THE IMPACT OF EXCHANGE RATE ON AGRICULTURAL OUTPUT IN NIGERIA: A STRUCTURAL VECTOR AUTOREGRESSION APPROACH

Abstract

Agricultural sector has elucidated at the very beginning of the study is considered one of the many ways through which a nation’s economy could grow. As much as it associated with production of food for the teeming masses, provision of employment for the largest percentage of the nation’s population, provision of raw material for many agro-allied industries, a major avenue for foreign exchange earnings to the nation as well as being a major components of the nation’s gross domestic product, the importance of the sector cannot be over-emphasised. The study therefore examines the impact of exchange rate reforms of agricultural output in Nigeria. The study made use of unit roots test and structural vector autoregression in analyzing the data. Of the four variables of acreage (ACRE), agricultural labour (AGLAB), lending rate (LR) and exchange rate (EXR), both acreage and lending rates were positively related to agricultural output, while agricultural labour and exchange rate were positively related to it. The study therefore recommend a general macroeconomic policy that will envelope a stable exchange rate policy, that will act as impetus for proper planning by farmers and guards against the dire consequence of exchange rates fluctuation. The said policy should make lending rates to be investment friendly, as high lending rate that negatively affect agricultural output will also negatively affect all other potential investments in the country.