Government Agricultural Credit Policy and Macroeconomic Fundamentals: a case study of Agricultural Credit Guarantee Scheme Fund (ACGSF) in Nigeria

The study established the relationship between amount of loan guaranteed by the Agricultural Credit Guarantee Scheme Fund (ACGSF) and some key macroeconomic variables in Nigeria. Augmented Dickey-Fuller unit root test and improved ADF-GLS unit root test conducted on the specified time series showed that all series were integrated of order one. The short-run and long-run elasticities of amount of loan guaranteed by ACGSF with respect to some key macro-economic fundamentals were determined using the techniques of co-integration and error correction models. The empirical results revealed that in the long run, the coefficients of interest rate charged by commercial banks and value of oil revenue has a significant negative and positive relationship respectively with the amount of loan guaranteed by the ACGSF in the country. Whereas in the short run, the coefficients of the previous amount of loan guaranteed and value of oil revenue as well as the real GDP has a positive association with the current amount of loan guaranteed by ACGSF while the external debt has a negative association. The results were further substantiated by the variance decomposition and impulse response analysis of the dependent variable with respect to changes in the explanatory variables. The findings call for appropriate short and long term economic policy packages that should focused on the stabilization of the identified significant macroeconomic shifters of amount of loan guaranteed by ACGSF in the country. Special attention should be given to the interest charged on agricultural loan by participating banks. Also, diversification of the country’s economy and drastic reduction in external debt would boost the operation of ACGSF in the country and enhances credit availability to Nigerian farmers. Keywords: Credit, policy, macroeconomic, external debt, interest rate, ACGSF, Nigeri