Agricultural sector and gross domestic product in Nigeria: Evidence from co-integration and vector error correction models

Abstract

The main objective of this study is to examined the relationship between agricultural sector and gross domestic product in Nigeria using co-integration and vector error correction model. The data used in this study covers a period 1981-2020 obtained from National Bureau of Statistics (NBS). The study employed Johansen co-integration test, Vector Error Correction Model and Granger Casualty test. The results of the Johansen co-integration test revealed three co-integrating equation indicating the existence of long run relationship between agricultural sector and GDP. The finding also revealed an existence of short run relationship between agricultural sub-sectors and GDP. In addition, the Granger Casualty test revealed that there is a bi-directional relationship between GDP, forestry and fishing and, uni-directional relationship between GDP, crop production and livestock. Based on this findings, it was recommended that government should provide special incentives to farmers and also provides farming input to farmers at subsidized rate, this will go a long way in boosting agricultural activities there by making significant impact on gross domestic product.