Abstract:

The main aim of this study is to determine the extent to which the growth of the real sector is influenced by the financing capacity of the deposit money banks in Nigeria. Secondary data was collected from. National Bureau of Statistics. Data of this study was conducted using Phillip Perron  test at levels and at first difference. Variables such as lending rate, total bank assets, gross domestic savings, distribution of commercial bank loans and advances to agricultural sector and agricultural sector output. Evidences from the table shows that all variables with the exception of lending rate reveal a non stationary trend process at levels. Hence the hypothesis of unit root cannot be rejected for the series at levels. It was further observed that a trend stationarity process was achieved from all the series at first differencing using 1% level of significance. The study concludes that there is a significant but indirect relationship between bank’s lending rate and the agricultural sector output. Also, total bank asset has a significant and a direct effect on agricultural sector output. The financing capacity of deposit money banks to finance agricultural sector is been determined by the magnitude of total bank asset. The study therefore recommends that deposit money banks should increase the channeling of financial resources to the agricultural sector of the economy.  Also, regulatory frame work that will ensure such financial institutions to channels their resources to the most viable sector should be in place.