Finance and Labour Productivity in Nigerian Agricultural Sector: Assessing the Moderating Effect of Insecurity

While numerous empirical studies have explored the linear relationship between finance and agricultural labour productivity, the moderating influence of insecurity – and the asymmetric effects of finance – have garnered significantly less attention in the economic literature. This study uses annual time series data from 1992 to 2023 to examine the asymmetric and moderating influences of insecurity on the interplay between finance and labour productivity in Nigeria. Employing the nonlinear autoregressive distributed lag (NARDL) model as a methodological framework, the analysis finds evidence of both long-run and short-run asymmetries in the effects of financial variables and insecurity on agricultural labour productivity. Specifically, increases in government expenditure on agriculture, commercial bank credit, microfinance loans, and agricultural credit guarantee funds were associated with significant improvements in productivity, while decreases in these variables led to declines. Insecurity was also found to significantly weaken the positive effect of finance on agricultural labour productivity. Additional key findings from this analysis reveal that the short-run response of agricultural labour productivity to positive shocks in finance and insecurity differed notably from the response to negative shocks, confirming the asymmetric nature of these relationships. These findings suggest that mixed results in the existing literature on this topic may arise from a failure to account for asymmetries. The study therefore recommends sustained improvements in agricultural finance, alongside adequate measures to address national security challenges.