ANALYSIS OF THE EFFECT OF CENTRAL BANK OF NIGERIA’S RECAPITALISATION POLICY ON AGRICULTURAL DEVELOPMENT

Abstract

The study examined the effect of bank recapitalization policy of the Central Bank of Nigeria (CBN) with respect to commercial banks’ loans and advances to agriculture, and total agricultural output within the period 1997 and 2013. The data for the study were obtained from the records of the Central Bank of Nigeria (CBN), Food and Agriculture Organization (FAO) and Federal Bureau of Statistics (FBS). Pearson square correlation, linear regression and Chow test were used for the analysis. The average total loans and advances to agriculture stood at N41.04 million. This figure is not statistically significant at 5% level. But there is a significant relationship between average total loans and advances to agriculture and bank recapitalization. This means that there is an increase in total loans and advances to agriculture as a result of increase in bank capitalization. There are no significant break / change point for bank recapitalization in predicting total loans and advances to agriculture. There is a significant positive correlation (0.93) between agricultural output and total loans and advances to agriculture. The coefficient of determination (R2) is 0.869. The average agricultural output is 1,483.441 tonnes, and significant at 5% level. Agricultural output and average total loans and advances exhibit positive relationship. A million increase in total loans and advances to agriculture, increases agricultural output by 41.565 tonnes, and is significant at 5% level. The structure of total agricultural output exhibits specified breakpoints in 1999, 2003, 2007 and 2011. These years coincided with the advent of new governments signifying new policy directions.