Agricultural Sector Performance and Nigeria’s Economic Growth

Abstract

The study investigated the contribution of agricultural sector output to the growth of domestic economy in Nigeria for the period 1980-2014. Specifically, the study examined the causality between agricultural sector and economic growth, as well as the impact of the sector on the growth of the Nigerian domestic economy. Cointegration test, Vector Error Correction Model (VECM) and Granger causality test were utilized in the analysis. The variables employed in the investigation include real gross domestic product (RGDP), value of agricultural output (VAO), foreign private investment (FPI) and financial development (FD). A stationarity test was conducted through the application of the Augmented Dickey-Fuller (ADF) stationarity test, and the result showed that all the variables except RGDP were non-stationary at level; however, the variables such as VAO, FPI and FD became stationary after first differencing. The cointegration result indicated long run equilibrium relationship among the variables under study. The VECM result on the other hand, showed that value of agricultural output (VAO) has positive and insignificant contribution to real GDP. Thus, it is estimated on average that 1% increase in the value of agricultural sector output (VAO) would lead to 1.9% increase in real GDP. Furthermore, the Pairwise Granger causality result showed that significant causality exist between the two variables, with causality running from agricultural output to RGDP. It therefore, implies that agricultural sector output contributed positively and insignificantly to the growth of Nigerian domestic economy. Therefore, the study recommends that government should increase its budgetary allocation on agriculture in order to boost the growth performance of the sector. Similarly, the study recommends that government should strengthen agricultural credit agencies to enable them monitor and ensure efficient disbursement of fund disbursed to farmers in the country. In that, diversion and mismanagement of agricultural sector fund in Nigeria would be discouraged, and hence, agricultural output would improve.