IMPACT OF MONETARY POLICY ON AGRICULTURAL FINANCING BY DEPOSIT MONEY BANKS IN NIGERIA

This study delved into the impact of monetary policy on agricultural financing by deposit money banks in Nigeria. To achieve these objectives, the study employed an ex-post facto research design and secondary annual time series data streaming from 2003 to 2023 and obtained from Central Bank of Nigeria (CBN) Statistical Bulletin. On the same vein, dependent variable of agricultural financing was proxied by credit concentration to agricultural sector, while, the independent variable of monetary policy was proxied by monetary policy rate, money supply, liquidity ratio and cash reserve ratio. Analytically, the staionarity test through Phillips-Perron unit root test revealed that the order of integration for variables included in the model was a mixture of I(0) and I(1). Therefore, the study employed the bound testing approach and error correction model within the Autoregressive Distributed Lag (ARDL) framework to explore the long-run and short-run effect of interest and inflation rate on economic development of Nigeria. Evidence of no long run relationship was found among the dependent variables and independent variables through the estimation of ARDL bound test of co-integration. Additionally, the ARDL result revealed that monetary policy rate exerts a positive but insignificant impact on agricultural financing by deposit money banks in the short run; money supply exerts a negative and insignificant effect on agricultural financing in Nigeria in the short run; there is a positive but insignificant relationship between liquidity ratio and agricultural financing by deposit money banks in the short run and there is a negative and insignificant correlation between cash reserve ratio and agricultural financing in Nigeria in the short run. Premise on these discoveries, the study concluded that monetary policy has an insignificant impact on agricultural financing by deposit money banks in Nigeria in the short run. Thereby, the study recommended that monetary authorities should ensure that special consideration is given to agricultural sector during formulation of their policies that guides the activities of deposit money banks in Nigeria; money in circulation should be adequately dispatched to the real sector without any discrimination through the deposit money banks and proper implementation of the monetary policy in Nigeria; the part of the aggregate deposit received by deposit money banks that is expected to be set aside for reserve as mandated by the monetary authorities should be considerate enough so as to enhance the financing of the agricultural sector in Nigeria and further studies should be extended to cover the agricultural financing by all the deposit money banks in Nigeria.