EMPIRICAL EXAMINATION OF CAUSAL RELATIONSHIP BETWEEN FINANCIAL DEVELOPMENT AND AGRICULTURAL SECTOR OUTPUT IN NIGERIA
Economists have long held the view that the development of the financial system and economic development are closely intertwined. This study therefore sought to examine empirically the causal relationship between financial development and agricultural sector output in Nigeria from 1986 to 2017. The ex-post facto research design was employed and the annual time series covering 1986 to2006 obtained from CBN statistical bulletin of 2006. Thus, 2017 CBN statistical bulletin is not yet published and extrapolation was used in projection of 2017provisional data that was used in this study in consideration of the existing trend. Statistical tools of Unit Root test, Engle –Granger co- integration test, ECM test and Granger causality tests were employed in analyzing the collected data. Descriptive statistics and inferential measure were used in analyzing the aggregated causality results to arrive at conclusion. In the model, the financial development is proxied by financial deepening, financial inclusion, financial liberalization, financial intermediation cashless policy, consolidation reform and the various indicators of these proxies for the independent variables were used in the econometrics modeling of financial development and agricultural sector output nexus. Results from the study revealed the existence of (1) unidirectional causality from AOG to PLR, RFS, RMS, RPSC, TLA and TBD, thus, there is evidence of demand following hypothesis. (2) Unidirectional causality from ACGSF, ATM, POS to AOG, hence, there is evidence of supply leading hypothesis,(3) Bi-directional causality between EXR, MPT, and AOG, hence, there is evidence of feedback hypothesis. (4) There is no evidence of causality between DDR, PLSE, LQR, LDR, MCB and AOG, hence, there is existence of neutral hypothesis. The researcher amongst others recommends that the government in targeting economic growth and development should ensure the enhancement of agricultural sector output considering the fact that it spurs and predicts most of the financial development variables in Nigeria.