EXCHANGE RATE MANAGEMENT AND AGRICULTURAL EXPORT FINANCING IN NIGERIA

Abstract The agricultural sector's role in Nigeria's economic development, employment generation, and food security is pivotal. Despite its importance, the sector encounters persistent challenges, particularly in obtaining sufficient financial resources for sustainable growth. One crucial challenge is the agricultural sector's susceptibility to fluctuations in exchange rates, which can significantly impact the availability and cost of bank credit, ultimately affecting its ability to generate export revenue. In light of these issues, this study aimed to explore the relationship between exchange rate management and agricultural export financing in Nigeria. The study employed time series data covering exchange rates, interest rates, inflation, and agricultural export financing from 2000 to 2022, sourced from the Central Bank of Nigeria Statistical Bulletin. Fully Modified Ordinary Least Squares (FMOLS) methodology was adopted to address endogeneity concerns in the time series data, accounting for simultaneous relationships between variables. The study's findings indicated that exchange rate management plays a significant role in determining agricultural export financing in Nigeria (β1=0.0135; P=0.0045). Therefore, it is recommended that the Central Bank of Nigeria (CBN) adjusts interest rates to stabilize the Naira, as fluctuations in interest rates can impact the cost of borrowing for exporters. A currency depreciation accompanied by higher interest rates may increase the cost of agricultural financing.