Macroeconomic Impact of Agricultural Commodity Price Volatility in Nigeria

Abstract

Introduction: The Nigerian economy has remained consistently heavily dependent on earnings from commodity exports which constitute over 95% external earning and 85% of budgetary and fiscal financing. Agricultural commodity exports have witnessed a significant price swings in the international market in the past few decades resulting in food price hike and macroeconomic distortions in economies heavily dependent on food imports. Methods and Materials: The study assesses the macreoconomic impact of agricultural commodity price volatility in Nigeria from 1970-2017 using Autoregressive Distributive Lag (ARDL) cointegration and Impulse-Response Function (IRF) analysis. The study adopted an atheoretical statistics to ascertain the evidence of swings in macroeconomic aggregates. Results: There was evidence of persistent fluctuations in the macroeconomic variables observed, implying that external price shocks exert a significant impact on the macroeconomic management, since bulk of national budgetary and fiscal financing is from commodity exports. Conclusion: The study found that volatile agricultural prices were responsible for a meager 2% of macroeconomic fluctuations. The empirical evidence corroborates the statistics showing that the share of agriculture in primary commodity exports has consistently remained less than 3% since the advent of crude oil. Furthermore, the study found that the swings in agricultural prices impacts foreign reserves and inflation more significantly and earlier in the time horizons than other macroeconomic aggregates.

Exploring Growth Inducing Knowledge in Africa: A System GMM Approach

“…The former, due to its weak value addition commands low and unstable prices in the global market place while the latter due to its value-addition and knowledge-based contents does not suffer from scarcity, exhibits a weak diminishing returns and attracts high prices in the global market. The evidence also supports the assertion by Prebisch (1950), Singer (1950 and Ogundipe et al (2019). To ascend on the track of competitiveness, there is need to channel investment into the development of technological productivity by conscious investment in the expansion of technological knowledge.…”

“…These proxies addressed the three main institutional framework including political, economic and legal framework. The World Bank's compilation of institution measures was chosen because they are consistent, best and more suitable for crosscountry analysis (Sani, Ismail & Mazlan 2019;Kar and Saha 2012;Ogunniyi et al, 2020;Azuh et al, 2019;Ogundipe et al, 2019). Although, the WGI institution variables lack sufficient variations, evidence from literature portrayed its reliability, and of course more comprehensive than that provided by the U.S Freedom House 1 and Kunčič (2014).…”

“…Where Y it denotes GDP growth rate, it is the per cent increase in annual GDP which reflects the productiveness of an economy (Ogundipe et al, 2019). ρY itÀ 1 represents the GDP growth rates lagged one year or the initial value of GDP.…”

“…X it represents the control variables included in the model that are determinants of output growth in the African economies. G it is the composite of the institutional strength indictor measured as the first principal component of indicators of WGI governance indicators, including government effectiveness, rule of law, control of corruption, political stability, regulatory quality, and voice and accountability (See Ogundipe, Oye, Ogundipe et al, 2019). η i is the unobserved country-specific effects.…”

“…However, a clear transmission of how knowledge drivers culminate into innovation is required to enable developing Africa economies reinvent the structure of institutions and organizations to promote growth and channel investment appropriately. Although, the relevance of knowledge and competitive innovations for economic agents and economies of African states, respectively, have received strong confirmation in literature and needs not to be affirmed using new data and figures (Kefela, 2010;Asongu 2018;Oluwatobi et al, 2016;Ogundipe et al, 2019) However, the experiences in most African economies and the attention directed towards knowledge creation leaves much concern and one doubt if the policy makers really understand the path to economic competitiveness. The concept of innovation is often misconstrued in most cases as a one-step thing rather than an outcome of a coordinated and coherent (knowledge processes) intervention; it simply implies that growth succeeds a conscious and concerted knowledge accumulation process.…”