A Vector Error Correction Model Approach to Government Agricultural Expenditure on Agricultural Growth in Nigeria Under the Period of Uninterrupted Democracy (1999–2020)

Abstract

This study examined government agricultural expenditure and agricultural growth in Nigeria from 1999–2020. Annual time series data on agricultural GDP growth rate, government agricultural expenditure, inflation, rate, exchange rate, population growth rate, interest rest, export rate, private investment, public investment and foreign direct investment collected from the records of Central Bank of Nigeria (CBN) publications and annual reports, National Bureau of Statistics (NBS) database, Federal Ministry of Agriculture and Rural Development, Food and Agriculture Organization Statistics (FAOSTAT) and World Bank database were analyzed using inferential statistics such as unit root, Johansen co-integration and vector error correction model (VECM). The result of Augmented Dickey Fuller tests showed that all the variables were stationary at first difference and they co-integrate. The result also revealed that agricultural expenditure had positive statistical significant impact on agricultural GDP growth at 1% probability in both short run and long run with coefficients of 0.02270 and 0.003055, respectively. Inflation (0.890787), public investment (0.004469) and private investment (0.004469) were both positive and significant. Acceleration in these variables will lead to acceleration in agricultural expenditure in the short and long run. The study concluded that Government agricultural expenditure will have statistical positive significant impact on agricultural GDP in both short run and long run. Thus, the government should improve on the expenditure on agriculture, in order to boost the growth of this sector, as well as its contribution to the growth of the domestic and national economy, and government expenditure also needs to be closely monitored to ensure its proper full implementation.