Federal Government Expenditure on Agriculture and Agricultural Outputs in Nigeria

Abstract

Every industrialised country today passed through the agrarian era. In fact, the industrial sector takes its root from the agricultural sector. In a developing nation, government expenditure power is very central to all facets of development including agriculture. In view of this the study empirically evaluated the nexus between Federal Government Spending on the four sectors (crops, livestock, forestry and fishery) of agriculture as its determined agricultural output. The study employed secondary data spanning from 1981 – 2019 sourced from the CBN Statistical Bulletin, 2019 and World Bank Development Indicators, 2019. ADF and Unit Root testing technique, Johanson co-integration test, error correction model (ECM) and Granger causality test were employed as analytical tools in the course of the study,. Each of the four sectors of Agriculture was explained by total government expenditure on agriculture, interest rate, Annual Rainfall, official exchange rate and population growth. Federal government capital expenditure was found to be positively related to agricultural output, because an increase in government expenditure on agriculture is likely to lead to a multiple increase in agricultural output. The ECM model showed that interest rate on bank loan has significant positive impact on each agricultural output, annual rainfall also has a significant positive impact on each agricultural output while official exchange rate has a negative but significant impact on each agricultural output. The policy imports of this study is that governments at all levels should seek more productive ways to invest in the agricultural sector by upgrading to mechanised farming, providing fertilizers for improved yields, providing high-yield seedlings to ensure self-sufficiency; The commercial banks should complement government’s effort in ensuring that interest on loans to the agricultural sector are favourable as this would encourage more investors in the sector, among others.