Effect of Government Financing on Agricultural Productivity in Nigeria

Abstract

This study examines the effect of government financing on agricultural output in Nigeria from 1992–2024. Despite the well-established importance of agriculture for economic development and food security, the sector's performance has remained below its potential, raising concerns about the effectiveness of fiscal and credit interventions. The study uses annual time-series data from the Central Bank of Nigeria Statistical Bulletin. It applies the Autoregressive Distributed Lag (ARDL) modelling framework to capture both short-run dynamics and long-run relationships. Government financing is proxied by agricultural capital expenditure and the Agricultural Credit Guarantee Scheme, while agricultural output is measured by agricultural gross domestic product. The results show that both capital expenditure and credit guarantee support have positive and statistically significant effects on agricultural output. This suggests that public investment and credit support work together to improve agricultural output. Consequently, to sustain agricultural output growth, the study recommends that the government steadily expand capital investment in key areas, such as rural infrastructure, irrigation, mechanization, storage, and research, prioritizing high potential areas and smallholder farmers who form the core of Nigeria's production system. Furthermore, the Central Bank of Nigeria should increase the proportion of agricultural loans guaranteed and broaden the reach of the ACGSF by simplifying access requirements, improving monitoring systems, and incentivizing financial institutions to participate more actively, thereby achieving greater inclusiveness and better agricultural productivity