An Investigation on the Macroeconomic Drivers of Agricultural Exports in Nigeria (1996-2024)

Abstract

The persistent underperformance of Nigeria’s agricultural exports raises critical policy questions, particularly regarding the role of macroeconomic conditions in shaping agricultural export outcomes. While output growth is found to stimulate agricultural exports, high interest rates, exchange rate instability, inflationary pressures, and protective trade policies often undermine export competitiveness. Given these contradictions, this paper investigated the macroeconomic drivers of agricultural exports in Nigeria from 1996 to 2024 using annual time series data . The Autoregressive Distributed Lag Regression was employed as main analytical technique within the Gravity Model of Trade theoretical framework. Findings revealed that tariff rate at level is positively and significantly related to agricultural exports both in the short -run and long run. Consequently, one percentage increase in tariff rate, will lead to a decrease in agricultural exports in Nigeri a by -0.05 and -0.52 percent respectively. On the other hand, the findings indicated that interest rate spread affect agricultural exports negatively in the short-run and long run. Controlling for other factors, for instance, a 1 percent increase in interest rate spread will lead to a decrease in agricultural exports by -0.19% and 0.28% in the short run and long -run respectively. Furthermore, the estimated impact of inflation rate at level on agricultural exports is positive and significant both in the short run and long run. By implication, one percentage change or increase in inflation rate at level will lead to 0.23% and 0.93% increase in agricultural exports respectively. While, the coefficient of exchange rate at level is positive and significant in the short run. Consequently, if there is a 1% increase in exchange rate at level, it is predicted that there may be an increase of 0.02% in agricultural exports in Nigeria in the short run. In the long run, exchange rate is negatively and significantly related to agricultural exports. Consequently, one percentage increase in exchange rate, will lead to a decrease in agricultural exports by -0.03 percent. Therefore, this study recommended that the Federal Ministry of Industry, Trade and Investment, Nigerian Export Promotion Council should establish a Bilateral Tariff Negotiation Unit Within Ministry of Trade and Investment ., given that that tariff rate at level is positively and significantly related to agricultural exports both in the short-run and long run. Also, the Central Bank of Nigeria, Bank of Industry, Nigerian Agricultural Insurance Corporation should establish a Single- Digit Interest Rate Window for Agricultural Exporters., since interest rate spread appears to affect agricultural exports negatively in the short-run and long run. While, the National Bureau of Statistics, Nigerian Institute of Social and Economic Research, Central Bank of Nigeria should link inflation monitoring to export performance indicators, stabilize currency to address root cause of inflationary pressure and establish price stabilization mechanism for export commodities, amongst others.