Inflationary Trends, Agricultural Output and Economic Growth in Nigeria

Abstract

Rapid output growth and low inflation are common objective of macroeconomic policy, it is widely believed that Price stability promote long term economic growth whereas tradeoff exist between inflation and economic prosperity. This study investigates the relationship between inflation rate, agricultural output and economic growth in Nigeria, using time series data spanning from 1990 - 2022. The specific objectives of the study were to find the effect of inflation on agricultural output, the contribution of agricultural output to economic growth in Nigeria, and the causal relationship between inflation and agricultural output, agricultural output and economic growth in Nigeria. The study used descriptive statistics, correlation analysis, ADF unit root test, Auto Regressive Distribution Lag (ARDL) and granger causality to achieve the objectives of the study. The ARDL Bound Test revealed that a long run relationship exists between inflation and agricultural output, agricultural output and economic growth in Nigeria. Also, the ARDL test revealed a negative and significant relationship between Inflation and Agricultural output, which was in line with the apriori expectation and also a negative relationship exists between Gross Capital Formation and Economic growth in Nigeria, which is not in line with the A-priori expectation. Agricultural output on the other hand has a positive relationship with economic growth in Nigeria which is in line with the apriory expectation. The granger causality also revealed that there is unidirectional causality between agricultural output and economic growth and bidirectional causality exists between inflation and agricultural output in Nigeria. The study recommends that optimal economic performance could be achieved and economic slump prevented by influencing aggregate demand through active stabilization and economic intervention policy by the government.