Analysis of Credit Access and Its Effect on Agricultural Output in Ogun State

This study analyses credit access patterns and their effect on agricultural output among farmers in Ogun State, South West Nigeria. Agricultural credit is a foundational input that enables farmers to purchase improved seeds, fertilisers, and equipment needed to increase production. Despite the presence of the Bank of Agriculture, cooperative credit societies, and microfinance institutions in Ogun State, formal credit access among smallholder farmers remains limited. This study uses a cross-sectional survey design, collecting data from 220 farmers in Abeokuta South, Ikenne, and Ijebu North local government areas. Credit access is measured by whether the farmer received formal or informal credit in the past two years and the credit amount obtained. Agricultural output is measured by total farm revenue and yield per hectare. Multiple regression and instrumental variable estimation address potential endogeneity of credit access. Findings reveal that credit access is associated with a 28 percent increase in agricultural output, driven primarily by higher fertiliser and improved seed expenditure among credit recipients. Formal credit recipients show stronger output effects than informal credit users. Collateral requirements, complex application procedures, and high interest rates are the most frequently cited credit access barriers. The study concludes that credit access significantly improves agricultural output in Ogun State. It recommends simplified loan application processes, group lending schemes for smallholders, and interest rate subsidies for agricultural loans through the Bank of Agriculture.

Keywords: agricultural credit, farm output, Ogun State, smallholder farmers, microfinance.