Modeling The Dynamics of Interdependence between Agricultural Sub-Sectors and Economic Growth in Nigeria

Abstract

This study examined the dynamic interdependence between agricultural sub-sectors and economic growth in Nigeria using annual time-series data from 1993 to 2023. The study aimed at investigating the long-run and short-run relationship among Gross Domestic Product (GDP), crop production, livestock, and fishing within the Johansen Vector Error Correction Model (VECM) framework. Forestry was excluded from the multivariate analysis due to its integration of order two, I(2), which violates standard cointegration assumptions. The Augmented Dickey-Fuller (ADF) unit root test revealed that GDP, crop production, livestock, and fishing were integrated of order one, I(1). The Johansen cointegration test confirmed the existence of long-run equilibrium relationships among the variables. The estimated long-run co-efficients showed that livestock and fishing exert significant positive effects on economic growth, with livestock having the strongest growth elasticity. The finding revealed that crop production primarily functions as an intra-sectoral stabilizer rather than a direct long-run driver of GDP growth. The adjustment dynamics indicated that GDP significantly corrects short-run disequilibrium in the macroeconomic system, while crop production adjusts deviations within the agricultural sector. Diagnostic tests confirmed the stability, normality, and overall adequacy of the estimated model. In addition, the robustness of the results was validated using an Error Correction Model (ECM) with Newey-West HAC standard errors. The study concluded that agricultural sub-sectors exert heterogeneous effects on Nigeria’s economic growth and therefore should not be treated as a single aggregate sector in policy formulation. Based on this, some recommendations were suggested, agricultural policies focusing on livestock value-chain development, sustainable fisheries management, and improved crop productivity to enhance economic growth, food security, and sustainable development in Nigeria.