Abstract

A strong and an efficient agricultural sector would enable a country to feed its growing population, generate employment, earn foreign exchange and provide raw materials for industries. This study makes a modest contribution to the debates by empirically analyzing the relationship between Nigeria government expenditure on the agricultural sector and its contribution to economic growth, using time series data from 1980 to 2011, obtained from the Central Bank of Nigeria Annual Report and Statement of Account, Journal of Food Research and Federal Office of Statistics. It employs the Engle-Granger two step modeling (EGM) procedure to co-integration based on unrestricted Error Correction Model and Pair wise Granger Causality tests.  From the analysis, our findings indicate that agricultural contribution to GDP (Gross domestic product) and total government expenditure on agriculture are cointegrated in this study. The speed of adjustment to equilibrium is 88% within a year when the variables wander away from their equilibrium values. Based on the result of granger causality, the paper concludes that a very weak causality exist between the two variables used in this study. Therefore, the policy implication of these findings is that any reduction in government expenditure on agriculture would have a negative repercussion on economic growth in Nigeria.

Key words: Agriculture, causality, gross domestic product, total expenditure.