Abstract

Agricultural and petroleum sectors are both of great importance to the Nigerian economy in terms of their contribution to Gross Domestic Product (GDP) and value of their exports. Dependence of Nigeria on the oil sector has been found to adversely affect both the agricultural sector and the economy. This study covered the periods between 1970 and 2003. It sought to know the effects and extent of petroleum dependency (in terms of oil exploration, production and trade) on the agricultural sector using Co-integration and Error Correction Modeling (ECM) analysis. Time series data were obtained from Central Bank of Nigeria (CBN), Food and Agricultural Organization (FAO), Federal Office of Statistics (FOS), National Institute for Social and Economic Research (NISER) and Federal Ministry of Agriculture and Rural Development. The study revealed that the trend in production levels of major export crops increased in recent years. Results from the analysis showed the presence of at least one co-integrating vector for all the crops. The result of the ECM confirmed a long run equilibrium relationship between the cash crops and the exogenous variables; and also the presence of significant short-run dynamics or divergences. The Ordinary Least Squares (OLS) results showed that the value of oil exports and imports increased with agricultural production. However, the quantity of oil production had an inverse relationship with the output of agricultural export crops. Based on the results, workable recommendations were made for improving the agricultural sector and reducing the adverse effects of petroleum dependency on agricultural trade and the economy at large.

Key words:  Petroleum dependency, agricultural production, error correction model (ECM), Nigeria.