Abstract
A strong and an efficient agricultural sector would enable a country to feed its growing population, generate employment, earn foreign exchange and provide raw materials for industries. This study makes a modest contribution to the debates by empirically analyzing the relationship between Nigeria government expenditure on the agricultural sector and its contribution to economic growth, using time series data from 1980 to 2011, obtained from the Central Bank of Nigeria Annual Report and Statement of Account, Journal of Food Research and Federal Office of Statistics. It employs the Engle-Granger two step modeling (EGM) procedure to co-integration based on unrestricted Error Correction Model and Pair wise Granger Causality tests. From the analysis, our findings indicate that agricultural contribution to GDP (Gross domestic product) and total government expenditure on agriculture are cointegrated in this study. The speed of adjustment to equilibrium is 88% within a year when the variables wander away from their equilibrium values. Based on the result of granger causality, the paper concludes that a very weak causality exist between the two variables used in this study. Therefore, the policy implication of these findings is that any reduction in government expenditure on agriculture would have a negative repercussion on economic growth in Nigeria. Key words: Agriculture, causality, gross domestic product, total expenditure.
Highlights
The study of economic history provides us with ample evidence that an agricultural revolution is a fundamental pre-condition for economic development (Eicher and Witt, 1964; Oluwasanmi, 1966; Jones and Woolf, 1969)
At 10% level of significance and 2 lag lengths total government expenditure on agriculture (TGA) is found to granger cause AGDP with no reverse causality from AGDP to TGA
At 10% level of significance and 3 lag lengths, a unidirectional causality running from AGDP to TGA with no reverse causality from TGA to AGDP was found
Summary
The study of economic history provides us with ample evidence that an agricultural revolution is a fundamental pre-condition for economic development (Eicher and Witt, 1964; Oluwasanmi, 1966; Jones and Woolf, 1969). According to Anyanwu et al (1997) as reported by Ebomuche and Ihugba (2010) agriculture involves the cultivation of land, raising and rearing of animals for the purpose of production of food for man, feed for animals and raw materials for industries. It involves cropping, livestock, and forestry, fishing, processing and marketing of these agricultural products. Nigeria is generously endowed with abundant natural resources. With its reserves of human and natural resources, Nigeria has the potential to build a prosperous
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