Roles of Macroeconomic Variables on Agricultural Diversification in Nigeria

Abstract

Abstract:The study examined the trend in agricultural diversification index from 1960 to 2014 in Nigeria. It also determined the influence of some macroeconomic variables on the estimated index. Augmented Dickey-Fuller-GLS unit root test showed that all series were integrated of order one. The long-run and short-run elasticity of the agricultural diversification index with respect to the specified macro-economic variables were determined using the techniques of co-integration and error correction models. The trend analysis revealed that, the country has witnessed appreciable level of agricultural diversification with 0.3%, 0.5% and 2.3% annual exponential growth rate in entropy diversification index, Herfindhal diversification index and Ogive diversification index respectively. The estimation of the error correction model supported the long run stability of agricultural diversification index in Nigeria. The empirical results revealed that, in the long run inflation, viable manufacturing sector, credit to agricultural sector, external reserves, per capita income, unemployment and energy consumption are positive drivers of agricultural diversification; whereas, crude oil prices, lending capacity of commercial Bank, foreign direct investment in agricultural sector and non-oil import are long run negative drivers of agricultural diversification in Nigeria. However, in the short run, inflation, external reserves and non-oil imports stimulated agricultural diversification; while energy consumption and manufacturing capability retard agricultural diversification in the country. A ten-year forecast was made on the estimated diversification indices and the result showed a progressive growth. The empirical results were further substantiated by the variance decomposition and impulse response analysis of the dependent variable with respect to changes in the explanatory variables. Results obtained were in line with the previous results. It is recommended that, the Nigeria government should re-aligned its macroeconomic policies to achieve stability in inflation rate, external reserves, industrial production, electricity consumption, agricultural credit institution if sustainable agricultural diversification is to be achieved in the long run.

The Impact of Exchange Rate Dynamics on Agricultural Output Performance in Nigeria

“…While maximum lending rate is the only significant negative driver of agricultural output, the ACGSF loan does not become a positive determinant of agricultural output share until the asymmetric effect of real exchange rate movement was accounted for, though the loan has not yet yielded the desired outcome. As far as the linear relation between exchange rate and agricultural output/exports is concerned, these results gave empirical support to the previous findings of Obayelu and Salau (2010), Omojimite (2014), Akpan et al (2015). In addition, though the effect of real appreciation is larger than the effect of real depreciation, the present study could not find any evidence in support of the asymmetric effect of real exchange rate dynamics on agricultural output performance in the Nigerian economy.…”

“…Brownson et al (2003) showed that in both long run and short run, real exports, real external reserves, inflation, and external debt have significant negative effects on agricultural productivity, whereas industrial capacity utilization and nominal exchange rate promote agricultural productivity in Nigeria. On the other hand, Akpan et al (2015) reported that longrun positive drivers of agricultural diversification include inflation, viable manufacturing sector, credit to agricultural sector, external reserves, per capita income, unemployment and energy consumption, whereas crude oil prices, lending capacity of commercial banks, FDI in agriculture, and non-oil imports constitute negative long-run drivers in the Nigerian economy. Omojimite (2012) found that the volume of credit to agricultural sector, deficit financing and institutional reform positively and significantly affect agricultural output.…”

“…Brownson et al (2003) investigated the effect of macroeconomic variable fluctuation on agricultural productivity in Nigeria over the period of 1970 and 2010 using the techniques of cointegration and error correction model (ECM). In a similar vein, Akpan et al (2015) adopted the techniques of cointegration and error correction model (ECM) to quantify the role of macroeconomic variables on agricultural diversification in Nigeria over the period of 1960 to 2014. Brownson et al (2003) showed that in both long run and short run, real exports, real external reserves, inflation, and external debt have significant negative effects on agricultural productivity, whereas industrial capacity utilization and nominal exchange rate promote agricultural productivity in Nigeria.…”

Remittances and agricultural productivity: the effect of heterogeneity in economic activity of farming households in Ghana

“…Of the few studies on remittances and agricultural productivity globally, only three (Zahonogo, 2011;Akpan et al, 2014;Dedewanou and Kpekou Tossou, 2022) are on countries in SSA and with inconclusive results (see Zahonogo, 2011), using household data from two villages in Burkina Faso found remittances and migration to negatively impact on agricultural productivity. Akpan et al (2014) examine the relationship at the macroeconomic level for Nigeria and find that in the short run remittances have a positive and significant effect on agricultural productivity, but this effect disappears in the long run. A recent study by Dedewanou and Kpekou Tossou (2022) on farming households in Burkina Faso also find that although remittances increase labor input there is a negative relationship between remittances and total agricultural productivity, confirming the findings of Zahonogo (2011).…”

The Trend in Fertilizer Consumption and Its Impact on Crop Outputs in Nigeria

“…However, experts have asserted that one of the ways to tackle the issue of food insecurity is to intensify agricultural production (Akpan et al, 2015a;Akpan et al, 2015b). Besides Morris et al (2007) opined that the intensification of crop-based agriculture has been associated with a sharp increase in the use of chemical fertilizer.…”