Abstract
This study examining the impact of foreign direct investment (FDI) and other macroeconomic variables on agricultural growth in Nigeria from 1981 to 2014, using annual time series data from Central Bank of Nigeria (CBN), World Bank and the United States of America (US) Federal Reserve System. Data was analysed using trend analyses, unit root tests, co-integration tests, ordinary least squares (OLS) regression and Granger causality tests, while the hypothesis was tested with F-test. Results revealed very low FDI inflow into agriculture, not commensurate with the share of agriculture to GDP. All significance were taken at the 5% probability level, i.e. p<0.05. There was positive non-significant relationship between agricultural growth and FDI in agriculture, meaning that FDI in agriculture has no direct impact on agricultural growth or the impact on agricultural growth is masked by other macroeconomic variables. Significant positive relationship exists between agricultural growth and macroeconomic instability, while interest rate differential had a significant negative relationship. There was unidirectional causality running from FDI in agriculture, stock of gross external debts, and variability of consumersâ price index to agricultural growth, while agricultural growth was significant in granger causing macroeconomic instability. Recommendations are government should not involve itself in business, but seek for and encourage more FDI for the agricultural sector, encourage joint ventures between foreign and domestic investors/entrepreneurs, ensure stability and consistency in its macroeconomic policies, while monetary policy rates should be fixed in such a way that it would attract the right amount of investments in agriculture.
Highlights
Nigeria is one of the economies with great demand for goods and services and has attracted some foreign direct investment (FDI) over the years. Danja (2012) explained that the amount of FDI inflow into Nigeria reached United States of America (US)$2.23 billion in 2003 and rose to US$5.31 billion in 2004 (a 138% increase), which rose again to US$9.92 billion in 2005 and declined slightly to US$9.44 billion (a 5% decrease) in 2006
This study was carried out to primarily analyse the impact of FDI inflows to agriculture on agricultural growth, measured by agricultural output (GDP) in Nigeria. It describes the trends in agricultural growth and FDI in agriculture vis-à-vis other sectors of the Nigerian economy and empirically analysed the effects of FDI in agriculture and other macroeconomic variables such as exchange rate, interest rate differential, stock of gross external debts, macroeconomic instability, political instability and inflation, represented by the annual variability of consumer price index as independent variables on agricultural growth, the dependent variable
It examined the causal relationship between agricultural growth and FDI in agriculture and the other macroeconomic variables listed above in Nigeria within the years from 1981 to 2014
Summary
Nigeria is one of the economies with great demand for goods and services and has attracted some FDI over the years. Danja (2012) explained that the amount of FDI inflow into Nigeria reached US$2.23 billion in 2003 and rose to US$5.31 billion in 2004 (a 138% increase), which rose again to US$9.92 billion (an 87% increase) in 2005 and declined slightly to US$9.44 billion (a 5% decrease) in 2006. Nigeria is one of the economies with great demand for goods and services and has attracted some FDI over the years. Fingar (2015) showed that Africa witnessed the largest increase in inward investment, with US$87 billion of FDI announced in 2014. In the former, for instance, agricultural FDI inflows in 2008-2010 represented an average increased share of 1.0% of gross fixed capital formation, compared to 0.1% in developed countries. It has become essentially imperative to empirically fill the knowledge gap that exists by establishing the trend of FDI and that of agricultural growth generally in developing countries and Nigeria in particular
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