Financial Intermediation and Agricultural Productivity in Nigeria

Abstract: Nigeria is regarded as one of the countries in the world that has very great agricultural potentials in terms of crop production and animal husbandry. Unfortunately, the lack of government financial support to the agricultural sector is arguably responsible for the food demand and supply deficit, thus warranting an empirical investigation to ascertain the effect of financial intermediation on agricultural productivity. The study relied on secondary time series data of financial intermediation and other related indicators like financial deepening proxied by banks credits to agricultural sector, government expenditure on agricultural sector, agricultural produce prices, labour proxied by labour force, population growth rate, inflation rate and interest rate to measure the effect of financial intermediation on agricultural productivity in Nigeria. The study employed inferential statistics like regression technique and t-statistics after conducting all preliminary test like stationarity and the unit root test. Findings revealed that financial deepening, government expenditure on agricultural sector; agricultural produce prices and interest rate were significant in explaining their impacts on agricultural sector growth while other variables used in the study were found to be non-significant in explaining the growth rate of the agricultural sector. Both R2 and adjusted R2 show that the explanatory power of the variables is very high and strong in explaining the variations of the agricultural sector by the variables of the model. Also, the standard errors show that all the explanatory variables were all low. The low values of the standard errors in the result show that some level of confidence can be placed on the estimates. The study recommends that government should make agriculture a top priority because of its unparallel contribution to the economy by setting up a supervised agricultural credit scheme for rural cooperative farmers to enable them access all the needed agricultural inputs for food production. Loanable funds should be made available through the Bank of Agriculture when it is needed to enable farmers plan ahead for the planting seasons among others.