Effect of Sectoral Credit to Agriculture and Manufacturing on Socio-Economic Development in Nigeria

This study investigates the effect of sectoral credit to agriculture and manufacturing on socio-economic development in Nigeria. It is motivated by the persistent paradox of substantial financial interventions in these key sectors coexisting with poor development outcomes and the conflicting findings in existing literature. Adopting a quantitative, ex-post facto research design, the study utilizes quarterly time-series data from 1990 to 2024. The Autoregressive Distributed Lag (ARDL) cointegration approach is employed to analyze the short-run and long-run relationships between credit to agriculture (BCA) and manufacturing (BCM) as independent variables, and the Inequality-Adjusted Human Development Index (IHDI) as the proxy for socio-economic development. The ARDL bounds test confirms a significant long-run cointegrating relationship between sectoral credit and socio-economic development. However, the error correction model reveals a complex dynamic: while there is a rapid speed of adjustment (122.7%) back to long-run equilibrium, credit to both the agricultural and manufacturing sectors has a statistically significant negative impact on socio-economic development in the short run. Post-estimation diagnostic tests confirm the model is robust, stable, and free from heteroskedasticity and significant serial correlation. The study concludes that while sectoral credit is a crucial long-term determinant of socio-economic progress in Nigeria, its short-term effectiveness is hampered, likely by allocative inefficiencies or structural bottlenecks. This highlights a critical disconnect between financial policy and real-sector impact. The findings underscore the urgent need for policy reforms focused not just on the volume of credit, but on improving the efficiency, monitoring, and institutional framework of credit allocation to ensure it translates into tangible development