Effect of Monetary Policies on Agricultural Output in Nigeria

This study analysed the effectiveness of monetary policy measures in driving agricultural output in Nigeria between 1981 and 2016. Specifically, the impacts of money supply, prime lending rate, deposit money bank credits to agriculture and inflation rate on agricultural output was examined using static and dynamic regression models. The data for each of the variables were collected from the Central Bank of Nigeria Statistical Bulletin. Dynamic error correction model formed the basis for the data analysis. It was found from the parsimonious ECM that one period lag of money supply and deposit money bank credits to agriculture have significant positive impact on agricultural output. A unit increase in the one period lag of broad money supply and deposit money bank credits increase agricultural output by 0.6496 and 4.4528 units respectively. These findings are in accordance with the a priori expectations and also fulfil the statistical criteria. On the other hand, inflation lagged for one period impacted negatively on agricultural output. It was observed from the regression estimate that a unit increase in inflation contracts agricultural output by 2.086 units. Although this finding corroborates with both theoretical and statistical expectations, it is an indication that instability in price level has dampening effect on agricultural output. The study therefore recommends amongst others that the Central Bank of Nigeria (CBN) should place more emphasis on expansionary monetary policy framework with a view to increasing monetary aggregates to boost output in the agricultural sector.

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  2018

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