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Economic and Financial Review

Publisher

Central Bank of Nigeria, Reaserch Department.

Keywords

Credit policies, Agricultural development, Economy, Government, Input supply.

Abstract

Credit policies have been used widely in Nigeria to stimulate agricultural development. This article evaluates through econometric methods the influence of credit policies on both institutional lending and borrowing behaviour of farmers, and ascertains the relationship between credit and agricultural development. The results show that credit quota and portfolio ceiling devices and the pursuit of cheap interest rate policies had negative effect on agricultural credit supply, while policies associated with plough back of rural savings mobilization and availability of guarantee were marginally effective. Farmers demand for credit was influenced mainly by the availability of credit subsidies, relative profitability of the farming enterprise vis-a-vis manufacturing investment portfolios; and availability of guarantees. However, availability of rural bank branches did not confer accessibility to institutional farm credit, and rising trend in farm credit outstanding did not imply rising access to institutional credit. Finally the study shows that a positive but inelastic relationship exist between credit and agricultural output. Among the keyfactors which militate against the effectiveness of agricultural credit policies include: lack of viable technologies and defective production environment, weak and defective administrative set-ups for credit policy implementation and the wrong perception of the roles of credit in development which informed the pursuit of defective financial intermediation policies that tended to undermine rather than promote growth. An agenda for credit policy reforms stressed the need to evolve and adopt policies which foster destrable financial technologies which serve both the interest of institutional borrowers and lenders.

Issue

29

Volume

2

Recommended Citation

Balogun, E. D. and Otu, M. F. (1991) Credit policies and agricultural development in Nigeria. CBN Economic and Financial Review, 29(2), 138–155.

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