Effect of Government Expenditure Components on Agricultural Productivity in Nigeria (1981-2017)

Olasusi Akinwale ,Akodu Patrick Ayodele

doi:10.7176/jesd/10-18-01

Abstract

We analyzed the relationship between government expenditure components and agricultural productivity in Nigeria by estimating the effects and their causal interaction over the period 1981-2017. The study employed the Autoregressive Distributed Lag (ARDL) technique to identify the existence of cointegration while going further by estimating the short and long run effects of government expenditure components on agricultural productivity as well as the Granger causality and Block Exogeneity tests under the Vector Autoregressive (VAR) models to analyze their causal relationship. Data were sourced from the Central Bank Statistical Bulletin, 2017 edition. The ARDL results revealed that there exists a long run relationship among the variables and showed that various components of government expenditure can positively improve agricultural productivity in Nigeria, but the current effects of these variables on agricultural productivity appears insignificant. The results revealed that the government expenditures on health and infrastructure have little effect on agricultural productivity and expenditures on education have a reduction effect on agricultural productivity in both short and long runs in Nigeria; highlighting the disconnection between agricultural knowledge acquisition and its implementation. Causality tests also showed that expenditures on education, health and infrastructure can help improve agricultural productivity in Nigeria. The study recommended effective policy implementation through a complete overhaul of the various government institutions and agencies responsible for implementation, revenue collection and monitoring of government project as it relates to agricultural development as well as encourage effective manpower development in the agricultural sector to boost productivity. Keywords: Agricultural credit; Agriculture productivity; Autoregressive Distributed Lag, Government Expenditure, Inflation; Vector Autoregressive model. DOI : 10.7176/JESD/10-18-01 Publication date :September 30 th 2019

Highlights

The importance of agriculture to every economy cannot be understated or overemphasized
In order to look at the differential effects of fiscal policy component, government expenditure is disaggregated into health, infrastructure and education expenditures as this decomposition of fiscal policy variable will help to assess the effects of fiscal policy shocks better on agricultural output
Government Expenditure on education, Government Expenditure on infrastructure and Real Agricultural output are all platykurtic with flatted curve

Summary

Introduction

The importance of agriculture to every economy cannot be understated or overemphasized. Even right before the discovery of oil in the early 1960s, the oil boom of the 1970s and till date, agriculture has remained an important economic nerve-center to Nigerian economic development This role is enormous since agriculture is undoubtedly the main source of food and employment for the largest part of the population. In the 1960s,over 80% of the rural Nigerian population was engaged in different types of agricultural activity and between 1963 and 1964; the sector contributed more than 65% of the nation’s Gross Domestic product (GDP) (Yesufu 1996, Anyanwu et al 1997) Recently, these roles seem to elude the country due to the neglects resulting from the dependence on oil since the oil boom of 1990s; the global economic crisis of the 1980s resulting from the deterioration in the nation’s terms of trade, and the continuous reduction in government finance to the sector (Iwayemi 1994, Ijaiya 2000). This is because agricultural financing have been relegated to the backward end despite the huge revenue been generated from oil, resulting into a critical malfunctioning of the Nigeria’s agricultural sector (Oji-Okoro, 2011; Hammond, 2003)

Methods

Results

Conclusion