Ogbonna and Osondu
Greener Journal of Agricultural Sciences Vol. 5 (3), pp. 084-095, June 2015.
Manuscript Number: 051815074
Determinants of Supply of Funds to Agricultural Sector from Formal Sources in Nigeria from 1992 to 2012
Ogbonna, S. I. and *Osondu, C. K.
Department of Agricultural Economics and Extension Abia State University, Umuahia Campus, PMB 7010, Umuahia, Abia state, Nigeria.
The study was carried out in Nigeria. Specifically the study
analyzed performance of formal credit sources by amount of loan disbursed to
agriculture from 1992 to 2012 and determined factors that influenced volume of
funds supplied to agricultural sector from formal sources in Nigeria from 1992
to 2012. Time series data, covering the periods of 1992 – 2012, culled
basically from the Central Bank of Nigeria’s Statistical Bulletin were used.
The data collected were analyzed using descriptive statistics and two Stage
Least Square regression technique. The result of the performance of the formal
credit sources by amount of loan disbursed to agriculture showed that
commercial banks under the ACGS performed better than the Microfinance banks
and Bank of Agriculture which was evident by the amount disbursed (
N48.8bn) by commercial banks, with
Microfinance banks disbursing N 32.3m
and BOA disbursing N 14.7m to
agriculture over the period under review. The 2SLS results showed that the
volume of funds supplied to agricultural production from formal sources was
affected positively by interest rate and commercial banks’ liquidity ratio and
negatively by banks’ cash reserve ratio (CRR) and index of World Agricultural
Commodity Prices. These variables were statistically significant at 1.0 % level
of probability except the index of World Agricultural Commodity Prices which
was significant at 5.0 % alpha level. The diagnostic statistics posted R2
and F- ratio values of 0.7904 and 6.46 respectively with Durbin Watson
estimates of 2.323311. The federal government must consider interest rate
regulation as a veritable tool for making credit accessible to farmers at
affordable levels where transaction costs will not be too high as to discourage
farmers willing to invest or expand their investment to withdraw from doing so.
Key words: Agricultural sector, bank loans, credit supply, transaction cost.
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