The Impact of Agricultural Public Expenditure on Agricultural Productivity in Nigeria

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Alabi, Reuben Adeolu
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This study analyzes the impact of agricultural public expenditure on agricultural productivity in Nigeria. The relevant time series data for the study were obtained from secondary sources. The data ranged from 1981 to 2014. An instrumental variable two-stage least squares (IV-2SLS) econometric model was employed to investigate the endogeneity of public agricultural expenditure, and the autoregressive distributed lag (ARDL) econometric technique was used to determine the long and short-term effects of public agricultural expenditure on agricultural productivity. The study shows that 20% of agricultural public budgets were not implemented in Nigeria. On average, agricultural public capital expenditure comprised 55% of total agricultural public expenditure in Nigeria, which is lower than the recommended 60% for effective agricultural sector performance. The study also reveals that while public agricultural capital expenditure and agricultural public total expenditure are strong determinants of agricultural productivity, agricultural public recurrent expenditure maintains a weak relationship with agricultural productivity in Nigeria. Finally, the study demonstrates that agricultural public spending on irrigation has the highest impact on agricultural productivity, while agricultural public spending on subsidies has the least impact on agricultural productivity. Among other recommendations, it is suggested that the agricultural public expenditure pattern should be realigned to favour investments in irrigation, research and development, and rural development, which currently attract lower budgetary allocations in Nigerian agricultural budgets.