Statistical Analysis of the Effects of Agricultural Loans on Agricultural Productivity

Abstract

Agriculture constitutes one of the most important sectors of the Nigerian economy. The sector is particularly important in terms of its contributions to employment generation, gross domestic product (GDP), and export revenue earnings. Before the country shifted its focus to oil exports in the 1970s, Nigeria's agrarian economy contributed 40% of the GDP and employed about 70% of the working population. With all this aforementioned agricultural contribution, it is true to say that agriculture, by every standard, is a business venture that requires a lot of finance. Since independence in 1960, successive government has been making efforts to address the problems of difficulty to access credit by the rural poor farmers. In recognition of the vital role of small-scale farmers in wealth creation, the government of Nigeria has experimented with various financing initiatives, like the establishment of institutions, programmes, and schemes aimed at providing for the financial needs of rural farmers. Despite government efforts, the Nigerian agricultural sector has been growing at a very low rate, and its contribution to the economy is reducing geometrically compared to its financing capacity. The data for this research was collected from the CBN office in Lagos State on the contributions of co-operative society crop farmers, farmer’s contributions in thousands, and single-life-stock farmers to the growth rate. The data covered a period of seven years, from January 2015 to December 2021. The R-programming package was used for the analysis. The descriptive statistics of the variables of the research work were shown in the analysis; both skewness and kurtosis showed values of zero and three, respectively, but for the inferential analysis, regression, ANOVA, auto-correlation, and coefficient of determination were used. The plots of all the variables of interest showed upward trends and fluctuation modes over the periods of interest. The growth rate (GR) maintained steady growth from the starting year before the excessive increment in 2020 up to 2021. The aggregate loans from crop farmers (CF) maintained an increment between 2020 and 2021 but were a bit lower in 2020. The aggregate loans from single-life-stock farmers (SLSF) and co-operative societies (CS) fluctuated but drastically fell from 2018 to 2020. The farmer’s contribution (CONT.) increased the growth rate. Their respective contributions are represented by the below linear equation: GR = -228.587 + 2.028CONT + 0.017CS + 0.454SLSF + 2.185CF. For the first test, we have F = 8.963, r = 0.801, R2 = 0.642, and a significance value of 0.030. We therefore concluded that there is a very strong relationship between the CBN guidelines and agricultural productivity. Likewise, we inferred that there is a significant relationship between the growth rate and all other considered independent variables (i.e., CONT, CS, SLSF, and CF). with all the above information. We therefore recommend that loans be given to real farmers at the appropriate time. And more effort to induce the youth into small and medium-scale farming to avoid famine.