ACCESS TO CREDIT AND AGRICULTURAL OUTPUT IN NIGERIA; GAUGING ARDL MODEL USING DUMMY VARIABLE
Abstract
This study investigates access to credit on agricultural output in Nigeria using data from the Central Bank of Nigeria (CBN) statistical bulletin for the period 1981 to 2022. Employing the Autoregressive Distributed Lag (ARDL) model and incorporating a dummy variable to account for structural breaks, the analysis examines the relationships between credit access and various agricultural subsectors, including crops, cash crops, livestock, and forestry production. Diagnostic tests confirm the absence of serial correlation and heteroscedasticity issues, ensuring robust estimation results. In the short run, credits to crops (TFC) and the first-differenced term of credits to crops (d(TFC)) are found to be significant, highlighting the short-term responsiveness of agricultural output to changes in credit for crop production. However, there is an insignificant relationship between funds to crop, cash crop, and livestock production with the dependent variable of agricultural output, indicating limited or non-existent long-term credit impact in these areas. Contrastingly, a significant positive relationship is observed between credit allocation to forestry production and overall agricultural output, underscoring the role of targeted credit in enhancing this subsector. The study concluded that credit access impacts agricultural output in certain areas, its effects are inconsistent across different subsectors. This highlights the need for a more tailored approach in credit allocation, particularly emphasizing credit availability for forestry, which has shown positive contributions to aggregate agricultural output. To maximize the impact of credit on agricultural productivity, policymakers should consider structuring credit facilities that align with the unique needs of each agricultural subsector. Additionally, strengthening credit access for the forestry sector could significantly contribute to the overall growth of Nigeria’s agricultural sector. Lastly, mechanisms to address structural breaks and ensure stability in credit allocation policies are recommended to enhance the reliability and sustainability of agricultural financing in Nigeria.
Keyword : Access to credit, Agricultural output, ARDL model, Dummy variable
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