp

-36.

Tomori, S. (1979). Structure of the Nigeria Economy, Forestry and Fishing: London: The Macmillan Press

Ltd.

Udensi, A. I., J. S. Orebiyi, D. O. Ohajianya, andC.C.Eze (2012). Determinants of

MacroeconomicVariables that Affect Agricultural Production in Nigeria. International Journal of

Agric and Rural Development, Vol. 15, No. 3, pp. 1169 – 1173.

Udih, M. (2014). Bank Credits and Agricultural Development: Does it Promote Entrepreneurship

Performance? International Journal of Business and Social Science, Vol. 5, No. 11, pp. 102 – 107.

Udoka, C., R. A. Anyingang, andA. T. Tapang, (2012). An Empirical Analysis of the Effect of Interest Rate

Management Policies in Nigeria 1970-2010.

Umoh, G. S. (2003). Nigeria Macroeconomic Environment and The Perennial Crop. Global Journal of

Agriculture Sciences, Vol. 2, No. 1, pp. 53 – 61.

Wells, J. C. (1974). Agricultural Policy and Economic Growth in Nigeria, 1962–1968. Oxford: Oxford

University Press.

World Bank (2000). Rural Financial Markets in Nigeria: Focus Notes on the Issue and Options. World Bank

Rural Development 2. Washington DC.

Zakaree, S. S. (2014). Impact of Agricultural Credit Guarantee Scheme Fund (ACGSF) on DomesticFood

Supply in Nigeria. British Journal of Economics, Management & Trade, Vol. 4, No. 8, pp.1273 –


Refbacks

  • There are currently no refbacks.