Impact of Agricultural Financing on Agricultural Growth Sustainability in Nigeria

Agricultural financing plays a crucial role in enhancing agricultural productivity, profitability, and sustainability. These factors are essential for achieving food security, reducing poverty, and promoting economic growth in developing countries, such as Nigeria. However, agricultural financing faces various challenges, including high risks, low returns, inadequate infrastructure, weak institutions, and limited access to formal financial services. This study aims to examine the impact of agricultural financing on agricultural growth sustainability in Nigeria from 1985 to 2021, taking into account both domestic and international perspectives. Domestic agricultural financing is measured through commercial bank loans, interest rates, and the Agricultural Credit Guarantee Scheme Fund, while international financing is measured through agricultural foreign direct investment. The study utilizes the ARDL bonding test to analyze the short- and long-term effects of agricultural financing on agricultural growth sustainability in Nigeria. The findings of this study reveal that agricultural financing has both short-term and long-term impacts on agricultural growth sustainability. Domestic financing of agriculture significantly influences agricultural growth sustainability in Nigeria. Bank credit to the agricultural sector stimulates agricultural GDP. Similarly, the interest rates set by banks exhibit a negative relationship with agricultural growth sustainability in Nigeria, both in the short and long term. On the other hand, the Agricultural Credit Guarantee Scheme Fund (ACGSF) positively affects Nigeria's agricultural GDP in both the short and long term. However, international financing adversely affects agricultural GDP in the long run in Nigeria. The negative impact of foreign direct investment on agricultural output may be attributed to increased competition and conflicts over land and resources as foreign investors seek to secure large-scale and long-term land deals, often with the support or involvement of the host government. The significance of this study lies in its contribution to the existing literature on the influence of agricultural financing on agricultural growth sustainability, providing valuable insights for policymakers, researchers, and stakeholders interested in advancing the agricultural sector. By considering both domestic and international perspectives, this study assists the government and policymakers in effectively managing agricultural financing to stimulate agricultural growth and ensure sustainability for overall development.