Nigerian Journal of Banking and Financial Issues (NJBFI)

An Analysis Of The Impact Of Monetary Policy On The Agricultural Sector In Nigeria

Abstract

In this paper, an attempt has been made to investigate the impact of monetary policy on the agricultural sector while specifically examining the impact of lending rate, cash reserve ratio, agricultural credit guarantee scheme and money supply on agricultural sector output. Also, the study examined the long run relationship between the different monetary policy channels and agricultural output. This was done through descriptive statistical analysis with focus on the level and trends in key variables over time. It was found that there is a long run relationship between monetary policy variables of agricultural credit guarantee scheme fund as well as foreign private investment on agricultural sector output with evidence showing a decline in agricultural output in the period between 2004 -2008. Also, it was found that changes in monetary policy over time caused significant changes in output. For example, as the prime lending rate falls, there was an increase in agricultural output.  With this in mind, it is recommended that even after deploying some monetary policy instruments by the government, there is the need to periodically monitor the impact of such policy to ensure that the desired goals are being achieved by putting in place a feedback mechanism.