Contributions of Banking Sector to Agricultural Sector.
ABSTRACT
This study was carried out to examine the impact of banking sector on Agricultural sector in the Nigeria. The aim is to determine the relationship between banking sector and Agricultural sector in the Nigeria economy.
The statistical tool of analysis is the error correction model (ECM). However, the variables were subjected to the unit root test to ensure stationary.
The three variables were tested using Error correction model and all the bull Hypothesis were rejected. One percent increase in commercial Bank loan will lead to crop production has a positive relationship.
An increase in interest rate by commercial Bank will decrease. Crop production by 1391.037 point. This show that interest rate of commercial Bank to crop production has a negative relationship. A one percent increase in government spending leads to 18.6% production.
This shows that government spending to crop production has a positive relationship. Base on the findings, we recommended that the commercial Bank should decrease the level of interest rate, in other to encourage farmers to get loan from them.
Furthermore the Agricultural credit, guarantee scheme should improve on their conductions for credit guarantee in order to make Agricultural financing attractive to commercial banks.
INTRODUCTION
According to CBN (2000), Nigeria is endowed with huge expanse of fertile land, rivers, streams, lakes, forests and grasslands, she has a large active population that can sustain highly productive and profitable agricultural sector which can ensure self-sufficiency in food and raw materials for the industrial sector and as well provide gainful employment for the teeming population.
This will generate foreign exchange for the growth and development of the economy. Ironically, the reverse is the case.
Several factors account for the poor performance of the agricultural sector in Nigeria; these include virtual neglect of the sector, poor access to modern inputs and technology, and lack of optimum credit supply, (Enyim, Ewno and Okoro, 2013).
Aside the problem of poor access to modern technology, the major bane of agricultural development in Nigeria is low investment finance. (Salami and Arawomo, 2013).
Udih (2014) indicated that bank credit is expected to impact positively on the investible sectors of the economy through improved agricultural production of goods and services.
He opined that sufficient financing of agricultural projects will not only promote food security, but also enhance the entrepreneurship performance of our young investors.
Concluding that, this is borne out of the expectation that a good match between adequate bank credit and agricultural entrepreneurship will ensure massive agricultural productivity.
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