ABSTRACT The study examines the determinants of agricultural output based on the empirical evidence of the short-run and long-run interrelationships among capital expenditure on agriculture, inflation rate, external reserve, interest rate, average annual rainfall and food importation using agricultural output as dependent variable. Macroeconomics data from 1970 – 2012 were sourced from Central Bank Statistical Bulletin and National Bureau of Statistics publications of several years. Data were analysed based on Johansen‟s test for multivariate cointegration and the corresponding Error Correction Models approach The result of Johansen test showed that the non-stationary among the variables used can cointegrate. This confirmed a long-run relationship among the variables with two cointegrating equations (p < 0.01). The coefficient of exchange rate of naira to US dollar (p<0.10), value of food import (p<0.01) and external reserve (p<0.01) are significantly influencing agricultural output in Nigeria. The result showed that 81% variation in agricultural output is attributed to exchange rate of naira to US dollar, value of food import and external reserve. The study recommends the need for government to embark on gradual ban on food importation and also to ensure that the naira is not overvalued or undervalued in order to ensure sustainable agricultural output.
TABLE OF CONTENTS
CONTENTS PAGE
Title page Dedication i
Certification ii Acknowledgement iii Abstract iv Table of contents v
CHAPTER ONE: INTRODUCTION 1.1 Background to the study 1 1.2 Statement of the problem 3 1.3 Objectives of the study 5 1.4 Hypothesis of the study 6 1.5 Justification of the study 6 1.6 Plan of the study 6
CHAPTER TWO: THEORETICAL FRAMEWORK AND LITERATURE REVIEW 2.1 Demand pull theory 7 2.1.1 Spatial Analogue Mechanism 7 2.1.2 Monetary Transmission Mechanism 8 2.1.3 Analytical framework 9 2.3.1.1 Model Implementation Technique 9 2.3.1.2 Test for stationarity 10 2.3.1.3 Test for co- integration 11 2.3.1.4 Error correction model 12 2.2 Literature review 14
CHAPTER THREE: METHODOLOGY OF THE STUDY 3.1 Area of study 9 3.2 Type and sources of data 19 3.3 Analytical tools 20 3.4 Description of variables and the a priori expectation 20 3.5 Limitation of data 22
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CHAPTER FOUR: RESULTS AND DISCUSSION 4.1 Descriptive statistics 23 4.2.1 Test for stationarity 28 4.2.2 Johansen co-integration test 29 4.2.3 Co-integrating equation 30 4.2.4 Vector Error Correction Model 32
CHAPTER FIVE: SUMMARY CONCLUSION AND RECOMMENDATION 5.1 Summary 33 5.2 Conclusion 33 5.3 Recommendation 34 REFERENCES 35 LIST OF FIGURES Figure 1 Trend in Real gross domestic product 23 Figure 2 Trend in Interest rate 24 Figure 3 Trend in External reserve 24 Figure 4 Trend in Real food importation 25 Figure 5 Trend in Inflation rate 26 Figure 6 Trend in Exchange rate 26 Figure 7 Trend in External reserve 27 LIST OF TABLE Table 1 Result of stationarity test 29 Table 2 Result of Johansen test 30 Table 3 Result of co-integration 31 Table 4 Result of Error correction model 32
