Abstract

The study examines the relationship between agricultural finance and economic growth in Nigeria based on vector error correction model(VECM) and vector error correction (VEC) granger causality. The study employed annual time series data obtained from Central Bank of Nigeria, Statistical Bulletin and World Development Indicators which spanned from 1992-2018. Findings from the correlational analysis reveals a strong, positive and statistically significant correlation between agricultural finance and economic growth. Furthermore, cointegration tests attest to the long run co-movement among the variables. In the short-run, agricultural finance has a negative and statistically insignificant relationship with economic growth. However, the converse holds between agricultural finance and economic growth in the long run. There was no causality between agricultural finance and economic growth but a unidirectional causality running from interest rate to economic growth, as well as a bi-directional causality exists between inflation rate and economic growth. It can therefore be concluded that agricultural finance has negative and statistically insignificant impact on economic growth in the short run but the reverse is the case in the long run. The study recommends that agricultural finance should be used in conjunction with other agricultural incentives capable of stimulation agricultural outputs in Nigeria. Proper watch should be placed on macroeconomic environmental factors such as inflation in decision making process of agricultural organisations.