Assessing the asymmetrical effects of exchange rate devaluation on agricultural output: Nigeria in focus

Abstract

The relationship between exchange rate devaluation and the agricultural sector performance has attracted the attention of researchers, since exchange rate is pertinent to agricultural output valuation. On the basis of this, the study examined the effects of exchange rate devaluation on the agricultural output in the case of Nigeria. The study employed the autoregressive distributed lag (ARDL) on the annual time series data covering the period 1980 to 2021 being the sampled period to test the hypothesis. In line to the theoretical expectation, the outcome suggests that the explanatory variables used in the model satisfied the a priori predictions. However, the inverse relationship of the exchange rate lagged by two years’ period also conforms to the expectation, implying that increase in exchange rate reduces agricultural output in Nigeria. The findings therefore suggest the need for government to have sound macroeconomic policies that can guarantee stability in the exchange rate as this will allow the monetary policies more effective to improving the performance of the agricultural sector in Nigeria. In addition, the government should increase its budget for the agricultural sector productivity as the findings attested to the claim.