Effect of Dutch Disease on the Agricultural Sector in Nigeria: An ARDL Approach

Nigeria's economy is seen as a mono-cultural economy as almost 80% of the government's revenue is coming from crude oil. This over-dependency on oil revenue hurts the economy due to the volatile nature of crude oil prices and it also causes a decline in agricultural sector output. This study, therefore examined the effect of Dutch Disease on agricultural sector output in Nigeria using annual data spanning from 1986 to 2021. The study employed Augmented Dickey-Fuller (ADF) to test for the stationarity of the time series properties of the research variables. The study also made use of the econometric tool of the Auto-Regressive Distributed Lag (ARDL) approach to estimate the short-run and long-run relationship between the agricultural output to the GDP and the determinants of the Dutch Disease in Nigeria. The overall result of the study exhibited the existence of a long-run relationship between a dependent variable and independent variables. The ndings from the study revealed that there is a signicant negative relationship between agricultural output and some explanatory variables such as oil revenue (OILRV), the real exchange rate (REXCH), and interest rate (INTR) with coefcients of -0.002184, -0.900190, and -0.000783 respectively. The result of the study also showed that there is a signicant positive relationship between agricultural output and other regressors like government expenditure (GEXP) and trade openness (TOP) with coefcients of 0.006516 and 0.900129 respectively. Based on the ndings of this study, it was recommended that the Agricultural sector should be regarded as a prerequisite and a core sector that could facilitate development as well contribute a greater percentage to the government's revenue through diversication of the economy. Also, the government should work out holistic policy measures to ensure a floating exchange rate and also make interest rates friendly for the farmers so as to boost agricultural output in Nigeria.