MONETARY POLICY AND AGRICULTURE, FORESTRY AND FISHERY FINANCING IN NIGERIA: ERROR CORRECTION MECHANISM APPROACH

The sole dependency of the Nigeria economy on oil has resulted to adverse effect most especially with the incessant fall in the global price of crude oil. Lots of calls have been made to the government to come up with measures that will increase participation in the agricultural sector. This study was carried out to examine the effect of monetary policy on agriculture, forestry and fishery financing in Nigeria using time series data which spans from 1981-2015. The study employed Augmented Dickey Fuller (ADF) and Philips Perron (PP) tests to ascertain the stationarity of the variables. A Cointegration test was also used to ascertain the long run relationship of the variables, and thereafter, error correction mechanism (ECM) technique was used for the analysis. The result revealed that there exist a long run relationship between monetary policy and debt financing of agriculture, forestry and fishery sector in Nigeria. Specifically, there exists a significant and positive relationship between broad money supply and agriculture, forestry and fishery financing in Nigeria. On the other hand liquidity ratio and monetary policy rate have a positive but insignificant relationship with agriculture, forestry and fishery financing in Nigeria. Also, exchange rate and interest rate were found to be insignificant but negatively related to agriculture, forestry and fishery financing in Nigeria. Based on these findings, the study recommends that an expansionary monetary policy should be adopted with special emphasis on reduction of interest rate to agricultural sector which will attract more interest to agricultural sector, thereby shifting focus from oil and gas.