An Appraisal of the Impact of Deposit Money Banks on the Agricultural Sector 

An Appraisal of the Impact of Deposit Money Banks on the Agricultural Sector.

ABSTRACT

Nigeria is endowed with huge expanse of fertile agricultural land, rivers, streams, lakes, forest and grassland, as well as a large active population that can sustain a high productive and profitable agricultural sector; yet the country is an import dependent nation even of the commodities she would have ordinarily produced, given her natural endowment.

The study then investigates the impact of Deposit Money Banks on the Agricultural sector with this question in mind: “does it mean that deposit money banks are not advancing adequate credit that will boost the productivity of the agricultural sector?” We developed two models, in line with economic theory.

The first model investigates the impact of Commercial Bank credit and Government expenditure on agriculture on the level of Agricultural productivity in Nigeria.

The second model looks at the contribution of agricultural productivity on the Gross Domestic Product with interest rate as a control variable.

The study found that deposit money banks’ credit and interest rate does not have impact on agricultural productivity in Nigeria.

Other findings of the study are agricultural output has significant impact on economic growth Nigeria; and Government spending on agriculture in Nigeria has impact on agricultural productivity.

 INTRODUCTION

In the early stages of economic development of most developing countries including Nigeria, agriculture and the agrarian population generates a greater proportion of the gross domestic product (GDP) and invariably stimulates the development of other sectors of the economy.

The place of agriculture, in Nigerian’s economy has remained critical over the years since independence .This is because prior to the political crisis of 1967-1970, the country’s food demand was satisfied from domestic production thereby obviating the need to utilize scarce foreign exchange resources on food importation.

Prior to growing fortunes of the petroleum sector in the 1970’s , agricultural played enormous role in the Nigerian economy in terms of its contributions to labor force employment and GDP as  shown by Tomori (1979), Agriculture is still the main stay of the Nigerian economy , without 70% of the country’s labor force employed in this sector .

At independence in 1960 the percentage contribution of the sector was about 70% as indicated by the CBN Publication. Also, substantial amount of capital were derived from the agricultural sector through tax revenue as shown by Hewlleiner (1966) between the periods of 1950-1967.

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