Econometric Impact of Agricultural Productivity Shock on Nigeria's Economy

Abstract

The concerns about agricultural productivity and its impact on the economy have been a recurring decimal within the sub-Saharan African terrain, given the abysmally low yields of most agricultural enterprises relative to best practice. Even though the continent witnessed some growth recently, it is unclear if these can be attributed to agricultural productivity, particularly in the crop sub-sector, thus suggesting the need for a robust tool in unearthing this fact. Using Nigeria as a case study, this research explored the impact of total factor productivity shocks on crops and those of associated variables on the Nigeria economy. The study employed the computable general equilibrium (CGE) approach based on the current Nigeria’s social accounting matrix. The result showed that total factor productivity (TFP) impacted positively on numerous macroeconomic indices of the economy, comprising absorption, gross domestic product, export sales, labour supply and incomes, including institutional incomes of households across the various quintile categorizations. The results suggest that implementation of 7.23% TFP growth rate, reflective of the agriculture sector growth rate projected under the Economic Recovery and Growth Plan (2017-2020), 50% subsidy as operational under the on-going growth enhancement support scheme and adherence to 10 % funding of the agriculture sector as prescribed by the Maputo declaration, will to some extent, support the achievements Nigeria’s development outcomes, particularly, institutional incomes, in line with its Economic Recovery and Growth Enhancement Plan (2017-2020). However, there is the need to change the direction of subsidy from agro-input support to projects with public good characteristics and for local fertilizer manufacturing, given the need to improve public investments in the agriculture sector and inevitably, the prospect for innovative private investments.