Increasing Agricultural Investments through Cost of Capital Deregulation in Nigeria

Author(s)

Ettah, Otu I. , Agbachom, Emmanuel E ,

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Volume 3 - June 2019 (06)

Abstract

the study was conducted to examine increasing agricultural investments through the cost of capital deregulation in Nigeria, with the following specific objectives: ascertain the factors that determine aggregate credit volume of agricultural investment within the cost of regulated and deregulated periods and estimate the level of growth rate in agricultural financing in Nigeria before and after a deregulated period. Co-integration and Real Credit Growth Rate Model were used to realize the objectives respectively. The result showed that interest rate deregulation had a significant and positive impact on agricultural growth in Nigeria, co-integration relationship existed among the variables and average interest lending rate and government budget allocation were the significant variables that had a long-run effect on the aggregate credit volume. Result also showed that 92 % of the disequilibrium caused by previous year's shocks converges back to the long-run equilibrium in the current year. Credit volume of agriculture increases with a decrease in average interest lending rate, also agricultural credit growth rate increased in real terms at 8.91% under the period of study, more so, agricultural GDP contribution to Nigerian economy had a positive relationship with credit volume to agriculture. Finally, ACGSF and CBL were major determinants of the government finance interventions on the agricultural sector and its contribution to the GDP of the Nigerian economy. The following recommendations were proffered: interest rate should be reduced to at least 5% or any other single digit to stimulate investment in the agricultural sector and there should be proper implementation, coordination, and evaluation of financial policies in the agricultural sector

Keywords

interest rate, deregulation, agriculture, co-integration, credit volume

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