Agriculture in Place of Crude Oil Production as an Alternative Income Earner for Nigeria: A Cointegration Analysis Approach

Abstract

Aims: To examine the contribution of agriculture as an alternative to crude oil production on the Nigerian economy using cassava production as proxy. Study Design: Johansen-Juselius co-integration procedure and error correction models are adopted. Place and Duration of Study: The data used in this study are from secondary sources. Data on gross domestic product per capital (GDPPC), and naira exchange rate (ER) are obtained from NGA_Country Meta Data_Agric 2013, while that on cassava production (CAS) are obtained from FAO Statistics Division 2013. Data covered 1980 and 2010. Methodology: The study uses Johansen-Juselius co-integration procedure to examine a possible long run equilibrium among GDPPC, CAS, and ER. Unit root, Granger-causality, and cointegration tests were conducted. Results: All variables are integrated of order one. Causality test indicates that both CAS and LEXH Granger cause GDPPC. The causality is one-way. Both trace and max-eigenvalue tests indicate 1 cointegrating equation with P=0.0296 and 0.0255 respectively. Johansen-Juselius co-integration procedure identified a long run equilibrium among gross domestic product per capital, cassava production, and naira exchange rate. GDPPC adjusts to disequilibrium at 21%, CAS adjusts at 9.2% while ER adjust to disequilibrium at a rate of 11% each year. The result shows that a unit increase in CAS produced over last period production will increase GDPPC by 5.6733 units, while a unit increase in ER over last period value will reduce GDPPC by 1.3098 units. Conclusion: The adjustment rate of disequilibrium by LCAS and LGDPPC are statistically significant good policies to encourage the production of cassava should be put in place to boost employment opportunities and increase revenue to the government.