Agricultural growth and external debt management in developing nations: evidence from Nigeria (1960-2005)

Abstract

Agricultural revenue has not been able to sustain the external debt in Nigeria despite the effort made by the government in facilitating its projects using the external funds. This study adopted external debt elasticity indices as well as an ordinary least square analysis and error correction mechanism to isolate the effect of agricultural output and other macroeconomic variables on external debt using a time series data from CBN and Federal Bureau of Statistics. The result showed that the External debt elasticity indices painted a dark picture at the middle stage of Nigerian economy. Instead of shrinking the volume of the debt, the highly elastic external debt indices indicated that a slight increase in real agricultural GDP from 1960 to 2005 magnified the debt at a more than proportionate size. There was an evidence of massive food importation. Agricultural output, real government expendituret food importt and external reserve each has a direct effect on increasing external debt volume while real private investment expenditure decreases with increase in external debt. It was suggested that agricultural activities in the country be privatized to increase income and food sufficiency and eternal funding should be used effectively in productive economic activities especially agriculture rather than projects that are not technically, economically and financially viable. It is important to set up an anti-corruption mechanism on debt control to ensure that debt services are sustainable. Keywords: External debt management, External debt volume, Agricultural GDP, Agricultural growth, Debt elasticity indices