Managing the Macroeconomic Uncertainties for optimal Performance of the Agricultural Sector in Nigeria

Abstract

Investment in the agricultural sector had long been recognized as a critical driver of sustainable economic growth, necessitating deliberate policy support to enhance overall economic performance. However, persistent macroeconomic uncertainties—particularly fluctuations in consumer price index, exchange rates, and interest rates—had posed significant challenges to many developing economies, including Nigeria. These concerns continued to attract the attention of economic researchers and policymakers alike. This study investigated the influence of selected macroeconomic variables on agricultural productivity in Nigeria. It utilized secondary data obtained from the Central Bank of Nigeria (CBN) Statistical Bulletin, covering the period from 1986 to 2023. The time series data were subjected to rigorous diagnostic and stability tests and were found suitable for empirical analysis. An Auto-Regressive Distributed Lag (ARDL) model was employed to assess the short-run and long-run relationships between macroeconomic variables and agricultural productivity. The empirical results, as indicated by the F-statistics and associated probability values, confirmed that the selected macroeconomic indicators exerted a statistically significant influence on agricultural productivity in Nigeria. Notably, interest rates exhibited a negative and significant relationship with agricultural productivity, underscoring the adverse effects of high borrowing costs on sectoral performance. Based on these findings, the study recommended that interest rates on agricultural loans should be consistently and deliberately reduced to stimulate investment in the agricultural sector and enhance its contribution to Nigeria’s economic growth.