Dynamic Analysis of Agriculture Productivity via Public Agricultural Spending and Bank Credit: Lessons from an Emerging Market

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Abstract

The low level of government spending on agriculture has resulted in poor productivity of the sector in the developing countries. To ensure a high level of productivity in the agriculture sector in emerging markets like Nigeria, public agricultural expenditures, as well as the provision of bank credit to the agriculture sector, are key to agriculture productivity. Consequently, this 
study examines the dynamic links between government agricultural spending, bank credit and agriculture productivity in Nigeria within the period of 1981-2019. We also incorporated government capital expenditure as one of the regressors determining agricultural productivity. Using the Autoregressive Distributed Lag (ARDL) model, the results suggest that there exists a long-run relationship between government agricultural spending, bank credit and agriculture productivity in Nigeria. The findings show that government agricultural expenditures and commercial bank credit to agriculture sector have a direct and significant 
impact on agriculture productivity in Nigeria. Meanwhile, government capital expenditure influences agricultural productivity positively in the short-run, whereas, in the long-run, it hurts agricultural productivity. Thus, there is a need to ensure that public expenditure is put into productive use to ensure that these funds support private capital formation in the agriculture sector. This will invariably enhance long-run agriculture productivity in Nigeria.