LONG AND SHORT RUN DYNAMICS OF INSTITUTIONAL CREDIT AND PRODUCTIVITY IN AGRICULTURAL SECTOR: EVIDENCE FROM NIGERIA

This study examined the economic relationship between agricultural productivity and institutional agricultural credit in Nigeria. The two institutionalized credit sources are the commercial bank loans which were proxy as the private sector credit and the government owned Agricultural Credit Guarantee Scheme (ACGS) proxy as the public sector credit while the  agriculture’s contribution to GDP was proxy as agricultural productivity. To estimate these dynamics, three different ARDL  models were estimated, two of which were restricted and the third unrestricted. The first model was restricted to assume that  the only credit source is the commercial bank loans while the second model was restricted to assume that the only credit  source available is the ACGS and the third assumed the two credit sources were available. The estimate of the models revealed that there is the presence of long run relationship between and among the variables in the models. The long run estimate of Model II revealed that ACGS is not just insignificant with productivity, it also exerts a negative influence at 5%. Model I showed that private sector credit is both significant and positively related to productivity at 5%. Though positively  influencing productivity, public sector credit is still insignificant in Model III. In the short run estimates, Model I and III affirms the positive significance of private sector loan to productivity while ACGS remained insignificant in both Models II and III at 5%. The ECT(-1) values of 30.1%, 0.45% and 32.32% of Models I, II and III respectively confirmed the presence of  long run relationship in the models and also show the speed of adjustment from short run disturbances to long run equilibrium.