Impact of Interest Rate on Agricultural Productivity in Nigeria; Analysis of Policy Implication (Subsidy Removal 2012-2022)

Impact of Interest Rate on Agricultural Productivity in Nigeria; Analysis of Policy Implication (Subsidy Removal 2012-2022)

Dorcas N. Munaji et al.,

Interest Rate | Agriculture

 Vol: 11; No: 2; Jun. 25 | ISSN: 2455-3921   

The study examined the impact of interest rate on agricultural productivity in Nigeria. The aim was to ascertain whether interest rate impacts agricultural productivity as measured by AGDP and how government policies/ intervention schemes such as subsidy removal in 2012, 2016, and 2020 impacted the sector’s productivity. Quarterly time series data were used which covered a span of 11 years (2012-2022) i.e. 44 quarters. The independent variables analyzed include interest rate, guaranteed loans from ACGSF, exchange rate, and deposit money bank loans to the agricultural sector. Agricultural GDP stood as the dependent variable.  The econometric models used in the research included ADF unit root tests, Auto Regressive Distributive Lag model (ARDL) and Granger Causality model. The result of the short and long-term coefficient and ECM indicated Interest rate had an insignificant negative impact on agricultural productivity while, LACGSF, and DMB loans exhibited a positive impact on agriculture. Results of the Granger causality test revealed no causality between AGDP and INT. The recommendation, therefore, is that the government and monetary authorities should stabilize the business environment in Nigeria as policy implications such as subsidy removal greatly impact these macroeconomic variables which in turn impact the real sector. Also, ease of access to credit opportunities for farmers especially those in the rural areas, and ensuring that government-introduced agricultural schemes and programs such as the ACGSF get to the targeted population is highly recommended.

Samson G. Simon, Department of Economics, Baze University, Abuja, Nigeria