Impact of foreign direct investment on the agricultural sector in Nigeria (1981–2017)

Abstract

AbstractThe study investigates the impact of foreign direct investment on the agriculture sector in Nigeria using quarterly time series data for the period 1981–2017 obtained from the Central Bank of Nigeria Statistical Bulletin. Preliminary tests on the time series data were done using the pairwise correlation test, Augmented Dickey–Fuller and Phillips–Perron unit root tests. The results of the Bounds test and Johansen test indicate the presence of cointegration in the model. The A utoregressive Distributed Lagged (ARDL) model, Fully Modified Least Squares (FMOLS) and Dynamic Ordinary Least Squares (DOLS) were used to estimate the parameter estimates of the regression model. Results indicate that foreign direct investment has a positive and significant impact on agricultural sector output. Specifically, the ARDL result shows the impact of foreign direct investment to be more in the short run (0.0024 < 0.05) than in the long run (0.0000 < 0.05). Also, deregulation of the economy has a significant impact on agricultural output over the period under study. The study recommends an increase in tax holidays (from the present 3 years to at least 6 years) to prospective foreign direct investors. There is a need to provide for a short‐ and medium‐term framework that will address increased and emergency funding of the agricultural sector by the government in Nigeria.