The Impact of Public Agricultural Expenditure on Agricultural Output in Nigeria (1981-2014)

Abstract

This study investigated the impact of public agricultural expenditure on agricultural output in Nigeria for the period 1981 to 2014 with time series data obtained from the Statistical Bulletin and Annual Reports of the Central Bank of Nigeria, 2014. The Augmented Dickey-Fuller test, Johansen Co-integration test, Error Correction Method (ECM) and Granger Causality test were employed as analytical tools in the course of the study. Agricultural output was explained by public agricultural expenditure, commercial bank loans to the agricultural sector and interest rates. The Johansen Co-integration test revealed that there exists a long-run relationship between agricultural output, public agricultural expenditure, commercial bank loans to the agricultural sector and interest rates in Nigeria. The results of the parsimonious ECM model showed that public agricultural expenditure has a significant negative impact on agricultural output while commercial bank loans to the agricultural sector and interest rate have insignificant positive impacts on agricultural output in Nigeria. The value of the coefficient of determination (R2) of 0.630677 showed that the exogenous variables in the ECM equation viz; public agricultural expenditure, commercial bank loans to the agricultural sector and interest rate explains over 63% of the systematic variations in agricultural output. The error correction term was highly significant at the 5% level with the appropriate negative sign, indicating that the adjustment is in the right direction to restore the long-run relationship. The study concluded that the negative impact of public agricultural expenditure on agricultural output may have resulted due to discrepancies that existed between the amount allocated to the agricultural sector and the amount actually spent on the sector in the country. We therefore recommended that monitoring agencies be established by the federal government to ensure that the amount allocated to the agricultural sector is actually and judiciously spent on the sector in Nigeria.