IMPACT OF MONETARY POLICY ON COMMERCIAL BANKS’ SUPPLY OF AGRICULTURE CREDIT IN NIGERIA

IMPACT OF MONETARY
POLICY ON COMMERCIAL BANKS’
SUPPLY OF AGRICULTURE CREDIT
IN NIGERIA
Umeh Anthony Chinedu
Department of Economics, Enugu State
University of Science and Technology
umehchinedu47@gmail.com
&
Ugwo Callistus Ezekwe
Federal school of Statistics Amaechi Ulor
Enugu State Nigeria:
ezekwe_cally@yahoo.com
ABSTRACT
The agricultural sector in Nigeria today has
been characterized by low productivity.
Recognizing this, the Nigerian government
introduced
series
of
macroeconomic
programmes and policy (both monetary and
fiscal policies) aimed at improving the sector
Accounting and Finance Research Association
performance. The study aims at examining
the impact of monetary policy on commercial
banks’ supply of agriculture credit. The
specific objectives are to: investigate to what
extent does monetary supply effects
commercial banks’ supply of agriculture
credits in Nigeria, ascertain to what extent
does cash reserve ratio effect commercial
banks’ supply of agriculture credits in Nigeria
and evaluate to what extent does interest
rate effect commercial banks’ supply of
agriculture credits in Nigeria. These variables
were used in the study: commercial banks’
loan and advances to Agricultural sector
(CBLA), Prime lending rate (PLR), Liquidity
Ratio (LR), cash reserve ratio (CRR), money
supply (M 1 ) for the period of 1985-2017. The
autoregressive-distributed lag model was
used to estimate the model. The study
concluded that monetary policy has
significant effect on commercial banks’ supply
of agriculture credits in Nigeria. The major
findings of the study: (1) monetary supply has
positive insignificant effect on commercial
banks’ supply of agriculture credits in Nigeria
(t – statistics (1.3511) < t 0.05 (1.684); (2) cash reserve ratio has positive significant effect on commercial banks’ supply of agriculture credits in Nigeria (t – statistics (3.2824) > t 0.05
(1.684); (3) interest rate has no insignificant
effect on commercial banks’ supply of
agriculture credits in Nigeria (t – statistics
(1.2053) < t 0.05 (1.684); (4) there is no long run
relationship between monetary policy
variables and the commercial banks’ supply of
agriculture credits in Nigeria and (5) the cash
reserve ratio was the monetary policy
variable that is more relevant to the
commercial banks’ supply of agriculture
credits
in
Nigeria.The
following
recommendations were made: monetary
authority of Nigeria (CBN) should formulate
expansionary monetary policies to move
away from credit quotas to credit rationing to
only farmer who has started agriculturalBook of Abstract
activities to some extent and require
agricultural credit to supplement their
existing fund. Monetary authority of Nigeria
(CBN) should decrease cash reserve ratio by
15 percent as against 22.50 percent to
encourage for commercial bank supply of
agriculture credit.
Keywords: Monetary Policy and Supply of
Agriculture Credit

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