Empirical Investigation on Domestic Credit to Private Sector and Rural Development in Nigeria

Abstract

Purpose: This research sought to investigate the substantial effects of private-sector lending on Nigeria's agricultural output by applying yearly time series data spanning 1981 to 2020. Methodology: This study used time series design and Ex-post facto to analyse its data. The data were collected directly from Central Bank of Nigeria (CBN) Statistical Bulletin and Annual Reports. The study used the Autoregressive distributed lag method (ARDL) for the analysis. It used the Autoregressive distributed lag model. The study's variables included agricultural productivity, which was utilized as a stand-in for rural development. Credit to the private sector, broad money supply, lending rate, exchange rate, government capital expenditure, and government capital expenditure were the control variables. Findings: The findings showed that credit share to the private and lending rate hold a considerable negative impact on agricultural productivity in both the short-run and long-run period. Broad money supply, exchange rate, and government capital expenditure have positive and significant influences. Recommendations: The study, therefore, recommends that by modifying the lending rate structure in the banking sector, a more accommodative monetary policy may foster an environment that is more conducive to investment, in order to boost agricultural production. Also, the Central Bank, in its function as the Federal Government's advisor, should take advantage of this platform to make sure that the nation's infrastructural problems are resolved in order to increase the country's capacity to absorb credit.