Long-run and Short-run Effects of Foreign Trade and Foreign Direct Investment on Agricultural Productivity in Nigeria

Abstract

This study was carried out to assess the impact of Foreign Trade and Foreign Direct Investment on Agricultural Productivity in Nigeria using annual time series data from 1980-2014. Inferential statistics were used for the analysis. Using Augmented Dickey Fuller test, the results shows that all variables were stationary in their first difference and that necessitated the application of Johansen co-integration test. The trace statistics of 59.28557 and maximum Eigen statistics of 32.58741 were greater than the critical values of 47.85613 and 27.58434 at 5% level of significance respectively. Both trace and maximum Eigen value indicates one co-integration equation. Further investigations based on Johansen co-integration test, indicate that long run equilibrium relationship exist among the variables of interest. The long run result shows a positive coefficient of 5.61 and 0.23 for Foreign Direct Investment and non oil export at 1% level of probability respectively. On the other hand, the coefficient of non oil import in the long run was negative (0.015) and significant at 1% level of probability. The Vector Error Correction Model (VECM) results show that there is no short run effect of foreign trade and foreign direct investment on agricultural productivity. It was recommended that importation should be discouraged, especially goods that the nation can produce or goods that the nation has comparative advantage in the production; Non oil goods exportation should be encourage through favorable trade policies, boosting the production of local industries and improving on the quality of Nigeria goods so as to compete favorably in the world market.