The Impact of Exchange Rate Dynamics on Agricultural Output Performance in Nigeria

Abstract

The study investigated the possible asymmetric effect of real exchange rate dynamics on agricultural output performance in Nigeria over the period of 1981 to 2016 by collecting data from secondary sources. The study employed a combination of stationary and nonstationary variables as was found out through the ADF unit root test. Based on the Bounds test for cointegration, a long-run relationship was absent between real exchange rate and agricultural output, irrespective of specifications. Generally, the result of model estimation showed that the significant drivers of agricultural output are real exchange rate (log-levels), real appreciation and depreciation (after some lags), industrial capacity utilization rate, and government expenditure on agriculture (after some lags). ACGSF loan exerted positive and insignificant influence on agricultural output. In addition, though the effect of real appreciation was larger than that of real depreciation, the present study could not find any evidence in support of the asymmetric effect of real exchange rate dynamics on agricultural output performance in the Nigerian economy. It is therefore suggested that fiscal and monetary authorities in Nigeria should work in unison at ensuring that the full potentials of the agricultural sector are harnessed for the growth and development of the country.