Impact of Monetary and Fiscal Policy on Rice Productivity in Nigeria

Article DOI: https://doi.org/10.57017/jaes.v16.4(74).03

Author(s):

Odey Moses OGAH Department of Agricultural Economics, Federal University of Agriculture Makurdi, Nigeria
Lydia NELSON KOTUR Department of Agricultural Economics, Federal University of Agriculture Makurdi, Nigeria
Jenny ESSIEN Department of Agricultural Economics, Federal University of Agriculture Makurdi, Nigeria

Abstract:

The paper examined the impact of monetary and fiscal policy instrument on rice productivity and employed vector auto-regressive model using Augmented Dickey Fuller unit root text, followed by Johansen Co-integration test among the series using annual data for the period 1981-2016.

The results also show that all the monetary and fiscal policy instrument fitted co-integrate with rice production. Therefore, long run relationship exists among the variables and rice productivity. In the long-run, interest rate, exchange rate, money supply and public expenditure significantly affected rice productivity with adjusted R2 value of 60%. The result also shows that there is deceleration in exchange rate, interest rate and rice output. The speed of adjustment where monetary and fiscal policies variables will equate rice productivity in the short run is- 0.365830. The study concludes that there exist no short-run effects of policies instruments on rice productivity but on the long run. From this finding, the study recommended regulations of interest rate to a single digit, exchange rate should be friendly. Government should increase spending to agriculture and by extension policy focus on rice production to boost rice productivity). The study also recommended government regulation of policies instruments and to desist from frequent policies change.

Keywords: monetary policy; fiscal policy; vector auto regressive; co-integration; augmented

How to cite:

Ogah, O.M, Kotur, L.N., Essien, J. 2021 Impact of Monetary and Fiscal Policy on Rice Productivity in Nigeria, Journal of Applied Economic Science, Volume XVI, Winter, 4(74): 400 - 414. https://doi.org/10.57017/jaes.v16.4(74).03

References:

[1] Abata, M. A., Kehinde, J. S. and Bolarinwa, S. A. 2012. Fiscal/Monetary Policy and Economic Growth in Nigeria: A Theoretical Exploration. International Journal of Academic Research in Economics and Management Sciences 1(5): 75 - 88.

[2] Abdullah, H. A. 2000. The Relationship Between Government Expenditure and Economic Growth in Saudi Arabia. Journal of Administrative Science. 12(2): 173 – 191.

[3] Abolarin, S. S. 2017. Effects of infrastructural growth on research and development and agricultural productivity in Nigeria.1981-2013. Unpublished M.Sc. Thesis, Department of Agricultural Economics, Federal University of Agriculture, Makurdi, Nigeria.pp.65.

[4] Adegboyo, O.S., Keji, S.A., Fasina, O.T. 2021 The impact of government policies on Nigeria economic growth (case of fiscal, monetary and trade policies). Future Business Journal, 7(59). DOI: https://doi.org/10.1186/s43093-021-00104-6

[5] Adegboyo, O.S and Olaniyan, N.O. 2021 The viability of public expenditure in stimulating economic growth in Nigeria (Mediating on the Role of Public Sector) Acta Universitatis Danubius, 17(1): 70 – 86 DOI:10.13140/RG.2.2.26998.52807

[6] Akanbi, O.O. Onuk, E.G and Umar, H. S. 2019 Effects of agricultural expenditure on Nigeria’s economic growth. Asian Journal of Agricultural Extension, Economics and Sociology, 32(3): 1-11 DOI:10.9734/AJAEES/2019/V321330157

[7] Akande, T. 2003. The rice sector in Nigeria. United Nation Crop Project (UNCP) country agricultural sector and the environment, Geneva. Available at: http://www.ifmaonline.org/pdf/congress/07Umeh&Ataborh.pdf

[8] Bodunrin, O. S. 2016. The Impact of Fiscal and Monetary Policy on Nigerian Economic Growth from 1981-2015. Available Online at https://mpra.ub.uni.muenchen.de/92811/MPRA; WP no 92811.

[9] Christopher, E and Akorah, C. C. 2012. The impact of monetary policy on agricultural development in Nigeria. IOSR Journal of Humanities and Social Sciences, 5 (5): 13-25.

[10] Dar-Atul, A. and Amirkhalkhali, S. 2002. Government size, factor accumulation and economic growth: evidence from OECD Countries. Journal of Policy Modeling. 24(7&8): 679—692. Available: http://www.sciencedirect.com/science/article/pii/S0161-8938(02)00163-1

[11] Djomo, C.R.F. 2017. Response of agricultural growth to public expenditure and foreign direct investment in Cameroon, 1985-2016. Ph.D Dissertation, Department of Agricultural Economics University of Agriculture Makurdi, Nigeria as cited by Egbeadumah M.O (2018). Monetary and fiscal policy instruments effects on agricultural growth in Nigeria from 1981 to 2016. Unpublished Ph.D Dissertation, Department of Agricultural Economics University of Agriculture Makurdi, Nigeria, pp. 78. DOI: https://doi.org/10.3390/su13052690

[12] Egbeadumah M. O. 2018. Monetary and fiscal policy instruments effects on agricultural growth in Nigeria from 1981 to 2016. Unpublished Ph.D Dissertation, Department of Agricultural Economics University of Agriculture Makurdi, Nigeria, pp.78.

[13] Fwah, F. H. 2017. Impact Assessment of Foreign Trade and Foreign Direct Investment on Agricultural Productivity in Nigeria. Unpublished Thesis for the Award of M.Sc, University of Agriculture Makurdi, pp 1-4.

[14] Gujarati, D. 2004. Essentials of Econometrics. 4th Edition, Mc Graw-Hill, New York. 778 pp.

[15] Hakan, B., Ali, I., Hasan, O. 2008. Inflation and growth. Positive or negative relationship? Journal of Applied Science, 8(2): 192-204. DOI: 10.3923/jas.2008.192.204

[16] Idriss, A., Lupien, J., Sheet, I. and Romanos, H. 2012. Food security: the moving borders of poverty, free markets and political interventions. MENA food safety associates (MEFOSA), Lebanon, University of Massachusetts, United States and Food and Nutrition Division of the FAO, Rome, as cited by Makama, S. A., Ilu, I. Y., Suleiman, N. J., Isiaku, S and Isah, M. A. 2017. Demand analysis of rice in Nigeria, Nigerian Journal of Agricultural Extension, 18(3): 70-75.

[17] Iddrisu, S., Harvey, S. K., Amidu, M. 2017. The impact of monetary policy on stock market performance: evidence from twelve (12) African countries. Research in International Business and Financehttp://dx.doi.org/10.1016/j.ribaf.2017.07.075

[18] Karahan, Ö. 2020. Influence of Exchange Rate on the Economic Growth in the Turkish Economy. Financial Assets and Investing, 11(1): 21 - 34. DOI: 10.5817/FAI2020-1-2

[19] Keji, S. A., Efuntade, O. O. 2020. Agricultural output and government expenditure in Nigeria. Journal of Perspectives on Financing and Regional Development, 8(2): 101 - 110. DOI: https://doi.org/10.22437/ppd.v8i2.9106

[20] Khosravi, A. and Karimi, M. S. 2010. To investigate the relationship between monetary policy, fiscal policy and economic growth in Iran: autoregressive distributed lag approach to co-integration. American Journal of Applied Sciences, 7(3): 420-424. DOI: https://Doi.org/10.3844/ajassp.2010.415.419

[21] Komain, J. 2013. The relationship between government expenditures and economic growth in Thailand Journal of Economics and Economic Education Research, 8(2): 1-9. DOI:10.2139/ssrn.2260035

[22] Makama, S. A., Ilu, I. Y., Suleiman, N. J., Isiaku, S., Isah, M.A. 2017. Demand analysis of rice in Nigeria Nigerian Journal of Agricultural Extension, 18(3): 70-75.

[23] Mffo, E.A. 2017. Analysis of relationship between financial development and agricultural growth in Nigeria; 1981-2013. M.Sc. Thesis Department of of Agricultural Economics University of Agriculture Makurdi, Nigeria as cited by Egbeadumah M.O 2018. Monetary and fiscal policy instruments effects on agricultural growth in Nigeria from 1981 to 2016. Unpublished Ph.D. Dissertation, Department of Agricultural Economics University of Agriculture Makurdi, Nigeria, 78 p.

[24] Michael, B. and Ebibai, T. 2014. Monetary policy and economic growth in Nigeria (1980-2011), Asia Economic and Financial Review, 4(1): 20-32. https://archive.aessweb.com/index.php/5002/article/view/1139

[25] Njikamp, P. and Poot, J. 2004. Meta-analysis of the effect of fiscal policy on long-run growth. European Journal of Political Economy, 20(1): 91-124. https://Doi.org/10.1016/j.ejpoleco.2003.10.001

[26] Nwoko, N. M. 2016. The impact of monetary policy on the economic growth of Nigeria. African Research Review,10(42): 194-206. DOI: 10.4314/afrrev.v10i3.13

[27] Okoh, A.S. 2015 Impact of fiscal policy on the growth of agricultural sector in Nigeria. European Journal of Education and Development Psychology. 3(4): 1-7.

[28] Olanipekun, E. F., Benjamin, A. F. 2015. Fiscal and monetary policy instruments and economic growth sustainability in Nigeria. American Journal of Economics, 5(6): 587-594. DOI: 10.5923/j.economics.20150506.04

[29] Onyeiwu, C. 2012, Monetary policy and economic growth in Nigeria. Journal of Economic and Sustainable Development, 3(7): 62-70.

[30] Oyinbo, O., Omolehin R. A., Abdulsalam, Z. 2013. Analysis of the demand for rice in Kaduna State, Nigeria, Agris on-line Papers in Economics and Informatics, 5(3): 45-52.

[31] Petrakos, G., Arvanitidis, P., Pavleas, S. 2007. The determinants of economic growth. The experts view DYNREG dynamic regions in a knowledge driven global economy lessons and policy implications for the EU, Working Papers.

[32] Prasert, C., Kanchana, C., Chukiat, C., Monekeo, K. 2015. Money supply influencing economic growth-wide phenomena of AEC, open Region. International Conference on Applied Economics ICOAE, Kazan Russia. Available online at: www.Sciencedirect.com.

[33] Samuel, A. A., Olufemi, A. O., Lawrence, B. A. and Tony, I. N. 2017. Interest rate and economic growth: The Case of Nigeria, International Review of Business Research Papers, 13(1): 141 – 150.

[34] Solow, R. M. 1956. A Contribution to the theory of economic growth, Quarterly Journal of Economics, 70: 65 - 94.

[35] Solow, R. M. 1957. Technical change and aggregate production function, Review of Economics and Statistics, 39: 312-320. DOI: http://dx.Doi.org/10.2307/1926047

[36] Swan, T. W. 1956. Economic growth and capital accumulation, Economic Record, 32: 334-361. DOI: https://doi.org/10.1111/j.1475-4932.1956.tb00434

*** FAO 2015. Food and Agriculture Organization statistical database. Rome; FAO as cited by Makama, S. A., Ilu, I. Y., Suleiman, N. J., Isiaku, S. Isah, M.A. 2017. Demand Analysis of Rice in Nigeria Nigerian, Journal of Agricultural Extension, 18(3): 70-75.

*** Global Agricultural Information Network. Nigeria Grain and Feed Annual Report. GAIN Report Number: NI1204. 2012 in Oyinbo, O., Omolehin R.A, Abdulsalam, Z. 2013. Analysis of the demand for rice in Kaduna State, Nigeria, Agris on-line Papers in Economics and Informatics, 5(3): 45-52.