Macroeconomic Policies and the Agricultural Sector in Nigeria: Evidence From Asymmetric Cointegration

Abstract

This study examines the impact of fiscal and monetary policies on agricultural output in Nigeria. Nearly 800 million people suffer from hunger globally and the vast majority of them live in developing countries (United Nations, 2015). These figures motivate the inclusion of zero hunger, defined as the eradication of hunger and the achievement of food security, as a Sustainable Development Goal (SDG) in the United Nations (UN) Sustainable Development Agenda and feeding of Africa as one of the High 5s (five) of the African Development Bank Agenda. To achieve the sustainable development goals and the goal of feeding Africa for the developing countries there is the need to reinvigorate the agricultural sector of developing countries. The Agriculture sector in most developing countries is largely underdeveloped and relies on primitive tools as against mechanized Agriculture, output per hectare is still very low, access to capital and credit by farmers is very limited and at very high cost, basic amenities and infrastructure that can enhance Agricultural performance is minimal and of very poor quality. It employed the asymmetric cointegration method and documented that macroeconomic policies have mixed impact on agricultural output in Nigeria over the years. Specifically, important monetary variables that drive agricultural output in Nigeria include interest rate , exchange rate and inflation rate while government budgetary provision for the agricultural sector is still abysmal low and far below the Maputo recommendation, thus its non-significance. Institutional quality was found to have a positive relationship with agricultural output in Nigeria; however, it does significantly influence agricultural output. The study therefore concludes that macroeconomic policies both monetary and fiscal are important drivers of agricultural performance in Nigeria and good institutional quality is key in achieving better performance in the agricultural sector in Nigeria. It is against this conclusion that the study recommends that institutional quality need to be strengthen in Nigeria as this may go a long way to assist macroeconomic policies which will engender better performance in the agricultural sector. The government may need to show more political will to meet up with the Maputo (10%) requirement in terms of budgetary provision for the agricultural sector.