Financial Depth Indicators and Agricultural Sector Performance in Nigeria

Abstract

The paper investigated Financial Depth Indicators (FDI) and agricultural sector output performance in Nigeria from 1989 to 2018. The objective was to investigate how the FDI measured by private sector credit (% of GDP), broad money supply (% of GDP), financial savings (% of GDP), stock market development (% of GDP), banks credit to the agricultural sector (% of GDP) while the dependent variable is agricultural sector output measured by the contribution of the agricultural sector to GDP. Data for the study were obtained from the Central Bank of Nigeria Statistical Bulletin and World Bank Data Bank (2018). The study found that credit to the private sector (% of GDP), broad money supply (% of GDP), stock market developments (% of GDP), prime lending rate positively impact the Nigerian agricultural sector, while financial savings (% of GDP), bank credit to the agricultural sector (% of GDP), and inflation rate negatively impact on the Nigerian agricultural sector. However, only bank credit to the agricultural sector (% of GDP), stock market developments (% of GDP) and prime lending rate passed the test of significance. Hence, the study concludes that bank credit to the agricultural sector (% of GDP), stock market developments (% of GDP), and prime lending rate contributes significantly to the Nigerian agricultural sector. In light of this, the study recommends that the Nigerian government should concentrate more on policies that enhance more credit to the private sector and development of the stock markets as well as policies that will push down prime lending rates.