Measuring the Responsiveness of Agricultural Supply to Macro-Economic Environmental Factors: Evidence from Nigeria

Evaluating the responsiveness of agricultural supply to macro-economic environmental factors is an important step to implementing agricultural policies in Nigeria. This study investigated agricultural output responsiveness to the level of infrastructure, rate of Inflation, exchange rate volatility, and financial deepening in the sector using annual time series spanning from 1971 to 2008, and source from CBN statistical bulletin. The study through the Augmented Dickey-Fuller (ADF) test of unit root shows that all variables were stationary and integrated of the same order [I(1)]. Further, the Johannsen test of cointegration established the existence of a long-run relationship among the variables. Moreover, from the Vector Error Correction model estimated, aggregate agricultural supply was inelastic to the level of infrastructure, exchange rate volatility and financial development; while the rate of inflation appears elastic. Also, it was uncovered that exchange rate volatility and inflation rate affect the sector negatively. It was based on the findings that the researchers proffers improving and providing quality infrastructure facilities to rural communities and a well-coordinated and articulated monetary and fiscal policy to abate the effect of exchange rate volatility and soaring inflation rate on agricultural supply in Nigeria.