Macroeconomic environment and agricultural sector growth: the nigerian experience

Abstract

Several macroeconomic policies have been used in Nigeria, which have both directly and indirectly influences on agricultural output growth. Therefore, this study examines the impact of macroeconomic policies on agricultural output growth in the Nigerian economy using time series data from 1986-2011. The methodology employed in this study includes; ADF test, VAR model impulse response function and granger causality test. It was found that, negative relationship existed between real GDP on agricultural product and credit to agricultural sector and interest rate, while positive relationship existed between real GDP on agricultural product and exchange rate, government expenditure on agriculture and inflation rate in Nigeria The granger causality result shows that, a unidirectional relationship existed mostly in the variable of interest rate in this study. Base on the findings, exchange rate management has not encouraged agricultural export recently. Also credit to the sector had no significant impact on agricultural output growth; its accessibility depends on how high the interest rates are. The paper recommend that government through her various agricultural institutions should implement on macroeconomic policies which encourage reduction in the level of inflation and boost the level of investment in agriculture through availability of agricultural credit to farmers; and have significant impact on agricultural output in the long run thereby stimulates government expenditure in this sector, and guarantee increase in agricultural output growth in the Nigerian economy.