Investments in agriculture, agriculture sector performance and economic growth nexus in Nigeria: ARDL bound testing evidence

Abstract

This research examined the federal government and private sector investments in agriculture, agriculture sector performance and economic growth nexus in Nigeria and widens the scope of the research by including more explanatory variables. Annual series data for the period 1980–2019 were obtained and ARDL approach to cointegration was utilized to examine the issue. Results revealed positive and negative relationships; but the variables were cointegrated, thereby fulfilling the mandatory requirement for estimating long run relationship among the variables. The error correction term is negative and significant but less than 1; thereby indicating that the speed of adjustment towards long run equilibrium was very high at 97% annually, if any shock(s) occurred. Findings showed that in the long run, government capital expenditure on economic services (lnGCEES), non-oil export (lnNOE), and agriculture, real GDP (lnAGDP) had positive relationships and statistically significant impact while, agriculture, value added %GDP (lnAGV) and value of loans guaranteed under ACGSF (lnACGSF) had negative relationships but significant impact on economic growth in Nigeria over the period of study. However, non-oil revenue (lnNOR) exhibited positive but insignificant relationship; while commercial bank loans and advances to agriculture (lnCBLA), government recurrent expenditure on agriculture (lnGEA) and agricultural output (lnAGOU) exhibited negative and insignificant relationships with economic growth.The model passed the entire diagnostic tests comprising serial correlation, normality, and heteroscedasticity. Stability tests of cusum and cusum squares were stable, which show the fitness, strength and reliability of the model. The policy implication of these findings is that commercial bank loans and advances to agriculture, the value of loans guaranteed under the ACGSF and other agricultural funding options such as the current Central Bank of Nigeria (CBN) driven Anchor borrowers programme, Agriculture credit to small and medium enterprises scheme (AGMEEIS) amongst others; and the recently revitalized National land development programme should be broadened, vigorously promoted and monitored to enhance the efficacy and performance of investments in agriculture and the agricultural sector; through increased value addition, agricultural exports and non-oil revenue and increased agricultural budgetary allocation for Nigeria’s economic growth and development.