Analysis of Agricultural Public Capital Expenditure and Agricultural Economic Growth in Nigeria 1961–2010

Abstract

Aims: This study investigated the impact of agricultural public capital expenditure on agricultural economic growth in Nigeria over the period 1961 to 2010. Methodology: Annual data was used for this study and was obtained from Central Bank of Nigeria 2010 statistical bulletin and annual report. The data was analyzed using Augmented Dickey-Fuller test, Johansen maximum likelihood test and Granger Causality test. Results: The result of the Johansen cointegration test showed that there exist a long run relationship between all the explanatory variables and explained variable. The result of parsimonious error correction model showed that agricultural capital expenditure had a positive impact on agricultural economic growth. Also, granger causality test showed a unidirectional relationship between agricultural capital expenditure and agricultural economic growth. This means that agricultural economic growth does not cause expansion of agricultural public capital expenditure rather; it indicates that agricultural public capital expenditure raises the nation's agricultural economic growth. The Error Correction Mechanism (ECM) indicated that if the economy is out of equilibrium, 5.2% of disequilibrium will be corrected for annually.  Conclusion: The study therefore recommends that the proportion of government capital expenditure that goes into agricultural expenditure financing should be increased