Agro-industrialisation and financial intermediation in Nigeria
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Abstract
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Purpose – The study aims to analyse the role of finance in the agro-industrialisation nexus in Nigeria using
annual data on manufacturing value added, agricultural value added and volume of finance availed to the
agricultural sector from 1981 to 2015.
Design/methodology/approach – To establish the presence of a long-run relationship, the error correction
model and bounds cointegration techniques are employed. Likewise, the model is augmented to test whether
the associated relationship between industrial output and agricultural output depends on access to finance by
farmers with the inclusion of an interaction term.
Findings – Some salient contributions to the literature are as follows: agriculture and finance are strong and
positive predictors of industrialisation in the long run; in the short run, past realisations of industrial output
and finance have significant asymmetric effects on industrial output; the explanatory power of agriculture
decreases with the growth of the financial system; and the long-run results validate the role of finance in the
agro-industrialisation nexus.
Originality/value – Given these findings, achieving growth in the agricultural sector that will induce desired
industrialisation should be prioritised by the government through agencies such as the central bank, financial
intermediaries and other stakeholders with a view to making agricultural financing a major concern for
sustainable domestic consumption and industrial growth.
Keywords
H Social Sciences (General), HB Economic Theory