EFFECT OF EXCHANGE RATE AND INFLATION RATE ON AGRICULTURAL SECTOR OUTPUT IN NIGERIA

Abstract

The study examined the effect of exchange rate and inflation rate on agricultural sector output in Nigeria from 1981 to 2020. In other to achieve the objective of this study, the Autoregressive Distributed Lag (ARDL) approach was used to analyse the effect of the data on agricultural sector output. The findings reveal that exchange rate and inflation rate has negative insignificant effect on agricultural output (AGDP) while commercial bank credit to agriculture has positive insignificant effect on agricultural sector output (AGDP) in the longrun. In addition, the short-run results revealed that the current value of exchange rate and its lag value (-2), inflation rate current value and commercial bank credit’s current value and its lag value (-1) have negative effect on agricultural output in the short-run.  Similarly, the short run result also showed that the lag values of exchange rate (-1, -3), the lag values of inflation rate (-1, -2 and -3) has positive relationship with agricultural sector output (AGDP)in the shortrun. Consequently, the study recommends among other things that Government should ensure adequate and effective implementation of policies that would enhance stable exchange rates, as effective and prudent management of exchange rate policies will significantly ensure stability of country’s exchange rate (naira). So also government should put in place policy that will help curb inflation. Policy such as selective credit control can be introduced by the central bank of Nigeria with full implementation. As this will help increase production forcing the price of agricultural goods and services to reduce.