Determinants of Aggregate Agricultural Supply Response in Nigeria (1960-2010)

The study investigated the determinants of aggregate agricultural supply response in Nigeria for the period spanning 1960-2010. The data were sourced from Central Bank of Nigeria Statistical Bulletin. The objective of the study was to determine the macroeconomic policy mix contributing to the aggregate supply response or aggregate agricultural output of Nigeria. The objective was achieved using regression analysis. The variables were tested for unit root and co-integration tests to determine the stationarity and long run equilibrium relationship between variables respectively. The results found out that 98 percent of the variations in aggregate agricultural output were explained by explanatory variables [inflation (infl), Exchange rate (Exc), foreign direct investment (fdi), interest rate (int), agricultural guarantee credit scheme fund (agcsf), recurrent expenditure (rec) and capital expenditure (cap)]. The results also revealed that exchange rate, foreign direct investment, agricultural guarantee credit scheme fund, Recurrent and capital expenditures were positively related to aggregate agricultural supply response while inflation and interest showed inverse relationship to aggregate agricultural output. The results concluded that FDI, INTR, AGCSF and REC were macroeconomic policy variables that contributed significantly to the aggregate agricultural output at between 5 and 1 percent probability levels respectively. Also, the results of causality test revealed a bi-directional relationship between GDP and AGR. The study therefore, recommended that for Nigerian government to achieve the desired transformation agenda on agricultural output, the significant macroeconomic policy variables are germane to sustainable economic growth and development and hence should be properly addressed