Impact of Government Expenditure on Agriculture on Agricultural Sector Output in Nigeria (1981-2018)

International Journal of Research and Innovation in Social Science (IJRISS) | Volume IV, Issue X, October 2020 | ISSN 2454–6186

Impact of Government Expenditure on Agriculture on Agricultural Sector Output in Nigeria (1981-2018)

 EDEH, Chukwudi Emmanuel, Ph.D.^1, OGBODO, Joseph Charles Ph.D.², ONYEKWELU, Uche Lucy Ph.D.^3
1,2Department of Economics, Faculty of Social Sciences Enugu State University of Science and Technology, Agbani Enugu
³Department of Accountancy, Faculty of Management Sciences Enugu State University of Science and Technology, Agbani Enugu

Abstract: The present study evaluated the impact of government expenditure on agriculture on agricultural sector output in Nigeria for the period 1981-2018with time series data obtained from the Central Bank of Nigeria Statistical Bulletin and Annual Reports. Agricultural value added was specified as a function of labour force, capital expenditure, recurrent expenditure, agricultural loans, average annual rainfall, interest rate and economic reforms. The Augmented Dickey-Fuller unit root test used to test for stationarity of the data reveals that the time series data were stationary at I(0) and I(1). Bound test cointegration indicates a long run relationship in the model. The result of the ARDL model technique analysis reveals that capital expenditure is positively related to agricultural output and it is also statistically significant at 5 % in the current year (P(t) = 0.0080). It was understood that the impact of capital expenditure on agricultural output begins to weaken after one year (P(t) = 0.0815). However, recurrent expenditure has a negative and insignificant impact on agricultural output (P(t) = 0.6657). The study recommends that governments at all levels should intensify and increase expenditure on capital items in Agriculture sector. Procurement of capital expenditure by government should be effectively monitored. This will ensure that the right and durable equipment are procured. With respect to recurrent expenditure which negates output in the agricultural output, there is need for reorganization of overhead expenditures in the sector. Close monitoring and cut of overhead spending in the agricultural should be instituted in all government agencies related to agriculture in Nigeria.

Keywords: Government expenditure, ARDL, Bound test, Agricultural sector Output

I. INTRODUCTION

Government involvement in economic activities could be traced to the emergence of the Keynesian school of thought in the early 1930s. The introduction of fiscal policy as a tool of macroeconomic management brought about the use of public expenditure to achieve stability in the economy. Fiscal policy refers to the use of government spending and tax policies to influence economic conditions especially macroeconomic conditions, including aggregate demand for goods and services, employment, inflation, and economic growth. It involves government’s use of its expenditure and revenue plans to achieve desirable effects while avoiding those effects that are not desirable on a nation’s output, production, and employment levels.

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