IJAAR-SSE/V1N2/N15/P14

AN ASSESSMENT OF THE CONTRIBUTIONS OF COMMERCIAL BANKS TO AGRICULTURAL FINANCING IN THE NIGERIAN ECONOMY

ADEWOLE JOSEPH ADEYINKA

Department of Banking and Finance,
College of Management and Social Sciences,
Oduduwa University,
P.M.B 5533, Ile-Ife,
Osun State,
Nigeria.

 

ADEKANMI ADEREMI DANIEL

Department of Accounting,
College of Management and Social Sciences,
Oduduwa University,
P.M.B 5533, Ile-Ife,
Osun State,
Nigeria.

 

GABRIEL ADEMOLA OLUKOTUN

Department of Banking and Finance,
Faculty of Management Sciences,
Kogi State University,
P.M.B 1008 anyigba,
kogi state,
Nigeria.

 

ABSTRACT

This study examined the contributions of commercial banks in agricultural financing in Nigeria. It pointed out the roles of bank credit in agricultural development. The study discussed a number of challenges that affected the agricultural financing in Nigeria. This is with a view to shedding light on the relationship between banks and agricultural sector and to evaluate the extent of banks involvement in agricultural financing. Secondary data (2002 -2014) on sectorial distribution of commercial banks’ loans and advances to agricultural sector, liquidity ratio of commercial banks, cash reserve ratios of commercial banks and money market minimum rediscount rates, etc. were sourced from various statistical publications of the central bank of Nigeria (CBN). Data collected were analyzed using multiple regression of ordinary least square to achieve its objectives. It was revealed that the parameter of cash reserve and discount rate is not statistically significant and the parameter of liquidity ratio is not statistically significant. It was also discovered that agriculture credit was found as a decreasing function of discount rate, liquidity ratio and cash reserve, this lower the volume of agricultural credit. The study therefore recommends that there is need for central bank of Nigeria to make available rediscount facilities in which the banks can fall back in the event of liquidity problems arising from lending. More so, banks should provide a means of monitoring the end-use of the loans given to farmers in order for them to manage the loan effectively and efficiently.

Keywords:

Agricultural Finance, Agricultural Credit, Commercial Banks, Liquidity Ratio, Discount rate, Cash reserves.

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