Role of Development Finance Institutions in Developing the Nigerian Agriculture Sector

ABSTRACT: This study investigates the role of development finance institutions (DFIs) in agriculture sectordevelopment in Nigeria. African Development Bank (AfDB), World Bank and International DevelopmentAssociation (IDA) were the underlying DFIs while agriculture value added formed the basis for measuringagricultural sector development. Data on the variables were sourced from World Development Indicators (WDI)and analyzed using error correction mechanism (ECM). The unit root test results indicate that all the variablesare not stationary. However, they become stationary after first differencing and as such they all integrated oforder one. The cointegration test results revealed that the variables have long run relationship. The resultshowed that the first and second lag of agriculture value added impacted negatively on its current. One-periodlag of AfDB loan has significant positive relationship with current value of agriculture value added. The resultshowed that agriculture value added increases by 0.079 percent due to 1 percent increase in lag of AfDB loan. Itwas also found that the lagged values of World Bank and IDA loans exert significant negative impact onagriculture value added. The Parsimonious ECMrevealedthat the model has an adjustment speed of 59.2 percent.On the basis of the findings, it is recommended that policymakers should prioritize the allocation of AfDBloans into productive sectors of the economy with particular emphasis on agriculture with a view to driving thedevelopment process in the real sector.

Keywords: Development finance, agriculture sector, Institutions, African Development Bank, World Bank andvalue addition