An Empirical Analysis of Selected Macroeconomic Indicators and Agricultural Value Added in Nigeria

Abstract

This study seeks to establish the relationship between agriculture value added and some selected macroeconomic factors in Nigeria from 2000-2022. Augmented Dickey Fuller unit root tests, co-integration test with Auto regressive Distributed Lag Bound test, Auto regressive Distributed Lag-Error Correction Model analysis were carried out on the data for the variable. The results revealed that GDP per capita (LNGDPC) (proxy for market size) has negative affect on agriculture value added while exchange rate (LNREXR), foreign direct investment (LNFDI) (proxy for technology), and index of human capital per person (LNIHC) (proxy for labour) exhibit positive impact on agriculture value added in Nigeria in the long run. As such, Nigerian government should promote policies (security issues) that are directed at attracting more foreign direct investment inflow to the agricultural sector so as to boost technology and agriculture value added. Similarly, it is critical to invest in human capital through training and education, given that agricultural technology is rapidly evolving. Lastly, through fiscal and monetary policies management, it is also vital for Nigerian government to increase agriculture value added by controlling inflation and building a stable exchange rate that will enhance foreign exchange earnings, encourage flexibility and competitiveness of farmer.