1

CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND TO THE STUDY

No government is an island. It would require some form of external support to perform

effectively. It is generally expected that developing countries facing a scarcity of capital will

acquire external loan building up her external debt to supplement domestic saving (Aluko, 2016).

Besides, external borrowing is preferable to domestic debt because the interest rates charged by

international financial institutions like International Monetary Fund (IMF) is about half the one

charged in the domestic market (Ayadi & Ayadi, 2008). The issue of Nigeria’s public debt

became important in recent times especially prior to the period of debt forgiveness because of its

magnitude and the amount which was required to service such debts, as well as, its attendant

possible effects on different operating sectors of the economy especially the banking sector and

the growth of the economy at large (Saheed, 2015). External debt burden in Nigeria can be traced

to so many factors in the past which caused the growth of the economy to decline alongside its

development. Heavy external debt burden nevertheless, may have been associated with

disincentives to invest, which could have contributed to the relatively poor growth performance

of Nigeria in the past. The origin of Nigeria's external debt can be traced to 1958 when $28

million was contracted from the World Bank for railway construction. Between 1958 and 1977,

the need for external debt was on the low side. However, due to the fall in oil prices in 1978

which exerted a negative influence on government finances, it became necessary to borrow to

finance projects and correct balance of payment difficulties. The first major borrowing of

$1billion, referred to as Jumbo loan, was contracted from the international capital market (ICM)

in 1978, increasing the country's total external debt to $2.2 billion (Adesola, 2009). The spate of

borrowing increased thereafter with the entry of the state governments into external loan
 2

contractual obligations. According to the Debt Management Office (DMO, 2003), Nigeria's

external debt outstanding stood at N17.3 billion. In 1986, Nigeria had to adopt a World

Bank/International Monetary Fund (IMF) sponsored Structural Adjustment Programme (SAP),

with a view to revamping the economy, making the country better-able to service her debt

(Ayadi & Ayadi, 2008).

The Agricultural sector has been a key driver of recent economic growth in Nigeria,

accounting for 70% of GDP of the non-oil sector (Akpaeti, 2014), and providing an avenue for

subsistence agriculture for two-third of Nigerians who are low income earners (Usman, 2006). It

is the single most important sector in Nigeria and some other African countries, providing

livelihood for at least 53% of the economically active labour force.

Over the years, several studies have focused on understanding the association between

agriculture and economic growth, yet there is some disagreement. While some researchers have

argued that agriculture should be the foundation of economic growth (Gollin, 2002; Thirtle

2003), others claim that the linkages agriculture has with other sectors are too weak and its

innovative structures are inadequate for promoting economic growth. The relationship between

agriculture and development, especially in sub- Saharan Africa, cannot be overemphasized.

Reducing poverty, improving nutrition and general well-being of the population hinges critically

on the performance of the agricultural sector as this would imply improving the standard of

living of citizens of the country. Agriculture plays an important role in the overall economic

development of a country, to the extent that a country that is able to achieve a 4% annual growth

rate in agriculture would record an improvement in technology, and an increase in agricultural

production is capable of reducing food import bills which in the long-run can translate to a

favourable terms of trade (World Bank, 2006).

 3

Economic growth will be almost impossible to achieve without developing the

agricultural sector because 70% of the population in Nigeria is employed in the sector.

Furthermore, the importance of agriculture to the Nigerian economy is evident in the nation’s

natural endowments in production factors such as: extensive arable land, water, human

resources, and capital. Exploring the nation’s productive advantage in this sector is the fastest

way to stimulate growth in the economy (FMARD, 2012).

For the sector to be developed, the government of Nigeria even resorts to borrowing

(externally or internally) for actualizing its agricultural and river basin development projects.

Hence, public debt is one method through which the government of Nigeria finances deficits and

carry out Agricultural development projects. Developing countries are faced with increasing

difficulties in obtaining external finance to drive the nation’s development efforts, these nations

therefore rely solely on domestic debt (Ola, 1998). Domestic debts are debt instruments issued

by the federal government and denominated in local currency.

Prior to the discovery of oil in commercial quantity in the years immediately before and

after independence, agriculture was the backbone of the economy, contributing about 60 - 65%

of GDP. Although its contribution had reduced to 20%, 21%, 36%, 24% and 21%, in 1980, 1990,

2000, 2010 and 2016, respectively, it is the single most important sector in Nigeria, and indeed in

some other African countries, providing livelihoods for at least 53 percent of the economically-

active labour force (Akpaeti, 2014). There have been arguments on whether external debt is a

veritable instrument for promoting agricultural growth in debtor nations. Empirical findings in

this area have been mixed. This research, therefore, seeks to examine the impact of public debt

on agricultural growth in Nigeria.

 4

1.2 STATEMENT OF THE PROBLEM

External borrowing has a significant impact on the agricultural growth of a nation up to a

point where high levels of external debt servicing sets in and affects the growth as the focus

moves from financing private investment to repayments of debts. Pattilo, Poirson and Ricci

(2002) assert that, at low levels, debt has positive effects on agricultural growth. But, above

particular points or thresholds, accumulated debt begins to have a negative impact on growth.

Furthermore, Fosu (2009) observed that high debt service payments shift spending away from

health, educational and social sectors. This obscures the motive behind external borrowing,

which is to boost growth and development, rather than to get drowned in a pool of debt service

payments which drains national resources due to high interest payments, thereby hindering

growth. Gohar and Butt (2012) opine that accumulated debt service payments create a lot of

problems for especially the developing nations, because debt is serviced for more than the

amount it was acquired and this could slows down economic growth in such nations. External

debt has the inherent capacity to promptly put a country on developmental pedestal, but, as it has

been, its misuse involves huge social and human costs. External debt rather than decrease has

been on the increase, particularly with the insurmountable regime of debt servicing and the

insatiable desire of political leaders to obtain loans for the execution of projects without adequate

planning (Essien, 2009). External debt accumulates since servicing requirement is not friendly

enough. In this regard, external debt becomes a self-perpetuating mechanism of exploitation and

so it serves as a constraint to growth in developing economies (Nakatami & Herera, 2007).

The federal government reliance in borrowing from the banking system to finance its

large and unsustainable fiscal deficits has also hindered the attainment of macroeconomic

stability and sustainable economic growth in Nigeria. In addition, this has crowded out the
 5

private sector from the credit market, thereby stalling investment and total output growth. A

major challenge facing Nigeria is the inability to capture the financial services requirements of

farmers and agribusiness owners who constitute about 70% of the population. Famers need

access to capital to purchase land and equipment and to invest in the development of new

products, services, production technologies and marketing strategies. Yet banks are often

reluctant to lend money to farmers for agricultural enterprises due to lack of creditability and

collateral. However, in order to attain economic development, particularly the growth of the

agricultural sector, there is a need to scrutinize the manner in which public debt is managed,

which is the focus of this study.

1.3 RESEARCH QUESTIONS

This seeks to provide answers to the following questions:

i. What is the impact of external debt on agricultural output in Nigeria?

ii. What is the impact of internal debt on agricultural output in Nigeria?

iii. How has debt servicing impacted agricultural output in Nigeria?

1.4 OBJECTIVES OF THE STUDY

The main objective of the study is to examine the impact of public debt on agricultural

output in Nigeria. The specific objectives include the following:

i. Investigate the impact of external debt on agricultural output in Nigeria.

ii. Investigate the impact of internal debt on agriculture in Nigeria.

iii. Determine the impact of debt servicing on agricultural output in Nigeria.

iv. Identify the trend of public debt and agricultural output in Nigeria.

1.5 HYPOTHESIS OF THE STUDY

Following from the objectives of this study, the research hypothesis are stated as:
 6

i. H0: External debt has no significant impact on agricultural output in Nigeria.

ii. H0: Internal debt has no significant impact on agricultural output in Nigeria.

iii: H0: Debt Servicing has no significant impact on agricultural output in Nigeria.

1.6 SIGNIFICANCE OF THE STUDY

The significance of this research on the analysis of public debt and its impact on

agricultural output in Nigeria cannot be over-emphasized. Public debt has become a challenge to

developing nations like Nigeria. It is like a blight plaguing the economy of Nigeria resulting to

the slowing down of economic growth and hindering macroeconomic stability. Based on this the

study would provide information on how public debt can be effectively managed which will in

turn boost agricultural output in Nigeria.

Again, the conduct of this research work is important as it would guide the relevant

stakeholders in making decisions via policy formulations that would curtail the harsh effects

public debt has on agricultural output in Nigeria. This is because public debt has negative impact

on the economy as a whole.

This study would also show how the government can effectively employ measures by

which public debt can be effectively managed. There have not been a lot of research studies on

the analysis of public debt and its impact on agricultural output in Nigeria, but this research work

would contribute significantly to previous knowledge on the subject matter. The study would

serve as a tool and a guide towards the formation of policies and help curb the problem in

agricultural output and increase growth in the economy.

The contents of this research work would equally bridge information gap created as a

result of insufficient statistics relating public debt and its effect on agricultural output in Nigeria.
 7

Also the findings and recommendations of the research work will suggest ways by which the

challenges faced by Nigerians because of public debt can be addressed.

1.7 SCOPE OF THE STUDY

This study which seeks to empirically investigate the impact of public debt on

agricultural output in Nigeria and will cover a period of 1990-2022. The study will cover Nigeria

as a whole and is restricted to the Nigerian economy.

1.8 OUTLINE OF THE STUDY

The study will comprise of six chapters. Chapter one is the introduction of the work,

which will comprise of the background of the study, statement of the problem, research

questions, objectives of the study, hypothesis of the study, significance of the study, scope of the

study and outline of the study. Chapter two is the literature review which has conceptual review

theoretical review, empirical review and the research gap. The third chapter discusses public debt

and agricultural output, its causes and impact on the Nigerian economy as a whole. Chapter four

is the research methodology which comprises sources of data, method of data collection, method

of data analysis and variable measurements. Chapter five will comprise data presentation

analysis and discussion of results. Finally, chapter six will comprise of summary of major

findings, conclusion and recommendations of the study.

 8

CHAPTER TWO
LITERATURE REVIEW

2.1 CONCEPTUAL REVIEW

2.1.1 Concept of Agriculture
According to Ramharacksingh (2012), the word “agriculture” comes from the Latin word

“agercultura” meaning the cultivation of the field. It covers all the arts, skills, science, industries,

and service used by humans to obtain food from the land. This includes the cultivation of land

and rearing of livestock, together with the related industries supplying seed, chemical fertilizer,

machinery, finance, and technology. Hence, agriculture also involves marketing and processing.

He also went further to state that traditionally, agriculture has been recognized as the art of tilling

the soil and a way of life for families in rural communities with a major emphasis on food

production.

According to Anyawu, Oyefusi and Dimowo(1997), agriculture is the activity that

involves the cultivation of land, raising and rearing of animals for the purpose of production of

food for man, feed for animals and raw materials for industries. It involves cropping, livestock

and forestry, fishing, processing and marketing of these agricultural products. Essentially it is

composed of crop production, livestock, forestry and fishing. Agricultural Output is the final

produce of agriculture. For example, crop yields, food for man, animal, diary, raw materials for

industries and all the final goods that is marketable in the local and international markets, and

also the portion that counts in the nation’s Gross Domestic Product (GDP). Agriculture is the

science, art and business of cultivating the soil, producing crops, and raising of livestock and

poultry for food, fibre, medicinal plants and other products used to sustain and enhance human

life (Francis, Breland & Kremer 2012).

Agriculture encompasses all aspects of production including horticulture, livestock

rearing, fisheries; forestry, etc. It is defined as an art, science and business of producing crops
 9

and livestock for economic purposes. Agriculture may also be defined as the biological

exploitation of soil for production but, in a broad sense, agriculture is the branch of applied

science which deals with production, improvement, protection, processing, marketing, extension,

etc. of crops, livestock and fishery, by proper utilization of natural resources. The natural

resources are soil, sunlight, air, water, temperature. Agriculture is a fundamental profession, a

fundamental industry, which is needed in every part of the world. It is a basic human activity, a

part of our existence. We must accept the fact that it is a challenging profession with great

responsibilities (Borlaug, 2006).

Nigeria is an agrarian country with about 70% of her over 140 million people engaging in

agricultural production and provides subsistence for two-thirds of Nigerians who are low income

earners (Usman, 2006). Nigerian agriculture consists of large numbers of smallholder farmers,

scattered across the Country. This self-perpetuating web is said to inhibit the participation of the

traditional farmers in economic development (Nwosu, 2004). In order to revamp the agricultural

sector, the federal government had embarked on and implemented several agricultural policies

and programmes some of which are defunct or abandoned, and some restructured while others

are still in place.

Thus, agriculture is the deliberate attempt by man to cultivate crops, rear animals, caring

for them for the benefits he will get from doing so. It also involves the preparation and

processing of plant and animal products as well as the disposal of these products through

marketing, for the everyday sustenance of lives.

2.1.2 Concept of Agricultural Output

Agricultural output is the total value of output or product an economy gets from crop

production, livestock, forestry, and fishery. Nigeria’s low fertilizer and inadequate government

expenditure were largely responsible for the low productivity and the inability to compete with
 10

others. Most times, the farmers depend on less efficient traditional tools which results in less

output compared to the use of Tractors and Harvesters. (Food and Agriculture Organization,

2012). According to Eurostat (2017), the output of the agricultural sector is made up of the sum

of the output of agricultural products and of the goods and services produced in inseparable non-

agricultural secondary activities; animal output and crop output are the main product categories

of agricultural output.

Generally, agricultural sector contributes to the development of an economy in four

major ways: Product contribution, factor contribution, market contribution, foreign exchange

contribution (Abayomi, 1997; World Bank, 2007). However, with Nigeria’s agricultural sector

continuity to underperform relative to the ambitious target set by government, hard questions are

being asked about the quantity and quality of the actions made by government to improve

agricultural output.

Growth in agricultural output can fuel growth in the non-agricultural economy through a

variety of mechanisms, some directly and others indirectly. Promoting agricultural output of the

rural economy may lead to sustainable increase in employment in rural areas, reducing regional

income disparities, stemming pre-mature rural-urban migration, and ultimately, reducing poverty

at its very source (Anríquez & Stamoulis, 2007).

Agricultural output is a key determinant of a nation’s food security and economic

development. Adequate agricultural production ensures stable supply of food, raw materials for

industries and contributes to rural employment and income generation. It can also impact trade

balances, as agricultural products are being traded internationally. In essence, agricultural output

can be referred to as the total output harnessed from various sectors of agricultural production in

terms of goods and services. This can be expressed in the percentage of gross domestic product.
 11

2.1.3 Concept of Public Debt

Public debt, sometimes referred to as government debt, represents the total outstanding

debt (bonds and other securities) of a country’s central government. It is often expressed as a

ratio of Gross Domestic Product (GDP). Public debt can be raised both externally and internally,

where external debt is the debt owed to lenders outside the country and internal debt represents

the government’s obligations to domestic lenders. Public debt is an important source of resources

for a government to finance public spending and fill gaps in the budget. Public debt as a

percentage of GDP is usually used as an indicator of the ability of a government to meet its

future obligations. Bade and Parking (2004) defined public or national debt as the total amount

that the federal government has borrowed to make expenditures that exceed tax revenue – to run

a government budget deficit. Budget deficit refers to the government budget that exceed it’s

available income, this kind of budget are financed through borrowing. It can be either

domestically sourced or externally sourced and paying back at a latter date. Ogba (2000) defined

debt as a contractual obligation of owing or accumulated borrowing with a promise to payback at

a future date.

Borrowing is the taking of money and similar values for repayment after a certain

period of time. Public borrowing refers to the legal obligation of the state to pay back the

principal and interest to the holders of the predetermined rights in accordance with a certain

schedule. Public credit and public borrowing referred as state borrowing in the economic

literature mean debts taken by government or other public institutions (Ulusoy, 2013). In

this context public debt is seen as the taking of loans by a government whether state or federal

government or public institution’s with the aim of financing developmental activities. According
 12

to Chukwuemeka and Samuel (2021), Public debt also refers to borrowing by a government from

within the country or from abroad, from private individuals or association of individuals or from

banking and non-banking financial institutions. Public debt is the borrowing by government in

order to finance its budget deficits with the intention to pay back at a future date.

According to Ogba (2011), a developing country wishing to mobilize capital resources to

foster economic development may at one time or the other resort to borrowing. Public debt

which is referred to as the debt owed by the government or the aggregate of borrowings of all

government units such as the federal, state and local government (Idenyi, Igberi & Anoke, 2016).

Public debt is described here as the aggregate of all government borrowing which includes both

domestic and external borrowing.

However, the definition of public debt by Chukwuemeka and Samuel (2021), which

stated that, “Public debt is the borrowing by a government from within the country or from

abroad, from private individuals or association of individuals or from banking and non-banking

financial institutions” is hereby adopted as a working definition in this study.

2.2 THEORETICAL REVIEW

2.2.1 Solow Growth Model and External Debt

The Solow growth model is built on a closed economy which makes use of labour and

capital as its means of production. Under this scenario, the implication of external debt on

growth can be seen through its effect on the domestic saving which, in turn, is used for

investment, in a closed model. The general effect of external debt on the Solow growth model

can be analyzed by looking at the individual effects of the debt overhang and debt crowding out

theories on the model.

 13

On the aspect of debt crowding out, Edo (2002) examined the foreign borrowing difficulties

experienced by African countries using Morocco and Nigeria as case study. The study affirms

that these debts have negatively affected investment seriously in these countries. Public

expenditure, balance of payments and global interest rate were cited among the many

determinants of debt accumulation in the studied countries. Measures were suggested in reducing

these problems. Some of the measures were privatization, sustained export promotion, and

reforming and expanding capital markets mostly in form of structural adjustment program.

According to Fosu (1999) on the debt overhang effect, was of the believe that in spite of

the seemingly small and negligible impact on investment rate it is probable that foreign

borrowing may negatively affects economic development via decreasing the capital output. This

argument is in the same direction with the proposition of Hameed, (2008); where they argued

and confirmed that the debt maintenance cost has adverse effects on the resultant output of

principal and labor which ultimately leads to a decline in economic growth.

2.2.2 Debt crowding-out Theory

This theory was propounded by Justin and Panda in 2020. According to the debt

crowding out theory, higher debt service payments can increase a country’s budget deficit,

thereby reducing public savings if private savings do not increase to offset the difference. This,

in turn, may either drive up interest rates or crowd out the credit available for private investment,

thereby depressing economic growth. When government increases borrowing to fund higher

spending, or reduce taxes, it crowds-out private sector investment through higher interest rates. If

increased borrowing leads to higher interest rates by creating higher demand for money and

loanable funds and thus higher prices, the interest rate sensitive private sector will likely reduce

investment due to lower rate of returns. A fall in business fixed investment will hurt long-term
 14

supply-side economic growth, that is, potential production growth. This crowding-out effect is

weakened by the fact that government spending through the multiplier increases the demand for

private sector products, thereby stimulating fixed investment via the acceleration effect (Justin &

Panda, 2020). Government deficit financing through domestic and external borrowing might

result in increased interest rates, lower disposable income and higher wages all of which reduces

the profitability of businesses and by extension private investment. This may consequently

discourage or crowd-out private investment and decrease the production level in an economy

(Spilioti & Vamvoukas, 2015). The Keynesian economists maintained that fiscal expansion have

the proclivity to increase aggregate demand for private sector goods through the fiscal multiplier,

thereby stimulating the growth of private investment. Higher government spending financed by

borrowing leads to a fall in private sector saving. This is for two main reasons: First, with

expansionary fiscal policy, private sector savers buy government bonds and so have fewer

savings to fund private sector investment. Also, higher government borrowing tends to push up

interest rates and these higher interest rates crowd-out private investment. Furthermore, by

shifting the tax burden to the future generations, current borrowing crowds out private

investment (Gordon & Cosimo, 2018).

2.2.3 Debt Overhang Theory

According to the debt overhang hypothesis, the government, in an attempt to amortize the

accumulated debt, will increase tax rate on the private sector (as means of transferring resources

to the public sector). This will discourage private sector investment and reduce government

expenditure on infrastructure as the resources are used to pay up huge debt service payments

instead of being put into other use. This will lead to a reduction of total (private and public)

investment in the economy and a shift downward of both the investment and production function
 15

curves in the Solow growth model. This theory is built on the principle that if the level of debt

will surpass the country’s ability to repay with some probability in the future, estimated debt

service is expected to be a growing function of the country’s output level.

Therefore, some of the returns obtained through investing in the domestic economy are

efficiently taxed away by current foreign creditors and the investment made by domestic and

new foreign investors is not encouraged. Debt servicing, which includes interest payments and

repayments, is likely to be a factual link from an indebted country. It only takes a large benefit

from the domestic economy to be able to allocate to the foreign economy. Therefore, the country

declines some outstanding multiplier-accelerator effects. This reduces the domestic country’s

growing ability in its economy and increases its dependency on foreign debt (Yucel, 2009;

Tamasehke, 1994).

2.2.4 The Dependency Theory

Momoh and Hundeyin (1999), see the underdevelopment and dependency of the third

world countries as being internally inflicted rather than externally afflicted. To this school of

thought, a way out of the problem is for third world countries to seek foreign assistance in terms

of aid, loan, and investment. And allow undisrupted operations of the Multinational Corporations

(MNCs). Due to the underdeveloped nature of most Least Developed Countries (LDCs), they are

dependent on the developed nations for virtually everything including technology, aid, technical

assistance, etc. This theory is based on the assumption that resources flow from a “periphery” of

poor and underdeveloped states to a “core” of wealthy states thereby enriching the latter at the

expense of the former. The phenomenon associated with the dependency theory is that poor

states are impoverished while rich ones are enriched by the way poor states are integrated into

the world system (Todaro, 2003). The theory indicates that the poverty of the countries in the
 16

periphery is not because they are not integrated or fully integrated into the world system as is

often argued by free market economists, but because of how they are integrated into the system.

From this standpoint, a common school of thought is the bourgeoisie scholars who to

them, the state of underdevelopment and the constant dependence of less developed countries on

developed countries are a result of their domestic mishaps. They believe that this issue can be

explained by their lack of close integration, diffusion of capital, low level of technology, poor

institutional framework, bad leadership, corruption, mismanagement, etc. The dependent position

of most underdeveloped countries has made them vulnerable to the products of the western

metropolitan countries and Breton Woods institutions (Ajayi, 2000).

2.3 EMPIRICAL REVIEW

Hameed, Ashraf and Chaudhary (2008) analyzed the long-run and short-run relationships

between external debt and agricultural growth in Pakistan. Annual time series data from 1970 to

2003 were examined to determine the dynamic effect of GDP, debt service, capital stock, and

labor force on the country's agricultural growth. The study concluded that the debt servicing

burden had a negative effect on the productivity of labor and capital, thereby adversely affecting

agricultural growth.

Malik and Hayat (2010) explored the relationship between external debt and agricultural

growth in Pakistan for the period 1972 – 2005, using the time series econometric technique. The

study showed that external debt was negatively and significantly related to agricultural growth

and suggested that an increase in external debt will lead to a decline in agricultural growth.

Measuring size of debt crisis effect on agricultural output using OLS for 13 less

developed countries over 1982-2010, inverse relationship between debt and agricultural output

was obtained (Warner, 2012). Also, in study of 13 countries over period of 1965-2011, it was
 17

affirmed that debt crisis of 1982 had significant effects in terms of intense slowdown of domestic

investment mostly on agriculture (Rockerbie, 2013).

Adetula (2009) investigated the effect of external debt on agricultural growth in Iran

(1974-2007) using the co-integration test and ECM, authors showed that external debt and

imports inverse impacted GDP though insignificantly (Safdari & Mehrizi, 2011). On the

dynamic impact of external debt accumulation on private investment and growth in Africa with a

focus on 81 DCs for 965-1999, no significant correlation was found between the debt/export

ratio and investment variables. The crowding-out effect had a point estimate of 0.03% (Cohen,

1993). Using the 2SLS technique to examine the relevance of the debt overhang hypothesis in

Nigeria, it was reported debt servicing adversely affected private investment while policy

simulation results revealed that hypothesized debt reduction of (40%, 50%, and 75%) anticipated

active in 1986 would increase investment and GDP.

Ayadi and Ayadi (2008) examined the impact of the huge external debt, with its servicing

requirements, on agricultural growth of the Nigerian and South African economies. Neoclassical

growth model which incorporates external debt, debt indicators, and some macroeconomic

variables, was employed and analyzed using both Ordinary Least Square (OLS) and Generalized

Least Square (GLS) techniques of estimation. Results revealed that debt and its servicing

requirement has a negative impact on the agricultural growth of Nigeria and South Africa.

Ogunbiyi and Okunola (2015), investigated the impact of domestic debt on real sector

growth in Nigeria with particular emphasis on the agricultural and industrial sector growth using

time series data covering a period of 34 years (1980–2013). Agricultural growth was proxied by

Agriculture GDP while industry growth was proxied by industrial GDP. The ADF unit root, and

Vector Auto Regression (VAR) analysis technique were employed in their estimation. The study
 18

concluded based on the findings that in an advent of consistency and project tied borrowing, the

real sectors will experience growth and development.

Ogunmuyiwa (2011) examined whether external debt promotes agricultural growth in

Nigeria, using time series data from 1970-2007. Results revealed that causality does not exist

between external debt and agricultural growth in Nigeria. Folorunso and Felix (2018) studied the

influence of foreign borrowing on the growth of Nigeria and South Africa’s economy. Analysis

of the data from the two countries indicated that debt propelled the growth of output in Nigeria,

but retarded such in South Africa. They based the reason for their findings on the repayment

patterns of such debts. Within their study period, Nigeria was only repaying a minute chunk of

her foreign debt while South Africa was repaying the debt service ratio assiduously. Further, it

can be asserted that even though debt service likely has a positive effect on the growth of output

in Nigeria, the more serious the debt, the more likely it is to compress output growth.

Ebhotemhen and Umoru (2017) analyzed the impact of external debt on growth of

agricultural production in Nigeria using the time series data from 1980-2017. They utilized the

co- integration test Error Correction Method (ECM) in their study as well. The findings indicate

that external debt stock in relation to agricultural output contributes negatively to the economic

growth in Nigeria. This could emanating from fact that some external loans may not have been

properly channeled and utilized to increase agricultural productive capacity of Nigerian economy

and this probably could have generated returns for the debt repayment and promote economic

growth and development. More also, less emphasis may have been placed on optimal debt

management strategies. This result is consistent with the findings particularly with Ogunmuyiwa

(2011), Olanrewaju, Abubakar and John (2015) who examined the effect of external debt on the

economic growth in Nigeria and also Warner (2012) for the case of 13 less developed countries
 19

and Safdari and Mehrizi (2011) for Iran. Empirical results reveal that external debt failed to yield

increase in output returns in agricultural productivity by its inverse association with agricultural

output. This indicates that acquired external loans for agriculture within period of study were not

optimally utilized for same resolve.

Brown, Vincent, Emmanuel, and Etim (2014) Measured the size of the debt crisis effect

on agricultural output using OLS for 13 less-developed countries from 1982-2010. Findings

indicated an inverse relationship between debt and agricultural output was obtained in their study

as well.

Matthew and Mordecai (2016) investigated the impact of domestic debt on agricultural

output in Nigeria using annual time series data spanning 1985-2014. The study employed the

Augmented Dickey-Fuller test, Johansen Co-integration test, Error Correction Method (ECM)

and Granger causality test. Findings of the Johansen Co-integration test revealed that there exists

a long-run relationship between agricultural output, domestic debt, public agricultural

expenditure and interest rate. The results of the parsimonious ECM model showed that domestic

debt has a significant positive impact on agricultural output, and public agricultural expenditure

has an insignificant positive impact on agricultural output.

According to Ukpe, Umeh and Asogwa (2017), their study examined the effects of public

external debt and private investment on agricultural growth in Nigeria. The result also showed

that public external debt and domestic private investment negatively affected the agricultural

growth in Nigeria during the period under review. Based on this review, it was recommended

that specialized development agencies should be set up with the aim of implementing and

evaluating government policies on foreign external debt and domestic private investment.
 20

This study tends to differ through its attempt to establish the relationship between public

debt and agriculture output in Nigeria.

2.4 RESEARCH GAP

Within the backdrop of this study, several studies by different scholars were reviewed with

respect to public debt, external debt, domestic debt, agricultural growth and development in

Nigeria. However, virtually all the works reviewed in this study, their spanning period is not up

to date and again most of their studies were conducted on other economies, some use a

combination of both developing and developed economies to test the effect of public debt on

agriculture, therefore could not be generalized in the Nigeria economy as only a few has been

conducted on the economy. Hence, this study has addressed the gap by investigating the impact

of public debt on agricultural output in Nigeria. Most importantly, this study separates itself by

covering a period that is more relevant from 1990 to 2022. Thus, this research sets out to fill this

gap by first, ascertaining the causal relationship between Public debt and agricultural output and

there after investigating the impact of public debt on agricultural output in Nigeria.
 21

CHAPTER THREE
PUBLIC DEBT AND AGRICULTURAL OUTPUT IN NIGERIA
3.1 OVERVIEW OF PUBLIC DEBT IN NIGERIA

Nigeria’s indebtedness dates back to pre-independence era. The debts incurred before

1978 were relatively small and mainly long-term loans from multi-lateral and official sources

such as the World Bank and Nigeria’s major trading partners. The loans were majorly obtained

on soft terms and therefore did not constitute a burden to the economy. However, due to the fall

in oil prices and oil receipts, the country in 1977/78 raised the first jumbo loan to the tune of $1.0

billion from the international capital market. The loan was used to finance various medium to

long-term infrastructural projects.

According to Essien (2016), the past couple of decades have witnessed rising concern on

the increase in Nigeria’s public debt. The first most significant rise in Nigeria’s public debt

occurred in 1987 when the total debt rose by 96.9% to N137.58 billion. From then, the rise in

Nigeria’s public debt continued unabated such that as at 2004, total public debt stood at

N6,188.03 million. In 1986, total debt which was hitherto driven largely by the domestic debt

witnessed a reversal and was being driven by the external debt. Thus, the dominance of the

external debt as well as the steady rise in total debt remained till 2005 when the country was

granted debt pardon by the Paris Club. The debt forgiveness saw Nigeria’s total debt and external

debt plummeting by 59.0 per cent and 90.8%, respectively between 2004 and 2006 to N2,533.47

billion and N451.5 billion. Incidentally, as external debt shrunk, domestic debt continued to

grow unabated such that by 2011, total debt which was being driven by the domestic debt had

exceeded the 2004 level and stood at N6,519.65 billion. By 2012, Nigeria’s total debt had hit an

all-time high of N7,564.4 billion. Between 2006 and 2012, the domestic debt had accounted for

82.2% to 87.2% of the total debt.

 22

Current debates on fiscal consolidation emphasized the crucial role of prudential limits on

public debt-to-GDP ratios. A debt-to-GDP ratio of 60% is quite often noted as a prudential limit

for developed countries, while for developing and emerging economies, a ratio of 30.0% was

maintained before 2008 and 40% was being applied since 2009 (DMO, 2013). However, these

ratios are not sacrosanct as countries are encouraged to adapt different strategies to achieve fiscal

consolidation (IMF, 2011).

Nigeria’s public debt was unsustainable between the periods of 1985-1995 and 1998-

2004. While brief sustainability was enjoyed in 1996-1998, Nigeria’s debt had been below the

threshold since 2005. The sustainability of the former was due to astronomical increase in Gross

Domestic Product (GDP) whereas that of the latter could be attributable to both GDP growth and

debt forgiveness. Though Nigeria’s debt had remained sustainable since 2005, it is however

noteworthy that both public debt and GDP had been on continuous rise. At 62.41%, by end-2012

the bulk of Nigerian domestic debt was made up of Federal Government of Nigeria (FGN)

bonds. This was followed by the treasury bills at 32.47%.

Most of Nigeria’s domestic debt which was mostly long-term in 2010 became more of

short-term, that is, they had maturity of less than one year. This led to increased debt service

burden. As at end-2012, the Nigerian total public debt service / GDP ratio stood at 0.5 per cent.

With the debt forgiveness in 2005, Nigerian foreign debt which was hitherto being driven by

Paris Club was being dominated by the multilateral debt.

The holding of the domestic debt which was mostly taken up by the CBN from 1981 to

2003 changed such that the Deposit Money Banks (DMBs) and the Non-Bank Public surpassed

the CBN and became major players in the domestic debt market with the DMBs taking the lead.

FGN’s Domestic Debt stock was N12,774.41 billion as at December 31, 2018 compared to

N8,837.00 billion as at December 31, 2015, and comprised mainly of FGN Bonds, and NTBs which
 23

accounted for 73 and 21% in 2018 and 66 and 31% in 2015 of the Total FGN’s Domestic Debt

respectively.

Domestic debt management in Nigeria had hitherto been carried out by the CBN through

the issuance of government instruments, such as the Nigerian Treasury Bills (NTBs); Nigerian

Treasury Certificates; Federal Government Development Stocks; and Treasury Bonds. The debt

management strategy adopted at that time led to inefficiencies resulting in fundamental

challenges. In consideration of these numerous difficulties, the government established an

autonomous debt management office in order to achieve efficient debt management practices.

The Debt Management Office (DMO) was thus established on October 4, 2000 to centrally co-

ordinate the management of Nigeria’s debt for all the tiers of government. While the state

governments’ external borrowing is guaranteed by the Federal Government (FG), their domestic

borrowings required analysis and confirmation by the FG based on clear criteria and guidelines

that the states can repay based on their monthly allocations from the Federation Account

Allocation Committee (FAAC) and Internally Generated Revenue (IGR).

The erratic nature of the oil sector has allowed some important discoveries: that the

excessive reliance on crude petroleum export and essential replacement of the previous

composite vector of “traditional” primary export with single, though more lucrative, crude oil

vector does not provide secure foundations for economic development in Nigeria. This trend

continued to threaten economic growth despite the government intervention programmes which

marked the supply of required inputs and capital allocation to farmers (Anyanwu, 1997). Though

some of the programmes seemed to improve the economy, they did not remove the high poverty

situation that is ravaging the economy. The situation became worst when Nigeria’s agricultural

products lost competitiveness in the global market in 1985 to 1990. The international price of

food product fell below their corresponding domestic prices as traditional export disappeared and
 24

gave way to some cheap import such as rice, maize and wheat. Output continued to decline

despite government effort, living the economy at the mercy of foreign dependency. It is this act

of dependency that led to their external borrowing.

25
 26

40000

35000

30000

25000

20000 Internal Debt (₦' Billion)

External Debt (₦' Billion
15000 Total Debt (₦' Billion)

10000

5000

0
90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20
19 19 19 19 19 20 20 20 20 20 20 20 20 20 20 20

Figure 1: The trend of Internal and External Debt, 1990-2021

Source: The Central Bank of Nigeria Statistical Bulletin of Public Finance, 2021
 27

In accordance with Figure 1, the trend for total public debt to GDP ratio from 2006

reveals an upward trend in this ratio. The change in this ratio from 2005 was largely driven by

the accumulation of domestic public debt stock, which can be attributed to government

deepening of the financial market through the development of financial instruments and domestic

debt finance of budget deficits (Debt Management Office Nigeria, 2005, 2006, 2009, 2018;

Titus, 2013). The composition of Nigeria’s public debt stock stood at 37.78% for external public

debt stock and 62.21% for domestic public debt stock while total public debt to GDP ratio stood

at 16.07% as at end 2018 (CBN, 2019). The composition ratios compare favourably to the

optimal target of 60:40 for domestic and external debt, respectively, by end 2019 as contained in

the 2016–2019 Nigeria’s Debt Management Strategy (Debt Management Office Nigeria, 2016).

Overall, for the study period, increased changes in the public debt stock were largely through the

implementation of domestic debt management strategies and fiscal excesses.

3.1.1 Causes of Public Debt in Nigeria

Public debt can be raised both externally and internally. However some of the reasons

why there is a consistent increase in Nigeria’s public debt is as a result of the following:

i. Fiscal Deficit: A fiscal deficit occurs when the government's expenditures exceed its

revenues. In Nigeria, persistent fiscal deficits have led to increased borrowing as the

government seeks to cover the gap between the money it spends and the money it

collects in taxes and other revenues. High government spending on salaries,

infrastructure, and social programs can contribute to fiscal deficits and subsequently

drive the need for borrowing. Also, this occurs when there is misplacement of

economic priorities such as: distortions and misallocations towards white elephant
 28

projects, lack of follow up guidelines, maturity mismatch with some shot to medium

term loans directed to long term developments.

ii. Overdependence on Oil Revenue: Nigeria's economy heavily relies on revenue

generated from oil exports. Fluctuations in oil prices can have a significant impact on

government revenue. During periods of low oil prices, the government's income

decreases, making it difficult to fund its activities. As a result, the government resorts

to borrowing to finance its budgetary needs during such times.

iii. Inefficient Revenue Collection: Inadequate tax collection and tax evasion have

hindered the Nigerian government's ability to generate sufficient revenue. This leaves

a gap between the government's revenue target and actual collections. Insufficient

revenue limits the government's ability to fund its expenditures and can lead to

borrowing to make up for the shortfall.

iv. Infrastructural Development: Nigeria, like many developing nations, has a

pressing need for infrastructure development. To address this, the government often

undertakes large-scale projects such as roads, bridges, and power plants. Financing

these projects can be costly, and borrowing is commonly used to cover the expenses

associated with these projects.

v. Economic Challenges: Periods of economic challenges, such as recessions or high

inflation, can negatively impact government revenue and increase public spending.

These economic challenges can make it difficult for the government to meet its

financial obligations, leading to borrowing to cover budget deficits.

vi. Lack of Fiscal Discipline: Poor management of public finances, including

inefficient allocation of resources and corruption, can contribute to an accumulation

 29

of debt. Lack of fiscal discipline may lead to excessive borrowing without proper

consideration for the long-term consequences.

vii. Exchange Rate Fluctuations: Nigeria's external debt is often denominated in

foreign currencies. Exchange rate fluctuations can increase the cost of servicing this

debt when the local currency weakens against these currencies. This puts additional

pressure on the government’s finances and requires more borrowing to manage the

debt.

viii. Interest Payments: High interest rates on existing debt can lead to substantial

interest payments that consume a significant portion of the government's revenue. As

interest payments increase, less funding is available for other essential government

projects, which in turn leads to further borrowing to meet them.

ix. Low level of savings: The low level of savings and high propensity to consume

foreign goods and services is another factor that has contributed to the Nigeria’s

public debt.

x. Natural Disasters: Natural disasters such as drought and desertification which

increases food production bills at low level of food production, account for debt

crisis.

3.1.2 Effects of Public Debt on the Nigerian Economy

Public debt if accumulated over time often has negative effect on the economy. Some of

them are listed below:

1. Mismanagement of public funds: Government decisions about how to allocate and

spend financial resources have a direct impact on the well-being of citizens. However, the

misallocation, abuse and mismanagement of public funds pose a tremendous challenge

 30

for the efficiency and effectiveness of development interventions and poverty reduction,

citizen participation and civil society involvement in processes of public budgeting and

financial management are essential for promoting transparency and accountability with

regards to public finances, building safeguards against corruption and insuring that public

funds are allowed equitably so that the interest and needs of poor and marginalize groups

are adequately addressed.

2. Accumulating government debt can destroy the economy if faced with high debt burdens.

Higher interest rates can also pose a dangerous situation, if an economy has most of its

debts in short-term paper and outstanding debts are allowed to mature many years before

repayment. Other causes include increase inefficiencies of public organization.

3. High rate of poverty: The welfare implications of domestic debt are that unemployment

rate increase due to the closure of industries and decline in government finance on social

service, infrastructure services, since most part of government revenue are used to service

the debt, the resultant effect of all these is that the rate of poverty continue to rise in the

country.

4. Large internal domestic debt tends to crowd out private investment: The process of

crowding out arises from the fact that once the government borrows heavily from the

domestic market, a shortage of loan able funds arise forcing interest rate up which is the

situation between 1994 and 2003, a period of large deficit financing, interest rate was an

average of 23.05% but between 2004 and 2008; a period of low deficit financing and

lower debt ratio, interest on the average reduced to 19.23%.

5. High domestic debts are bound to put pressure on government at the point of repayment

as this may cause the government priorities, while introducing measures to reduce the
 31

nation domestic debts profile, greater attention needs to repaid to viable investment

initiatives. If the government can ensure huge returns for private owners, the impacts will

be better felt by all and sundry instead of continuous borrowing.

6. Another factor that coincides with the domestic debt crises is the recurrent budget deficit

which also causes the nation to be borrowing from financial institutions. With the

nation’s abundant human and natural resources, the question that continues to agitate the

mind is the reason for our continuous borrowing both externally and internally. This

unanswered question poses a lot of leadership challenges for the nation. In other words,

the nation’s infrastructural deficits and poor living condition of people are part of the

resultant effect of domestic borrowing.

3.1.3 Management of the External Debt in Nigeria

Nigeria's external debt management involves overseeing and strategizing the country's

borrowing and repayment of foreign loans. The government aims to maintain sustainable debt

while prioritizing development and economic growth. In order to achieve this, Nigeria focuses

on the following:

1. Debt Buy-Back: this is when a substantial discount is offered by the creditor to the

debtor for the payment of outstanding debt. This is when the debtor is offered a

substantial discount by the creditor nation for the payment of outstanding debts. Nigeria

got involved in February, 1992, when USA 3.395 billion USD commercial debts owed to

the London Club was bought back by Nigeria at 60% discount. The implication is that

Nigeria paid $1.352 billion to liquidate or buy back the commercial debts (Edosa &

Osaze, 2003).
 32

2. Prudent Borrowing Practices: The government evaluates borrowing needs carefully,

taking into account debt sustainability and potential impact on the economy. This

involves borrowing for productive projects that can contribute to economic growth and

revenue generation.

3. Negotiating Favorable Terms: Nigeria aims to negotiate favorable loan terms, including

lower interest rates, longer repayment periods, and flexible terms to ease debt burden and

enhance repayment capacity.

4. Strengthening Debt Monitoring and Reporting: Nigeria focuses on enhancing debt

data collection, analysis, and reporting to ensure transparency, accountability, and

effective decision-making.

5. Fiscal Discipline and Revenue Enhancement: The government implements measures to

enhance revenue collection, improve fiscal discipline, and reduce budget deficits, thereby

minimizing the need for excessive borrowing.

6. Economic Reforms and Development: Nigeria pursues economic reforms and invests in

development projects to promote sustainable economic growth, which contributes to

reducing the debt-to-GDP ratio.

7. Debt Sustainability Analysis: Regular debt sustainability analyses are conducted to

assess the country's ability to manage and service its external debt without jeopardizing

macroeconomic stability.

3.1.4 Management of the Internal Debt in Nigeria

I. Debt Servicing: The CBN makes the interests and principal payments of domestic debts

which fall due. It provides discount as well as rediscount facilities in respect of debt

instruments held by its customers. This later function is however being transferred to the
 33

Discount Houses. In the case of development stocks, the CBN publishes due dates for

redemption of maturing stocks through redemption schedule statements and payment

forms. This is further facilitated by the creation of a sinking fund. Sinking fund is a fund

into which government pays in amount from time to time for the purpose of redeeming its

liabilities on the development stocks under various balances. The balance of the sinking

fund of each development stock is at times reinvested in another development stock with

a higher rate of interest and of nearer maturity.

II. Debt Restructuring: Restructuring is an arrangement under which the existing debt

stock could be converted to various categories of debt. Such conversion could consist of a

buy-back, issuance of collateralized bond and provision of new money. When necessary,

Nigeria engages in debt restructuring to improve debt serviceability, by renegotiating

terms and conditions with creditors.

III. Acquisition of Domestic Debts: The Central Bank of Nigeria advises government as to

the timing of floatation of debt instruments and terms of issue. Advertisements are

usually put up and subscription made through the banks and acceptance houses. The duty

lies on the CBN to maintain appropriate books and accounts of such transaction.

3.2 AN OVERVIEW OF AGRICULTURAL OUTPUT IN NIGERIA

The agricultural sector is no doubt, one of the key drivers of the Nigerian economy,

accounting for over a quarter of the nation’s GDP; 36% of employment; 88% of non-oil exports

earnings; and a major source of food and raw materials for agro-allied industry (World Bank,

2019). In terms of performance, agriculture remains one of the key sectors of the Nigerian

economy. The sector employs about two-thirds of the workforce while contributing nearly 21%

to GDP (FAO, 2020; CBN, 2018). The sector is endowed with an arable landmass of 82 million
 34

hectares, out of which only 34 million hectares have been cultivated (FMARD, 2016). According

to the FAO (2020), Nigeria is the largest producer of cassava in the world, with 50 Million

metric tons annually from a cultivated area of 3.7 million hectares, which accounts for about

20% of world production as well as Africa’s highest consumer of rice, and one of its leading

producers in the continent.

Despite the contribution to the economy, Nigeria’s agricultural sector faces many

challenges which impact on its productivity. These include; poor land tenure system, low level of

irrigation farming, climate change and land degradation. Others are low technology, high

production cost and poor distribution of inputs, limited financing, high post-harvest losses and

poor access to markets. These challenges have stifled agricultural productivity affecting the

sector’s contribution to the country’s GDP as well as increased food imports due population rise

hence declining levels of food sufficiency. For instance, between 2016 and 2019 Nigeria’s

cumulative agricultural imports stood at ₦3.35 trillion.

The Government has implemented several initiatives and programmes to address the

situation including the Agriculture Promotion Policy (APP), Nigeria–Africa Trade and

Investment Promotion Programme, Presidential Economic Diversification Initiative, Economic

and Export Promotion Incentives and the Zero Reject Initiative, Reducing Emission from

Deforestation and Forest Degradation (REDD); Nigeria Erosion and Watershed Management

Project (NEWMAP); Action Against Desertification (AAD) Programme, among others.

All these efforts aim to increase agricultural productivity in order to provide sufficient

quantities of food to meet domestic demand as well as an abundance of commodity crops for

export in the international market. Besides, they aim at reversing forest loss and degradation;

promoting sustainable management of natural resources; rehabilitation of degraded lands and

 35

reducing erosion and climate vulnerability. Nigeria has 70.8 million hectares of agriculture land

area with maize, cassava, guinea corn, yam beans, millet and rice being the major crops.

Nigeria’s rice production rose from 3.7 million metric tons in 2017 to 4.0 million metric tons in

2018. In spite of this, only 57% of the 6.7 million metric tons of rice consumed in Nigeria

annually is locally produced leading to a deficit of about 3 million metric tons, which is either

imported or smuggled into the country illegally. To stimulate local production, the Government

banned importation of rice in 2019.

Animal production has remained underexploited. Livestock mostly reared by farm

families in Nigeria are the small ruminants like goats (76 million), sheep (43.4million), and cattle

(18.4 million). The ecology in the northern part of the country makes it famous for livestock

keeping. In addition to small and large ruminants, poultry population stands at 180 million

poultry (FMARD, 2017). Here too domestic demand outweighs production despite several

interventions by development partners to improve production and safeguard against diseases

including transboundary animal diseases.

The boom in the oil sector brought about a distortion of the labor market. The distortion,

in turn, produced adverse effects on the production levels of both food and cash crops.

Governments had paid farmers low prices over the years on food for the domestic market to

satisfy urban demands for cheap basic food products. This policy, in turn, progressively made

agriculture unattractive and enhanced the lure of the cities for farm workers. Collectively, these

developments worsened the low productivity both per unit of land and per worker due to several

factors: inadequate technology, acts of nature such as drought, poor transportation and

infrastructure, and trade restrictions. Although the government had taken several measures to

facilitate the flow of credit to agriculture, administrative delays often cause credit to reach many
 36

farmers after the planting seasons hence providing an opportunity for loan diversion to

unproductive activities and leading to eventual poor repayment. It is not surprising, therefore,

that the problem of insufficient supply of agricultural inputs such as fertilizer, agricultural

chemicals, and improved seeds has continued to slow down the total agricultural output as

measured by the aggregate index of production, which declined in the pre-SAP era.

3.2.1 Problems of Agricultural Output in Nigeria

Agricultural output in Nigeria is sometimes encountered with problems which in turn

affects the output in the country as a whole. Some of them are highlighted below:

1. Limited Access to Credit and Finance: Many small-scale farmers in Nigeria

lack access to formal credit and financial services. Without adequate financing,

farmers struggle to invest in modern farming techniques, equipment, and inputs,

leading to lower agricultural productivity.

2. Outdated Farming Methods: A significant portion of Nigeria's agricultural

sector relies on traditional and outdated farming methods. Lack of knowledge

about modern agricultural practices, such as crop rotation, improved seeds, and

efficient irrigation, limits the potential for increased agricultural output.

3. Inadequate Infrastructure: Poor infrastructure, including inadequate roads,

storage facilities, and transportation networks, contributes to post-harvest losses

and higher marketing costs. This discourages farmers from investing in high-

value crops and leads to lower overall agricultural output.

4. Climate Change and Environmental Degradation: Climate change-related

factors like irregular rainfall patterns, droughts, and flooding can negatively affect

crop production. Environmental degradation, including soil erosion and

 37

deforestation, further reduces agricultural productivity and leads to reduction in

soil fertility.

5. Limited Access to Technology: Many Nigerian farmers lack access to modern

agricultural technologies, such as improved seeds, mechanized equipment, and

pest management solutions. This hinders their ability to optimize crop yields and

protect their crops from pests and diseases.

6. Low Mechanization: The majority of farming activities in Nigeria are still

labour-intensive due to the low level of mechanization. This limits the scale of

production and makes farming less efficient, resulting in lower agricultural

output.

7. Inadequate Extension Services: Extension services play a crucial role in

educating farmers about modern agricultural practices, pest management, and

market information. However, the availability of extension services in rural areas

of Nigeria is limited, leading to a lack of knowledge and skills among farmers.

8. Market Access and Price Fluctuations: Many farmers struggle to access

markets that offer fair prices for their produce. Price fluctuations, lack of storage

facilities, and middlemen exploiting the situation lead to lower profits and dis-

incentivize farmers from increasing production.

9. Land Tenure Problems: Land ownership and tenure issues can hinder

investment in agriculture. Lack of secure land rights can discourage farmers from

making long-term investments in improving soil quality and adopting sustainable

farming practices.
 38

10. Lack of Government Support: The Nigerian government pays little or no

attention to agriculture and they do not provide support to farmers which in turn

affect agricultural output in terms of agricultural policies, subsidies, and research

and development investment limits the growth of the sector. Adequate policies

and funding are crucial to provide farmers with the resources and incentives

needed to enhance agricultural output.

Addressing these challenges requires comprehensive approaches which are: investments

in rural infrastructure, improved access to credit and technology, capacity building for farmers,

climate-resilient farming practices, and supportive government policies. By tackling these issues,

Nigeria can unlock the full potential of the agricultural sector and contribute to food security and

economic growth as well.

3.3 THE RELATIONSHIP BETWEEN PUBLIC DEBT AND AGRICULTURAL

OUTPUT IN NIGERIA
The external debt in Nigeria started since 1958 when a sum of $28 was borrowed for

railway construction to aid the transportation of agricultural raw materials from hinterlands to the

sea for onward shipment to Europe. Thereafter more loans were contracted though very low as

the economy was able to withstand its shock at that time (CBN, 2005). The astronomical rise in

external debt stock in Nigeria was triggered off by the decline in international oil prices in the

early 80’s. The decline was due to a downturn in the world economy and fall in demand for

energy in the international market. The revenue from crude oil dropped, Nigerian reserve

contrasted and more loans were contracted to finance their deficits. Nigeria became a serious

victim of external debt shock. It became obvious that the economy is dependent mainly on crude

oil revenue and foreign policies. CBN (2005) noted that the external debt crisis worsened with

the entry of state government into external loan contractual obligations with Paris and London
 39

Clubs. Most of the loan repayment was not accounted for and a general rise in recapitalization of

accrued arrears became eminent, thus culminated to a heavy debt stock (Anyanwu, 1997).

The heavy debt overhang triggered off two major problems on agriculture. First, returns

were used to service the external debt and foreign investment in agriculture dropped drastically

as the uncertainties in foreign policies could not give enough room for a long term plan. The debt

could not finance agriculture neither is agriculture ready to sustain the debt. This vicious cycle of

debt burden has become a primary concern to Nigeria and most developing nations that

contracted the debt.

Statistics obtained from the Debt Management Office indicates that the domestic debts

had also increased from ₦1,525,906.60 billion as at 2005 to ₦2,725,947.30 billion,

₦4,127,973.50 billion and ₦2,320,310.00 billion in the year 2006, 2007 and 2008 respectively.

Considering the economic implications of the nation’s rising domestic debt profile, it becomes a

major policy issue. The office further noted that this phenomenon has menacing economic

implications towards the country as the debt witnesses uprising to have rising from

₦3,218,030.00 billion to ₦4,551,822.399 billion in the year 2009 and 2010 respectively. In

absolute terms, Nigeria’s domestic debt consumes a larger chunk of her Gross Domestic

Production (GDP) thereby tending to decline in total output of goods and services. The sharp

increase in Nigeria’s domestic debt stock had grown sky-rocketed over the years, was

attributable largely to the failure to embark on necessary adjustment, particularly at the time of

declining revenue. That resulted in growing fiscal deficits and further domestic debt

accumulation. Secondly, the banking system mainly the CBN remains the dominant holder of

Federal Government securities. It bears repeating that one of the major problems that have

hindered the attainment of macro-economic stability and sustainable growth has been the

excessive reliance by the Federal Government on borrowing from the banking system,
 40

particularly the CBN, to finance its large and unsustainable fiscal deficits. Borrowings from the

CBN amounts to the injection of high-powered money into the system, which has serious

adverse implications on price and exchange rate stability. The borrowed money must be

prudently utilized in the execution of productive projects in order to enhance the capacity for

repayment of both the principal and interests as they fall due. An effective debt management

requires that borrowed resources must be productively utilized such that the economic and social

rate of return is higher than the future cost of servicing the loan. A debt problem would naturally

ensue when the resources that should have been deployed for the execution of productive

projects are employed in the financing of current or past consumption.

Nigeria is the largest fish consumer in Africa and among the largest fish consumers in the

world with about 3.2 million metric tons of fish consumed annually. Its fisheries and aquaculture

are among the fastest growing subsectors in the country. With a coastline of 853km and over 14

million hectares of inland waters, total fish production per year is close to 1 million metric tons

(313,231 metric tons from aquaculture and 759,828 metric tons from fisheries). Fishing is a vital

livelihood for the poor as well as an important protein source at the household level in Nigeria.

The aquaculture sub-sector is considered a very viable alternative to meeting the nation's need

for self-sufficiency in fish production and nutritional needs.

The average annual agricultural output between the years 1981-1991 was N54.86.

Between the years 1992-2002, agricultural output in Nigeria has risen to N1321.84 in

agricultural output, public debt within this period amounts to ₦23691.01billion. The average

figure for agricultural value added between 2003 and 2018 was N13,972.92 billion (CBN, 2018).

The trend in public debt and agricultural output is presented in table 1 and figure 3

Table 1: Trend of public debt and agricultural output in Nigeria: 1990-2021

 41

YEAR Agricultural output Domestic debt External debt

(₦’ Billion) (₦’ Billion) (₦’ Billion)

1990 106.63 84.09 298.61

1995 790.14 477.73 716.87

2000 1508.41 898.25 3097.38

2005 6032.33 1525.91 2695.07

2010 13048.89 4551.82 689.84

2015 19636.97 8837.00 2111.51

2021 41126.06 19242.56 15855.23

Source: Central Bank of Nigeria (2021)

 42

45,000.00

40,000.00

35,000.00

30,000.00

25,000.00
Agricultural Output (₦'Billion)
20,000.00 External Debt (₦' billion)
Internal Debt (₦' Billion)
15,000.00

10,000.00

5,000.00

0.00
90 993 996 999 002 005 008 011 014 017 020
19 1 1 1 2 2 2 2 2 2 2

Figure 2: Trend of public debt and agricultural output in Nigeria: 1990-2021

Source: Central Bank of Nigeria (2021)
 43

Looking at Figure 2 and Table 1, prior to the discovery of oil in commercial quantity in

the years immediately before and after independence, agriculture was the backbone of the

economy, contributing about 60 - 65% of GDP. Although its contribution had reduced to 20%,

21%, 36%, 24% and 21%, in 1980, 1990, 2000, 2010 and 2016, respectively, it is the single most

important sector in Nigeria, and indeed in some other African countries, providing livelihoods

for at least 53 percent of the economically-active labour force (Akpaeti, 2014 ).

In the second quarter of 2022, Nigeria’s agricultural sector grew by 1.2% in real terms

compared to the same period of the previous year. During the selected period, the contribution of

agriculture to Nigeria’s GDP experienced the highest increase in the fourth quarter of 2021, with

a growth of over 3.5%. Agricultural output contributes to a significant part of the country’s GDP.

It is a key activity for Nigeria’s Economy after oil. Nevertheless, agricultural activities provide a

livelihood for many Nigerians, whereas the wealth generated by oil reaches a restricted share of

people.
 44

CHAPTER FOUR
METHODOLOGY
4.1 RESEARCH DESIGN

Research design is the overall plan and structure of a research study that shows the

methods and procedures used to collect and analyze data. This study adopted the expost facto

research design to evaluate the impact of public debt on agricultural output in Nigeria. The

expost facto design attempts to examined a cause and effect relationship between the

independent variable and the dependent variable; it finds out how the independent variable

affects the dependent variable. The phenomenon to be studied/ investigated has already occurred

and has being documented by highly research-based institutions therefore, no further

manipulations can be made (Ekaette, Owan & Agbo, 2019). Econometric software was

employed to estimate the model and provide the relationship between public debts and

agricultural output in Nigeria.

4.2 TYPES AND SOURCES OF DATA

Data are Broadly Categorized into Types: Primary & Secondary Data. Primary data is

highly relevant to the research context since it is collected to address specific research needs. It is

typically current and specific to research scope. Also while using in primary data, researchers

have control over the collection process, allowing them to design data collection instruments,

choose the sample, and determine the timing and methods of data collection. On the other hand,

secondary data refers to data that are collected by someone else for a purpose other than the

current research project. It is data that already exist in various forms, such as published reports,

academic studies. However, this study utilized data obtained from secondary sources which were

collected from the Central Bank of Nigeria (CBN) statistical bulletin (2022). Time series data on

public debt was sourced from the Debt Management Office (DMO) (2022) while that of

agricultural output was obtained from the World Bank Development Indicator (WDI) (2022).
 45

Other sources of data include the National Bureau of Statistic (NBS) (2022), Textbooks and

Journals.

4.3 MODEL SPECIFICATION

A model is a statistical, mathematical equation or system of measurement in quantitative

form which showed the interrelationship among variables of interest in research. In order to

analyze the effect of public debt on agricultural output in Nigeria, a multiple linear regression

model was formulated. The endogenous variable for the study is the agricultural output (AGO%)

while the exogenous variables are external debt (EXTD%), domestic debt (DOM%) and debt

servicing (PDS%).

Following the study objectives and hypotheses of the study, the functional form of the model is

given as:

AGO = f (EXTD, DOM, PDS)- - - (1)

Where

AGO = agricultural output

EXTD = external debt

DOM = domestic or internal debt

PDS = debt service payment

The econometrics form of the model is stated as

AGO = β0 + β1EXTD + β2DOM + β3PDS + Ut - - - (2)

where
 46

β0 = intercept of the regression line

β1, β2, β3, = Parameter estimates or slope of the variables.

Ut = White noise or error term

A priori Expectation:

Theoretically, the Parameter estimates should be positive. That is, β 1, β2 and β3 greater

than zero (0). Which implies that external debt (EXTD%), domestic debt (DOM%) and public

debt servicing (PDS%) is expected to lead to a decrease in agricultural output and its growth rate

in Nigeria.

4.4 TECHNIQUES OF ANALYSIS

Before considering the regression model estimation, a crucial step involved conducting a

Vector Autoregression (VAR) lag order selection to determine the appropriate number of lags for

the analysis. Additionally, the Augmented Dickey Fuller (ADF) test was employed to assess

whether the time series data exhibited a unit root and to ensure stationarity, thereby preventing

any misleading outcomes and enabling the use of appropriate analytical procedures. Once these

preliminary checks were completed, several post-estimation tests were conducted to validate the

results comprehensively. These included the Breusch-Godfrey serial correlation LM test, the

Breusch-Pagan-Godfrey Heteroscedasticity Test, a Stability Test, and a Histogram Normality

Test. Having ensured the reliability of the data and obtained credible results, the study proceeded

to examine the impact of public debt on agricultural output in Nigeria using the Vector Error

Correction Model (VECM). This model is particularly suitable for time series data, as it accounts

for both the short-term dynamics and long-term equilibrium relationships between the variables

of interest. By employing VECM, the research aimed to gain deeper insights into the intricate

interactions between public debt and agricultural outputs in the Nigerian context.
 47

4.5 PRE-ESTIMATION TESTS

Pre-estimation tests are tests carried out prior the estimation of the main model to ensure

that the appropriate procedures are utilized

4.5.1 UNIT ROOT ANALYSIS FOR TIME SERIES

Researchers assume that economic variables are always stationary (that is stable) but in

most cases they are non-stationary. According to Konya (2004), there exist non-stationary in

most economic variables. Therefore, it is necessary to test whether they are stationary or not. The

stationary test is carried out using unit root test, this study employs the Augmented Dickey Fuller

(ADF) unit root test which was developed by Dickey and Fuller in 1979.

To determine whether the variables are stationary or not, the ADF test states that, if ADF

test statistic (that is the probability value) is greater than the 5% critical value (that is the level of

significance), it means the variable is stationary and we will accept the null hypothesis (thereby,

reject the alternate hypothesis). On the other hand, if ADF test statistic is lesser than the 5%

critical value, it means that the variable is non-stationary in which we will reject the null

hypothesis and go further to use the 1 st difference. However, if at 1 st differences level it still

remains non-stationary, we will use the 2nd difference. If variable does not become stationary at

second levels, we will either discard the variable or take natural log of the variable (Sulaiman &

Azeez, 2012).

4.5.2 JOHANSEN COINTEGRATION

The Johansen test is used to estimate the co-integration relationships between the

dependent variable and the independent variables. This approach is more widely used than the

other techniques for co-integration testing such as the Engle and Granger, Co-integration

Regression Durbin-Watson (CRDW) and Autoregressive Distributed Lag (ARDL) techniques.

 48

The reason is because it is a test for co-integration that allows more than one co-integration

relationship, unlike the Engle–Granger method (Ergun & Göksu, 2013).

Co-integration tests are run to check whether or not there is a long-run relationship

between the variables in a model. The Johansen test is generally more applicable than the other.

Rejection criteria is at 0.05 level. Rejection of the null hypothesis is indicated by an asterisk (*).

The null hypothesis is rejected if the probability value is less than or equal to 0.05 otherwise

accept the alternate hypothesis. Reject the null hypothesis if the Trace or Max-Eigen statistic is

higher than the 0.05 critical value. The implication is that if the null hypothesis is rejected at 5%

level of significant, it is concluded that a long-run relationship exists among the variables and

vice vasa.

4.6 THE VECTOR ERROR CORRECTION MODEL (VECM)

The Vector Error Correction Model (VECM) is a prominent econometric framework used

to analyze and model the behavior of multiple time series variables. It extends the

Autoregressive Distributed Lag (ARDL) model by incorporating both the short-term dynamics

and long-run equilibrium relationships among the variables. Developed by Engle and Granger

(1987), VECM has become an invaluable tool in various fields, including economics, finance,

and social sciences.

Theoretical Foundation of VECM:

VECM is rooted in the concept of co-integration, which refers to the long-term

equilibrium relationships among non-stationary variables. Co-integration arises when a linear

combination of non-stationary variables is stationary. The Johansen co-integration test is

commonly employed to determine the presence and rank of co-integrating vectors within a
 49

system of variables. Once co-integration is established, VECM enables the investigation of the

short-term dynamics that restore the equilibrium relationship when deviations occur.

Estimation Methods for VECM:

The estimation of VECM parameters typically involves two stages: co-integration testing

and estimation of the VECM model itself. The Johansen procedure is widely used for co-

integration testing, providing estimates of the co-integrating vectors and associated eigenvalues.

To estimate the VECM parameters, methods such as the Maximum Likelihood Estimation

(MLE), the Generalized Method of Moments (GMM), and Bayesian techniques are commonly

employed.

Key Applications of VECM

VECM offers a versatile framework for investigating various economic and social

phenomena. Some key applications include:

a. Macroeconomic Analysis: VECM has been extensively utilized to study

macroeconomic variables, such as GDP, inflation, exchange rates, public debt, poverty

rate, unemployment and interest rates. It enables the identification of long-run

relationships, estimation of short-term dynamics, and analysis of impulse response

functions and forecast error variance decompositions.

b. Financial Market Analysis: VECM provides insights into the relationships among

financial variables, including stock prices, bond yields, and exchange rates. It assists in

understanding the transmission mechanisms, volatility spillovers, and risk management

strategies within financial markets.

 50

c. Environmental Economics: VECM can be applied to examine the interdependencies

among environmental variables, such as carbon emissions, energy consumption, and

economic growth. It aids in policy evaluation, sustainability analysis, and the assessment

of environmental impacts on economic systems.

4.7 POST-ESTIMATION TESTS

Post estimation test are tests after model estimation to diagnose the model estimated

which would help predictability and enhance the efficacy of it for forecasting in real life

situation.

4.7.1 Serial Correlation LM Test

The Breusch-Godfrey serial correlation test is a statistical test used to detect the presence

of autocorrelation in the residuals of a regression model. Autocorrelation, also known as serial

correlation, occurs when the residuals of a regression model are not independent over time,

meaning that the error terms in the model are correlated with each other. The test is an extension

of the Durbin-Watson test, which is more appropriate for cases where there may be higher-order

autocorrelation (correlation between residuals at different lags). The Breusch-Godfrey test is

commonly used in econometrics and time series analysis. The formula for the Breusch-Godfrey

serial correlation test is as follows:

Hypothesis:

Null Hypothesis (H0): There is no serial correlation in the residuals.

Alternative Hypothesis (H1): There is serial correlation in the residuals.

Test Statistic:

BG = n * R^2

Where:
 51

n: The sample size (number of observations).

R^2: The coefficient of determination from the auxiliary regression of the residuals on their lags.

In this auxiliary regression, the dependent variable is the residuals, and the independent variables

are the residuals at lags 1, 2, ..., k (k represents the number of lags included in the test). Under

the null hypothesis (H0) of no serial correlation, the test statistic BG follows a chi-squared

distribution with degrees of freedom equal to the number of lags used in the auxiliary regression.

Researchers often refer to statistical tables or software to determine the critical value for the chi-

squared distribution or the F distribution at a given significance level.

4.7.2 Heteroscedasticity Test

Autoregressive Conditional Heteroscedasticity (ARCH) is a statistical model introduced

by Robert Engle in 1982 to address the issue of heteroscedasticity in time series data.

Heteroscedasticity refers to the phenomenon where the variability of the error term in a

regression model is not constant across different levels of the independent variables. In other

words, the variance of the residuals changes as the value of the independent variables’ changes.

ARCH models are a class of econometric models used to capture time-varying volatility or

variance clustering in financial and economic time series data. These models assume that the

conditional variance of the time series is a function of past squared residuals.

A heteroscedasticity test is used to formally check for the presence of heteroscedasticity

in the residuals of a regression model. The most commonly used test is the Breusch-Pagan test,

introduced by Trevor Breusch and Adrian Pagan in 1979. The null hypothesis of the Breusch-

Pagan test is that the variance of the residuals is constant (i.e., no heteroscedasticity), while the

alternative hypothesis suggests the presence of heteroscedasticity. The Breusch-Pagan test

 52

involves regressing the squared residuals from the original regression on the independent

variables used in the initial regression model. The test statistic is then calculated, which follows a

chi-square distribution under the null hypothesis. If the test statistic is significant at a chosen

significance level, the null hypothesis of homoscedasticity is rejected, indicating the presence of

heteroscedasticity.

Now, the term "ARCH heteroscedasticity test" likely refers to a situation where an

ARCH model is used to model the conditional variance of a time series, and then a

heteroscedasticity test, such as the Breusch-Pagan test, is conducted on the residuals of the

ARCH model to check for the presence of heteroscedasticity. This approach is common in

financial econometrics, where ARCH and GARCH (Generalized Autoregressive Conditional

Heteroscedasticity) models are widely used to capture time-varying volatility in financial asset

returns. Once an ARCH or GARCH model is estimated, it is essential to check whether the

model has effectively captured all the heteroscedasticity in the data. This is done by conducting a

heteroscedasticity test on the residuals of the model (Wooldridge, 2010).

It is important to note that the specific approach to testing for heteroscedasticity in the

context of ARCH models may vary, and researchers may use alternative tests or diagnostic

procedures based on their specific research objectives and assumptions.

4.7.3 Stability Test

In econometrics and time series analysis, the AR (autoregressive) characteristic

polynomial plays a crucial role in assessing the stability of a time series model. Stability is an

essential property of time series models, particularly in econometrics, as it ensures that the model

remains valid and reliable over time. An unstable model can produce unreliable predictions and
 53

inference results, making it difficult to draw meaningful conclusions from the data. The AR

characteristic polynomial is derived from an autoregressive model, commonly denoted as an

AR(p) model. The general form of an AR(p) model is as follows:

y_t = c + Φ₁y_(t-1) + Φ₂y_(t-2) + ... + Φ_p*y_(t-p) + ε_t

Where:

y_t is the dependent variable at time t.

c is a constant term (intercept).

Φ₁, Φ₂, ..., Φ_p are the autoregressive parameters representing the relationship between the

dependent variable and its lagged values up to order p.

ε_t is the white noise error term at time t.

The AR characteristic polynomial is obtained by setting the AR(p) equation equal to zero:

Φ(L)y_t = 0

Where L is the lag operator, and Φ(L) is the autoregressive operator. The autoregressive operator

is defined as:

Φ(L) = 1 - Φ₁L - Φ₂L^2 - ... - Φ_p*L^p

For stability, the roots of the AR characteristic polynomial, denoted as λ, should lie

outside the unit circle in the complex plane. In other words, all the roots should have absolute

values greater than 1.

Mathematically, this can be expressed as:

|λ| > 1

If all the roots of the AR characteristic polynomial satisfy this condition, the model is

considered stable. Stable models will not exhibit explosive or erratic behavior over time, making

them more reliable for forecasting and policy analysis. On the other hand, if any root of the AR
 54

characteristic polynomial lies inside the unit circle (|λ| ≤ 1), the model is unstable. In this case,

the model may diverge or show explosive behavior in the long run, and the estimated parameters

may not have meaningful interpretations. To test the stability of an econometric model,

researchers often estimate the autoregressive parameters (Φ ₁, Φ ₂, ..., Φ_p) using various

estimation techniques (e.g., least squares, maximum likelihood). After obtaining the parameter

estimates, they can compute the roots of the AR characteristic polynomial and check if they

satisfy the stability condition (|λ| > 1).

In summary, the AR characteristic polynomial plays a crucial role in assessing the

stability of an econometric time series model. Ensuring model stability is essential for making

reliable forecasts and drawing meaningful conclusions from economic data.

4.7.4 Jarque-Bera Normality Test

The Jarque-Bera normality test, proposed by Jarque and Bera (1987), is a statistical test

used to assess the normality of a given set of data. It examines whether the data follow a normal

distribution by analyzing the skewness and kurtosis coefficients. The test is based on the fact that

in a normal distribution, the skewness should be close to zero, indicating a symmetric

distribution, and the kurtosis should be close to three, indicating a moderate level of peakedness.

Departures from these values suggest deviations from normality. The Jarque-Bera test statistic is

calculated using the skewness and kurtosis coefficients of the data. It follows a chi-square

distribution with two degrees of freedom. The null hypothesis assumes that the data are normally

distributed, while the alternative hypothesis suggests departures from normality. If the test

statistic exceeds the critical value at a chosen significance level, we reject the null hypothesis and

conclude that there is evidence of non-normality in the data. Jarque and Bera (1987) proposed

the Jarque-Bera normality test as a means to test the normality assumption of observations and
 55

regression residuals, providing a statistical tool for assessing departures from normality. If the

probability value is greater than 5% level of significance the null hypothesis that assumes that

the data are normally distributed is accepted, otherwise alternate hypotheses would be accepted

and the conclusion would be that the data are not normally distributed.
 56

CHAPTER FIVE
DATA PRESENTATION AND ANALYSIS

This section empirically examines the effect of public debt on agricultural output in

Nigeria. It deals with data presentation, analysis and interpretation of results. The variables

employed are external debt, domestic debt and debt servicing on the agricultural output

comprises of time series data 1990 to 2022.

 57

5.1 DATA PRESENTATION

Table 2:
Data on agricultural output in percentage (AGO)%, external debt in percentage (EXTD%),
domestic debt in percentage (DOM%) and public debt servicing in percentage (PDS%) in
Nigeria for the period 1990 to 2022
YEAR AGO% EXTD% DOM% PDS%
1990 21.556263 11.08 22.6 6.521339
1991 20.885283 38.8 18.1 6.310799
1992 20.321159 34.5 18.5 5.384206
1993 23.49113 35.5 17.7 5.868715
1994 25.173849 38.5 18.1 5.945631
1995 25.486506 33.5 20 4.380546
1996 26.199159 26.3 19.3 4.562666
1997 27.416651 25.8 19.3 2.711316
1998 27.908371 25.9 16.1 2.572518
1999 26.028486 21.8 15.8 1.851662
2000 21.357241 28.71 8.33 2.930158
2001 24.475355 28.67 9.18 3.609492
2002 36.965083 31.39 9.31 1.659825
2003 33.827061 28.11 8.35 1.680209
2004 27.230454 26.67 7.47 1.357906
2005 26.089283 11.48 6.5 5.425152
2006 24.734991 1.51 5.88 2.870449
2007 24.662577 1.32 6.54 0.379461
2008 25.279751 1.34 5.94 0.21161
2009 26.748855 1.48 8.1 0.27014
2010 23.893704 1.26 8.33 0.361924
2011 22.234711 1.42 8.93 0.134157
2012 21.859959 1.43 9.12 0.302798
2013 20.758623 1.73 8.89 0.100218
2014 19.990255 1.72 8.88 0.819028
2015 20.631893 2.13 10.89 0.333689
2016 20.98311 3.26 13 0.62929
2017 20.846571 4.85 13.35 0.969128
2018 21.203774 9 10.9 1.334482
2019 21.906296 9.3 12 1.117886
2020 24.143306 9.3 12.9 1.331018
2021 23.357059 9 14.9 2.015331
2022 23.058762 11.635 13.164 2.103213
Source: Central Bank of Nigeria (CBN) Statistical Bulletin (2022), the World Bank
Development Indicator (WDI) (2022) and Debt Management Office (DMO) (2022) Data on
Internal Debt
 58

5.2 DATA ANALYSIS AND INTERPRETATION OF RESULTS

Table 3: VAR Order Selection Criteria

Lag LogL LR FPE AIC SC HQ

0 -331.3977 NA 29352.82 21.63856 21.82359 21.69888
1 -239.4834 154.1788* 221.5670* 16.74087* 17.66602* 17.04244*
2 -224.2792 21.58025 247.0185 16.79220 18.45748 17.33504
Source: Authors’ computation using E-views 10 (2023)
 59

Table 3 showed the Vector auto regression (VAR) order selection criteria, the number

with the higher asterisks is selected for model estimation and this was chosen automatically by

the VAR model during estimation, hence, the entire model would be estimated using lag one

which has the most asterisks.

 60

5.2.1 Unit Root Test

Table 4: Augmented Dickey-fuller Unit Root Result

Variables ADF Value 5% Critical Value Probability Order of integration Remark
AGO -6.463667 -2.963972 0.0000 I(1) Stationary
DOM -6.074649 -2.960411 0.0000 I(1) Stationary
EXTD -8.176298 -2.960411 0.0000 I(1) Stationary
PDS -6.477896 -2.960411 0.0000 I(1) Stationary
Source: Authors’ computation using E-views 10 (2023)
 61

Table 4 showed the stationarity results of the variables over the study period. None of the

variable was stationary at level. However, at first difference, agricultural output (AGO), external

debt (EXTD), domestic debt (DOM) and debt servicing (PDS) became stationary I(1). Using the

absolute value, this is also showed by their respective ADF value (-6.463667) (-6.074649) (-

8.176298) and (-6.477896) being greater than the respective critical value (-2.963972) (-

2.960411) (-2.960411) (-2.960411) at the 5% level of significance, and using their respective

probability value (0.0000) (0.0000) (0.0000) (0.0000) were all less than the 0.05 level of

significance. This signified the variables can be used for analysis and it would not lead to

pointless result in real life situation.

 62

5.2.2 THE JOHANSEN COINTEGRATION TEST

Table 5: Cointegration Results for the Variable.

Trace Statistic
Hypothesized Trace 0.05
No. of CE(s) Eigenvalue Statistic Critical Value Prob.**

None * 0.754147 84.67930 47.85613 0.0000

At most 1 * 0.496507 41.18565 29.79707 0.0016
At most 2 * 0.398726 19.91389 15.49471 0.0101
At most 3 * 0.125129 4.144038 3.841466 0.0418
(Maximum Eigenvalue)

None * 0.754147 43.49366 27.58434 0.0002

At most 1 * 0.496507 21.27175 21.13162 0.0478
At most 2 * 0.398726 15.76985 14.26460 0.0287
At most 3 * 0.125129 4.144038 3.841466 0.0418
Source: Authors’ computation using E-views 10 (2023)
 63

Table 5 showed the co-integration results for the model, and it indicated four asterisks

(*) in both trace statistic and maximum eigenvalue. With the probability values of all the number

having asterisks (*) in Table 4 being less than the 0.05 level of significance, it was concluded

that there is a presence of co-integration in the variables. The indication of asterisk also means

that there is a presence of co-integration, hence, there exist a long run equilibrium relationship

among the variable. Since all the variables were not stationary at level and there exist a long run,

the ordinary least square estimator cannot be employed. Thus, the Vector Error Correction

Model (VECM) would be applied to estimate the equation since all the variables would be

treated as endogenous in VECM and it would provide the error correction term (ECT) to

ascertain the speed of adjustment in the short run towards the long run equilibrium. The VECM

result is presented in table 5.

 64

5.2.3 THE VECTOR ERROR CORRECTION MODEL (VECM) ESTIMATION

Table 6:
VECM Results for the Variables
Variables Coefficient Std. Error t-statistic
ECT -0.93896 0.18195 -5.16065
D(AGO_(-1)) 0.502357 0.16506 3.04355
D(EXTD_(-1)) -0.14488 0.08465 -1.71139
D(DOM_(-1)) 0.178498 0.25466 0.70093
D(PDS_(-1)) -0.20124 0.38534 -0.52224
C 0.046295 0.41178 0.11242
R-square 0.579868
Adj. R-square 0.474835
F-statistic 5.520826
Akaike AIC 4.641589
Schwarz SC 4.965392
Source: Author’s computation using E-views 10 (2023)
 65

Table 6 presented the VECM result, to get the significant of the variable, using the

number of sample size (n) = 33, number of co-integrating equation using the trace statistic or

maximum eigen value from the Johansen co-integration (r) = 4 and endogenous variable (k) = 4

since all variables in VECM is treated as endogenous.

The formula to calculate the degree of freedom (df) in a VECM is given by:

Df = n – k – r – 1. Plugging in the values:

Df = 33 – 4 – 4 – 1 = 24

Therefore, the degree of freedom would be 24, using the critical value of 0.05 from the t-

distribution = 1.711, hence this number (1.711) would be used to check the significance of the

variable. If t-calculated in any of the variable is greater than the critical value of 1.711 at 0.05

level of significance the null hypotheses would be rejected in acceptance of the alternate

hypotheses.

The error correction term is (-0.93896) with a t-statistic -5.16065 > 1.711 meet the

requirement of the (ECT) of being negative and statistically significant. It implied that the

system adjusts towards long run equilibrium at the speed of 93.89% given that the ECT value

was statistically significant at 5% critical value.

From the table 6, external debt (EXTD) is negatively (-0.14488) related to agricultural

output (AGO) in Nigeria. The absolute value of t-statistic (-1.71139) is greater than or equal to

the critical value (1.711) at 5% level of significance, thus the null hypothesis is rejected and

conclude that marginally, there is a significant relationship between external debt and

agricultural output in Nigeria. Domestic debt (DOD) is positively (0.178498) related to

agricultural output in Nigeria and the t-value (0.70093) less than (1.711) at 5% confidence level.

This indicates the acceptance of null hypotheses and the conclusion drawn by the study is that
 66

there is no significant relationship between domestic debt and agricultural output in Nigeria.

Conversely, debt servicing (PDS) is negatively (-0.20124) related to agricultural outputs in

Nigeria and the t-value (-0.52224) taking the absolute value is less than (1.711) at 5% level of

significance, hence the null hypothesis is accepted and concluded that there is no significance

relationship between debt servicing and agricultural outputs in Nigeria. It was also noting that

agricultural output is positively (0.502357) related to external debt, domestic debt and debt

servicing in Nigeria, and was statistically significant in determining them in Nigeria since the t-

value (3.04355) is greater than (1.711) at the 5% critical value.

The coefficient of the constant or intercept is (0.046295) indicating that if the explanatory

variables were held constant, agricultural productivity would be 4.52% an increase in agricultural

outputs, hence, improve in economic growth development. The study also revealed that the

coefficient of determination (R2) showed the percentage of variations in the independent

variables that can be explained by dependent variable. The R 2 of (0.579868) or 57.98% showed

that agricultural outputs can be explained by changes in the explanatory variables used in the

model while the remaining 42.05% can be explained by factors outside the model. This shows

the goodness of fit of the model. The Akaike information criterion and Schwartz criterion with

lower value, implies that the model is well specified (Ogboru & Alabi, 2018). The values of

Akaike information criterion and Schwartz criterion were found to be (4.641589) (4.641589)

respectively, indicating that the values are relatively low, thus, the model is well specified, and

has performed well.

 67

5.2.4 POST ESTIMATION TEST

Table 7:
Serial Correlation LM Tests Results
Lag LRE* stat Df Prob. Rao F-stat df Prob.

1 16.05362 16 0.4492 1.016239 (16, 52.6) 0.4555

Source: Author’s computation using E-views 10 (2023)
 68

Table 7 summarizes the serial correlation LM test results. It can be observed that the p-

value (0.4555) is greater than the 0.05 critical value, hence, the null hypothesis cannot be

rejected. It is be confirmed that the model is free of auto correlation problem.

 69

Table 8:
Heteroscedasticity Tests Results
Chi-sq df Prob.

119.7959 120 0.4881

Source: Author’s computation using E-views 10 (2023)
 70

The result of the heteroscedasticity test is as revealed in table 8. Since the p-value

(0.4881) is greater than the 0.05, the null hypothesis is accepted, thus, the residual is free from

heteroscedasticity.
 71

Figure 3: Stability Tests Results

Source: Author’s graph using E-views 10 (2023)

 72

Figure 3 shows that one of the roots is directly on the circle while all others falls inside

the circle. This means that the roots of the model do marginally remained within the circle from

1990 to 2022, which means that the parameter are marginally adjusted to be stable within the

study period as indicated by the graph. Therefore, the estimated ECT is marginally stable and

efficient in estimating the dynamic relationship between the variables under investigation.

Note that the stability of a variable refers to its consistency or reliability over time or

across different conditions. If a variable is not stable, it means the variable exhibits fluctuations

or variations that make it less predictable or consistent. While stability is generally desirable for

accurate and reliable analysis, it does not automatically invalidate the entire analysis.
 73

Table 9
VEC Residual Normality Tests Results
Component Jarque-Bera df Prob.

1 0.056713 2 0.9720
2 0.056224 2 0.9723
3 1.007572 2 0.6042
4 1.923701 2 0.3822

Joint 3.044211 8 0.9316

Source: Author’s computation using E-views 10 (2023)
 74

The result of the VECM residual normality test as showed in table 9 revealed that the

Jarque-Bera p-value of each variables from one to four is significantly greater than the 0.05

critical value. Going by the joint probability value (0.9316) great than 0.05, it can be concluded

that the null hypothesis is accepted and that the variables are normally distributed and has

performed well.

5.3 DISCUSSION OF FINDINGS

The study has investigated the effect of public debt on agricultural outputs in Nigeria for

the period 1990 to 2022. The Vector Error Correction Model (VECM) results provide valuable

insights into the relationships between the variables and their effects on agricultural output in the

Nigeria economy. Below is discussion of the findings in more detail;

The ECT coefficient of -0.93896 is significant at a level of 5%. This term indicates the

speed of adjustment of the system towards its long-run equilibrium after a shock. In this case, the

agricultural system adjusts towards its equilibrium at a rate of 93.89% after a deviation from the

long-run relationship. This is a significant finding because it demonstrates the tendency of the

variables to correct any imbalances over time.

Findings in this study also revealed that, absolute value of t-statistic (-1.71139) is greater

than or equal to the critical value (1.711) at 5% level of significance, thus the null hypothesis is

rejected and conclude that marginally, there is a significant relationship between external debt

and agricultural output in Nigeria. The negative coefficient of -0.14488 for external debt

suggests that an increase in external debt by 1% would lead to a decrease of approximately

0.145% in agricultural output. This result aligns with economic theory – when a country

accumulates more external debt, a larger portion of its resources may be diverted towards debt

servicing, leaving fewer resources for investment in sectors like agriculture.

 75

On the other hand, domestic debt (DOD) is positively (0.178498) related to agricultural

output in Nigeria and the t-value (0.70093) less than (1.711) at 5% confidence level. This

indicates the acceptance of null hypotheses and the conclusion drawn by the study is that there is

no significant relationship between domestic debt and agricultural output in Nigeria. The positive

coefficient of 0.178498 for domestic debt indicates that a 1% increase in domestic debt would

result in a 0.178% increase in agricultural output. This finding might be counterintuitive at first

glance. One possible explanation is that domestic debt can stimulate economic activity, leading

to increased demand for agricultural products within the country. Additionally, domestic debt

might be used for infrastructure development, which could indirectly benefit the agricultural

sector, there by leading to increase in agricultural outputs.

Public debt servicing (PDS) in this case is negatively (-0.20124) related to agricultural

outputs in Nigeria and the t-value (-0.52224) taking the absolute value is less than (1.711) at 5%

level of significance, hence the null hypothesis is accepted and concluded that there is no

significance relationship between debt servicing and agricultural outputs in Nigeria. The negative

coefficient of -0.20124 for debt servicing implies that a 1% increase in debt servicing would lead

to a decrease of about 0.201% in agricultural output. This result is consistent with the notion that

a larger portion of government revenue being used for debt servicing means less funding for

productive sectors like agriculture. High debt servicing can potentially crowd out resources that

could otherwise be invested in economic growth.

The positive coefficient of 0.502357 for the lagged agricultural output (AGO) indicates

that a 1% increase in past agricultural output would lead to a 0.502% increase in current

agricultural output. This finding reflects the positive momentum of the agricultural sector –

higher output in previous periods contributes to higher output in the current period.
 76

The VECM results suggest that both external debt and debt servicing have significant

negative effects on agricultural output in Nigeria, while domestic debt has a positive impact.

These findings are consistent with Ogunmuyiwa (2011), Olanrewaju, Abubakar and John (2015)

who examined the effect of external debt on the economic growth in Nigeria and also Warner

(2012) for the case of 13 less developed countries and Safdari and Mehrizi (2011) for Iran with

economic intuition and theories about how different types of debt can impact economic sectors

differently. It’s important for policymakers to carefully manage public debt and ensure that the

resources allocated to debt servicing do not excessively hinder productive sectors like

agriculture.
 77

CHAPTER SIX
SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATIONS

6.1 SUMMARY OF FINDINGS

This study examined the impact of public debt on agricultural output in Nigeria for the

period of 1990-2022. The study employed the use of internal and external debt for the

development of agricultural output in Nigeria over the study period. This study employed the

Vector Error Correction Model (VECM) technique in its analysis. Based on the result of this

study, findings revealed that:

1. External debt was negative and statistically significant in determining agricultural

output in Nigeria.

2. Domestic debt was positive and statistically significant in determining agricultural

output in Nigeria.

3. The Error Correction Term (ECT) showed that equilibrium from shock adjusted at

the speed of 93% in the model.

6.2 CONCLUSION

This study examined the impact of public debt on agricultural output in Nigeria for the

period 1990 to 2022. The result of this study showed that public debt has a negative and

significant relationship with agricultural outputs in Nigeria. Given the result of this study it is

unjustified to allege that public debt has been the backbone to the agricultural sector. However,

an increase in public debt has potential of boosting agricultural output in Nigeria and thus

improving the general well of the economy at large.

 78

6.3 RECOMMENDATIONS

Based on the findings of this study, the following recommendations are put forth:

1. It is important to set up an anti-corruption mechanism on debt control to ensure that

debt services are sustainably maintained in the economy.

2. External funding should be used effectively in productive economic activities

especially agriculture. The agricultural projects selected should undergo technical,

economic and financial viability test to ensure sustainability and avoid failure or

distress.

3. In order to boost agricultural sector productivity, the government should promote

mechanisation beyond granting 0% import duty on agricultural machines and

equipment by incentivising smallholder farmers through a hire purchase window.

4. Based on this study, it is also recommended that specialized development agencies

should be set up with the aim of implementing and evaluating government policies on

public debt.

6.4 LIMITATIONS OF THE STUDY

In carrying out this research, certain limitations were encountered. They include:

1. Finance: access to funds proved to be one of the major challenges the researcher

experienced during the course of this research work. However, the problem of finance

was resolved by cost cutting measures as adviced by the project supervisor.

2. Time Constraint: This work was constrained by limited time; this is because the

researcher had to combine the research work with academic studies, which is of equal

importance. This constraint was managed by adaptive scheduling of time that brought

about efficiency in both the research work and student’s course work.
 79

3. Constraint of Accessing Data: The researcher encountered some difficulties in

accessing the accurate data needed which would aid the completion of this research

work. However, this constraint was overcome by the researcher eventually and the

validity of this research work remained unaffected.

6.5 SUGGESTIONS FOR FURTHER STUDY

Based on the findings in this study, the following areas are suggested for further study:

1. Further studies should be carried out to determine the effects public debt on

productive sectors of the economy.

2. Studies can also be done to determine the level of public debt that can sustain the

agricultural sector in Nigeria.

3. More studies should be conducted on macroeconomic variables which could lead to

the root cause of the continuous increase in public debt in Nigeria. Variables which

are already known are overdependence on oil revenue, and so on

6.6 CONTRIBUTIONS TO KNOWLEDGE

This study has successfully evaluated the impact of public debt on agricultural output in

Nigeria with external debt and internal debt having an inverse relationship with agricultural

output in Nigeria for the study period. This implies that increase in public debt does not

necessarily translate into increase in agricultural output. Rather, Public debt could be increased

to hasten the development of essential public goods that will facilitate increases in productive

activities and hence, lead to economic growth.

 80

REFERENCES

Abula, M. & Mordecai B. D (2016) The Impact of Domestic Debt on Agricultural Output in
Nigeria. British Journal of Economics, Management & Trade 13(3): 1-12

Adesola, W. A. (2009). Debt Servicing and Economic Growth in Nigeria: An Empirical

Investigation, Global Journal of Social Sciences, 8(2): 1-11.

Adeleye, B. N. (2018). Time Series Analysis (Lecture 4 Part 1): Johansen Co-Integration Test in
Eviews. Retrieved: 25th March 2018 from: crunchEconometrix.blogpost.com

Adetola, W. A. (2009). Debt Servicing and Economic Growth in Nigeria: Empirical

Investigation. Global Journal of Social Sciences 8(2): 11-36.

Akpaeti, A. J, Bassey, N. E, Okoro U. S. & Nkeme K. K (2014) Trends and Drivers of

Agricultural Investments and Growth in Nigeria: The Pre and Financial Sector Reforms
Experience. Asian Journal of Economic Modelling 2(3): 115-127.

Aluko, F. & Arowolo, D. (2010) Foreign aid, the Third World’s debt crisis and the implication
for economic development: The Nigerian experience. African Journal of Political
Science and International Relations 4(4): 120-127.

Anríquez, G. & Stamoulis, K. (2007): Rural Development and Poverty Reduction: Is

Agriculture Still the Key? ESA Working PaperNo. 07-02. FAO, Rome.

Anyawu, J. C, Oyefusi, A. O, Dimowo, FA. (1997) The Structure of the Nigerian Economy.
Anambra, Nigeria: Joanee Educational Publishers Ltd.

Ayadi, F. S & Ayadi, F. O (2008). The impact of External debt on Economic growth: a
comparative study of Nigeria and South Africa. Journal of Sustainable Development In
Africa, 10(3): 234-264
Bhandari, P. (2022). Independent and dependent variables definition and examples. Retrieved:
02/18/2022 from: scribbr.com/methodology.

Breusch, T. S., & Godfrey, L.G. (1981). A diagnostic test for the adequacy of regression
models. Journal of the Econometric Society, 50(1): 653-670

Breusch, T. S., Pagan, A.R., & Godfrey, L. G. (1980). The econometrics of financial markets.
Journal of Business, 53(3): 301-324.

Breusch, T. S., & Godfrey, L. G. (1978). Testing for independence of regression disturbances.
Journal of the American Statistical Association, 73(364): 640-647.

Brown, S., Vincent, O., Emmanuel, J & Etim, P. (2014) External debt and Agricultural
Productivity: A computable General Equilibrium Case Study of Nigeria 1985-2012.
(Unpublished doctora ldissertation).
 81

Central Bank of Nigeria (2005). Annual Statistical Bulletin Public Finance. Abuja.

Central Bank of Nigeria (CBN). (2018). Annual Statistical Bulletin Public Finance, Abuja.
Central Bank of Nigeria (2019). Annual Statistical Bulletin Public Finance. Abuja.

Central Bank of Nigeria (CBN) (2020). Annual Statistical Bulletin Public Finance. Abuja.

Central Bank of Nigeria (2022). Annual Statistical Bulletin, Abuja, Nigeria.

Cooper, D. R., & Schindler, P. S. (2019). Business research methods. McGraw-Hill Education.

Creswell, J. W. (2014). Research design: Qualitative, quantitative, and mixed methods

approaches. Sage Publications.

Damian, K. U, & Chukwunonso, S. E. (2014) Domestic debt and private investment in Nigeria.
International Journal of Scientific Research & Education. 8(2): 2321-7545.

Datt, G. (2008). "Principles of Economics" (2nd ed.). McGraw-Hill Education.

Debt Management Office Nigeria (DMO) (2003), from www.dmo.gov.ng

Debt Management Office Nigeria (DMO) (2013), from www.dmo.gov.ng

Debt Management Office Nigeria (DMO) (2016), from www.dmo.gov.ng

Dooley, M. P. (2000). Debt Management and Crisis in Developing Countries. Journal of

Development Economics, 63, 45-58.
Dornbusch, R., Fischer, S., & Startz, R. (2014). "Macroeconomics" (12th ed.). McGraw-Hill
Education.
Ebhotemhen, W & Umoru, D (2019) External Debt and Agricultural Production in Nigeria.
Sriwijaya International Journal of Dynamic Economics and Business, 3(1): 1-14.

Edo, S. E. (2002), The external debt problem in Africa: A comparative study of Nigeria and
Morocco. Africa Development Review, 14(2): 221-236.

Edosa, E. & Osaze, E. B. (2003). Public Finance: A Study Guide. Ethiope, Benin City:
Publishing Corporation

Eichengreen, B., & Portes, R. (2000). "Dealing with Debt: The 1930s and the 1990s." The
Economic Journal, 110(460): 109-137.
Ekaette, S. O., Owan, V. J. & Agbo, D. I. (2019). External debt and the financing of education
in Nigeria: Implementation for Effective Educational Management. Journal of
Educational Realities- JERA, 9(1): 1-14.
 82

Engle, R. F., & Granger, C. W. (1987). Co-integration and error correction: Representation,
estimation, and testing. Econometrica: Journal of the Econometric Society, 55(2): 251-
276.
Essien, E. A, Onwuoduokit, E. A (2009) Nigeria’s Economic Growth and Foreign Debt. CBN
Economic Review 36(1).

Federal Ministry of Agriculture and Rural Development(2012). Nigeria fertilizer strategy report.
Abuja, Nigeria: Africa Fertilizer Summit (FMARD).
Federal Ministry of Agriculture and Rural Development (FMARD). (2016). The Agriculture
Promotion Policy: Building on the Successes of ATA. Policy and Strategy Document.

Food and Agriculture Organization (FAO) (2012): The State of Food Insecurity in the World.
Food and Agriculture Organization (FAO) (2020) Nigeria at a glance. From:
www.fao.org/Nigeria.

Folorunso, S., & Felix, O. (2018). The impact of external debt on economic growth: A
comparative study of South Africa and Nigeria. Journal of Sustainable Development in
Africa, 10(3): 1-10
Fosu, A. K (1999). The External debt burden and economic growth in the 1980s: Evidence from
the Sub-Saharan Africa. Canadian Journal of Development Studies, 20(2): 307-318
Fosu, A. K. (October, 2009). The External Debt-Servicing Constraint and Public-Expenditure
Composition in Sub-Saharan Africa. Retrieved on 12 January, 2014, from:
http://www.uneca.org/sites/default/files/page_attachments/aec2009theexternaldebt-
servicingconstraint.pdf
Francis, C. A., Breland, T. A., & Kremer, R. J (2012). Conservation Agriculture. CRC Press.

Gollin, D., Parente, S. & Rogerson, R. The Role of Agriculture in Development. The American
Economic Revenue. 2002 ;92(2): 160-164.

Greene, W. H. (2012). Econometric analysis (7th ed.). Pearson.

Hameed, A., ,Ashraf, H. & Chaudhary.M.A (2008), External Debt and its impact on economic
and business growth in Pakistan. International Research Journal of Finance and
Economics, 20, 132-140
International Monetary Fund (IMF) (2011). Public Sector Debt Statistics (PSDS): Guide for
Compilers and Users. Washington D.C., U.S.A.

Jarque, C. M., & Bera, A. K. (1987). A test for normality of observations and regression
residuals.International Statistical Review/Revue Internationale de Statistique, 55(2): 163-
172.
 83

Johansen, S. (1991). Estimation and hypothesis testing of cointegration vectors in Gaussian

vector autoregressive models. Econometrica: Journal of the Econometric Society, 59(6),
1551-1580.

Krugman, P. R., Obstfeld, M., & Melitz, M. J. (2014). "International Economics: Theory &
Policy" (10th ed.). Pearson. ISBN-13: 978-0133423648.

Lipton, M. (2012) Learning from others: Increasing agricultural productivity for human
development in sub-saharan. United Nations Development Programme Regional Bureau
for Africa; from: http://web.undp.org/africa/knowledge/WP-2012-007-Lipton-
Agriculture-Productivity.pdf

Lütkepohl, H. (2005). New Introduction to Multiple Time Series Analysis. Springer.

Malik, S., Hayat, M. K. & Hayat, M.U. (2010). External Debt and Economic Growth: Empirical
Evidence from Pakistan”, International Research Journal of Finance and Economics, 5
(44): 88-97.
Mishkin, F. S., & Eakins, S. G. (2006). "Financial Markets and Institutions" (5th ed.).Pearson.
ISBN-13: 978-0321290457.

Mishkin, F. S. (2018). "The Economics of Money, Banking, and Financial Markets" (12th ed.).
Pearson. ISBN-13: 978-0134733821.

Nausha, R. (2020). Interpreting Results of Dickey Fuller Test for Time Series Analysis.
Retrieved: Feb. 8, 2020 from: datadriveninvestor.com
Ogba, L. 2011. Element of Public Finance. Heritage publications.
Ogboru, I. & Alabi, O. R. (2018), Effect of Capital flight on Economic Growth in Nigeria.
Journal of Economic and Financial Issues, 4(1): 133-135.
Ogunbiyi, S. S, Okunlola, F. A. Domestic debt and real sector growth: A Var Approach.
International Journal of Banking and Financial Research. 2015;5(1): 1-14.

Ogunmuyiwa, M. S. (2011). Does External Debt Promote Economic Growth?

Current Research Journal of Economic Theory 3(1): 29 – 35.

Okezie, A. I, Nwosu C, Njoku, A. C (2013) An assessment of Nigeria expenditure on the

agricultural sector: Its relationship with agricultural output (1980 - 2011). Journal of
Economics and International Finance 5(5): 177-186.

Ola C. S & Adeyemo J. (1998) Public finance in Nigeria. Lagos, Nigeria: CSS Publishing
Company
Pattillo, C.; Poirson, H & Ricci, L. (2002), External Debt and Growth, Finance and
Development,39(2),Retrieved
from:http://www.imf.org/external/pubs/ft/fandd/2002/06/pattillo.htm, 13/03/2017
 84

Pesaran, M. H., & Shin, Y. (1998). An autoregressive distributed-lag modelling approach to

cointegration analysis. In S. Storm (Ed.), Econometrics and Economic Theory in the 20 th
Century: The Ragnar Frisch Centennial Symposium (371-413). Cambridge University
Press.

Ramsey, J. B. (1969). Tests for specification errors in classical linear least squares regression
analysis. Journal of the Royal Statistical Society: Series B (Methodological), 31(2), 350-
371

Rose, A. K., & Spiegel, M. M. (2009) - "Domestic bond markets: a key to economic growth?".
The Review of Financial Studies, 22(2), 463-491.

Saheed, Z. S, Sani, I. E & Idakwoji, B. O (2015) Impact of Public External Debt on Exchange
Rate in Nigeria. European Journal of Business and Management 7(21): 51-57.

Sims, C. A. (1980). Macroeconomics and reality. Econometrica: Journal of the Econometric

Society, 48(1): 1-48.

Statsita Publlications (2023). Agriculture Sector Growth in Nigeria 2019-2023. Statista research
Department. From: www.statista.com

Sulaiman, L. A. & Azeez, B. A. (2012). Effect of External Debt on Economic Growth of Nigeria.
Journal of Economics and Sustainable Development, 3(8): 71-79.

Sunday N. Essien, Ngozi, T. I., Michael K. Mba & Ogochukwu G. Onumonu CBN Journal of
Applied Statistics (2016) 7 (1)

Thirtle C, Lin, L. Piesse, J. (2003) The impact of research-led agricultural productivity growth
on poverty reduction in Africa, Asia and Latin America. Durban: Contributed Paper for
the 25th Conference of the International Association of Agricultural Economists.

Todaro, M. P (2003) “Economic Development, 8th low prize edition, Pearson Education”. New
Delhi.

Trochim, W. M., & Donnelly, J.P. (2008). The research methods knowledge base (3rd ed.).
Cengage Learning.

Usman, N. E (2006) Agriculture: Vital to Nigerian Economic Development. Economic

Stakeholders on “Growing the Nigeria Economy” 2006

Warner, A. M. (2012). Did the debt crisis cause the investment crisis? The Indian Journal
of Economics 42(73): 326-371.

Wamboye, E. (2012). External Debt, Trade and FDI on Economic Growth of Least Developed
Countries. Cambridge Business &Economics Conference, Cambridge, UK.
Wooldridge, J. M. (2010). Econometric analysis of cross section and panel data. MIT Press.
 85

World Bank. (2006) Poverty reduction and growth: Virtuous and vicious circles. Washington
D.C., USA.

World Bank Publications (2019).World Development Indicators.

World Bank Development Indicator (WDI) (2022). Meter Data – Indicator. Retrieved:
05/07/2023 from: world bank data base: api.worldbank.org
 86

APPENDICES

APPENDIX I:
Data on agricultural output in percentage (AGO)%, external debt in percentage (EXTD%),
domestic debt in percentage (DOM%) and public debt servicing in percentage (PDS%) in
Nigeria for the period 1990 t0 2022
YEAR AGO% EXTD% DOM% PDS%
1990 21.556263 11.08 22.6 6.521339
1991 20.885283 38.8 18.1 6.310799
1992 20.321159 34.5 18.5 5.384206
1993 23.49113 35.5 17.7 5.868715
1994 25.173849 38.5 18.1 5.945631
1995 25.486506 33.5 20 4.380546
1996 26.199159 26.3 19.3 4.562666
1997 27.416651 25.8 19.3 2.711316
1998 27.908371 25.9 16.1 2.572518
1999 26.028486 21.8 15.8 1.851662
2000 21.357241 28.71 8.33 2.930158
2001 24.475355 28.67 9.18 3.609492
2002 36.965083 31.39 9.31 1.659825
2003 33.827061 28.11 8.35 1.680209
2004 27.230454 26.67 7.47 1.357906
2005 26.089283 11.48 6.5 5.425152
2006 24.734991 1.51 5.88 2.870449
2007 24.662577 1.32 6.54 0.379461
2008 25.279751 1.34 5.94 0.21161
2009 26.748855 1.48 8.1 0.27014
2010 23.893704 1.26 8.33 0.361924
2011 22.234711 1.42 8.93 0.134157
2012 21.859959 1.43 9.12 0.302798
2013 20.758623 1.73 8.89 0.100218
2014 19.990255 1.72 8.88 0.819028
2015 20.631893 2.13 10.89 0.333689
2016 20.98311 3.26 13 0.62929
2017 20.846571 4.85 13.35 0.969128
2018 21.203774 9 10.9 1.334482
2019 21.906296 9.3 12 1.117886
2020 24.143306 9.3 12.9 1.331018
2021 23.357059 9 14.9 2.015331
2022 23.058762 11.635 13.164 2.103213
Source: Central Bank of Nigeria (CBN) Statistical Bulletin (2022), the World Bank
Development Indicator (WDI) (2022) and Debt Management Office (DMO) (2022)
 87

APPENDIX II:
VAR Lag Order Selection Criteria
Endogenous variables: AGO_ DOM_ EXTD_ PDS_
Exogenous variables: C
Date: 08/29/23 Time: 08:34
Sample: 1990 2022
Included observations: 31

Lag LogL LR FPE AIC SC HQ

0 -331.3977 NA 29352.82 21.63856 21.82359 21.69888

1 -239.4834 154.1788* 221.5670* 16.74087* 17.66602* 17.04244*
2 -224.2792 21.58025 247.0185 16.79220 18.45748 17.33504

* indicates lag order selected by the criterion

LR: sequential modified LR test statistic (each test at 5% level)
FPE: Final prediction error
AIC: Akaike information criterion
SC: Schwarz information criterion
HQ: Hannan-Quinn information criterion

APPENDIX III:
Null Hypothesis: D(AGO_) has a unit root
Exogenous: Constant
Lag Length: 1 (Automatic - based on AIC, maxlag=1)

t-Statistic Prob.*

Augmented Dickey-Fuller test statistic -6.463667 0.0000

Test critical values: 1% level -3.670170
5% level -2.963972
10% level -2.621007

*MacKinnon (1996) one-sided p-values.

Augmented Dickey-Fuller Test Equation

Dependent Variable: D(AGO_,2)
Method: Least Squares
Date: 08/29/23 Time: 08:35
Sample (adjusted): 1993 2022
Included observations: 30 after adjustments

Variable Coefficient Std. Error t-Statistic Prob.

D(AGO_(-1)) -1.380566 0.213589 -6.463667 0.0000

D(AGO_(-1),2) 0.553435 0.160268 3.453176 0.0018
C 0.124736 0.491131 0.253976 0.8014

R-squared 0.614814 Mean dependent var 0.008861

Adjusted R-squared 0.586282 S.D. dependent var 4.179397
S.E. of regression 2.688227 Akaike info criterion 4.910280
Sum squared resid 195.1173 Schwarz criterion 5.050400
Log likelihood -70.65421 Hannan-Quinn criter. 4.955106
F-statistic 21.54801 Durbin-Watson stat 1.922296
 88

Prob(F-statistic) 0.000003

Null Hypothesis: D(DOM_) has a unit root

Exogenous: Constant
Lag Length: 0 (Automatic - based on AIC, maxlag=1)

t-Statistic Prob.*

Augmented Dickey-Fuller test statistic -6.074649 0.0000

Test critical values: 1% level -3.661661
5% level -2.960411
10% level -2.619160

*MacKinnon (1996) one-sided p-values.

Augmented Dickey-Fuller Test Equation

Dependent Variable: D(DOM_,2)
Method: Least Squares
Date: 08/29/23 Time: 08:36
Sample (adjusted): 1992 2022
Included observations: 31 after adjustments

Variable Coefficient Std. Error t-Statistic Prob.

D(DOM_(-1)) -1.048110 0.172538 -6.074649 0.0000

C -0.171176 0.342005 -0.500507 0.6205

R-squared 0.559948 Mean dependent var 0.089161

Adjusted R-squared 0.544774 S.D. dependent var 2.800029
S.E. of regression 1.889191 Akaike info criterion 4.172516
Sum squared resid 103.5023 Schwarz criterion 4.265031
Log likelihood -62.67399 Hannan-Quinn criter. 4.202673
F-statistic 36.90136 Durbin-Watson stat 1.928012
Prob(F-statistic) 0.000001

Null Hypothesis: D(EXTD_) has a unit root

Exogenous: Constant
Lag Length: 0 (Automatic - based on AIC, maxlag=1)

t-Statistic Prob.*

Augmented Dickey-Fuller test statistic -8.176298 0.0000

Test critical values: 1% level -3.661661
5% level -2.960411
10% level -2.619160

*MacKinnon (1996) one-sided p-values.

Augmented Dickey-Fuller Test Equation

Dependent Variable: D(EXTD_,2)
Method: Least Squares
 89

Date: 08/29/23 Time: 08:37

Sample (adjusted): 1992 2022
Included observations: 31 after adjustments

Variable Coefficient Std. Error t-Statistic Prob.

D(EXTD_(-1)) -0.959277 0.117324 -8.176298 0.0000

C -0.873558 0.762828 -1.145157 0.2615

R-squared 0.697450 Mean dependent var -0.809194

Adjusted R-squared 0.687017 S.D. dependent var 7.591440
S.E. of regression 4.247022 Akaike info criterion 5.792654
Sum squared resid 523.0787 Schwarz criterion 5.885169
Log likelihood -87.78614 Hannan-Quinn criter. 5.822812
F-statistic 66.85186 Durbin-Watson stat 1.450574
Prob(F-statistic) 0.000000

Null Hypothesis: D(PDS_) has a unit root

Exogenous: Constant
Lag Length: 0 (Automatic - based on AIC, maxlag=1)

t-Statistic Prob.*

Augmented Dickey-Fuller test statistic -6.477896 0.0000

Test critical values: 1% level -3.661661
5% level -2.960411
10% level -2.619160

*MacKinnon (1996) one-sided p-values.

Augmented Dickey-Fuller Test Equation

Dependent Variable: D(PDS_,2)
Method: Least Squares
Date: 08/29/23 Time: 08:38
Sample (adjusted): 1992 2022
Included observations: 31 after adjustments

Variable Coefficient Std. Error t-Statistic Prob.

D(PDS_(-1)) -1.183217 0.182654 -6.477896 0.0000

C -0.162360 0.218121 -0.744359 0.4626

R-squared 0.591337 Mean dependent var 0.009627

Adjusted R-squared 0.577245 S.D. dependent var 1.853925
S.E. of regression 1.205415 Akaike info criterion 3.273865
Sum squared resid 42.13771 Schwarz criterion 3.366380
Log likelihood -48.74491 Hannan-Quinn criter. 3.304023
F-statistic 41.96314 Durbin-Watson stat 2.067316
Prob(F-statistic) 0.000000
 90

APPENDIX IV:
Date: 08/29/23 Time: 08:40
Sample (adjusted): 1992 2022
Included observations: 31 after adjustments
Trend assumption: Linear deterministic trend
Series: AGO_ DOM_ EXTD_ PDS_
Lags interval (in first differences): 1 to 1

Unrestricted Cointegration Rank Test (Trace)

Hypothesized Trace 0.05

No. of CE(s) Eigenvalue Statistic Critical Value Prob.**

None * 0.754147 84.67930 47.85613 0.0000

At most 1 * 0.496507 41.18565 29.79707 0.0016
At most 2 * 0.398726 19.91389 15.49471 0.0101
At most 3 * 0.125129 4.144038 3.841466 0.0418

Trace test indicates 4 cointegrating eqn(s) at the 0.05 level

* denotes rejection of the hypothesis at the 0.05 level
**MacKinnon-Haug-Michelis (1999) p-values

Unrestricted Cointegration Rank Test (Maximum Eigenvalue)

Hypothesized Max-Eigen 0.05

No. of CE(s) Eigenvalue Statistic Critical Value Prob.**

None * 0.754147 43.49366 27.58434 0.0002

At most 1 * 0.496507 21.27175 21.13162 0.0478
At most 2 * 0.398726 15.76985 14.26460 0.0287
At most 3 * 0.125129 4.144038 3.841466 0.0418

Max-eigenvalue test indicates 4 cointegrating eqn(s) at the 0.05 level

* denotes rejection of the hypothesis at the 0.05 level
**MacKinnon-Haug-Michelis (1999) p-values

Unrestricted Cointegrating Coefficients (normalized by b'*S11*b=I):

AGO_ DOM_ EXTD_ PDS_

0.412456 0.111011 -0.154883 0.837893
0.188196 0.195896 0.002338 -0.672820
0.018164 -0.095976 0.115373 -0.155811
-0.043959 0.273155 -0.021018 -0.070419

Unrestricted Adjustment Coefficients (alpha):

D(AGO_) -1.527381 -1.641833 0.168581 0.193808

D(DOM_) -0.207445 -0.572506 -0.435474 -0.481484
D(EXTD_) -1.125440 0.284827 -1.731954 0.898796
D(PDS_) -0.514403 0.506069 0.266502 -0.083422

1 Cointegrating Equation(s): Log likelihood -244.8720

 91

Normalized cointegrating coefficients (standard error in parentheses)

AGO_ DOM_ EXTD_ PDS_
1.000000 0.269146 -0.375513 2.031471
(0.09252) (0.03933) (0.27023)

Adjustment coefficients (standard error in parentheses)

D(AGO_) -0.629978
(0.21130)
D(DOM_) -0.085562
(0.14294)
D(EXTD_) -0.464194
(0.31472)
D(PDS_) -0.212169
(0.07542)

2 Cointegrating Equation(s): Log likelihood -234.2361

Normalized cointegrating coefficients (standard error in parentheses)

AGO_ DOM_ EXTD_ PDS_
1.000000 0.000000 -0.510800 3.986697
(0.07189) (0.48175)
0.000000 1.000000 0.502653 -7.264546
(0.19503) (1.30699)

Adjustment coefficients (standard error in parentheses)

D(AGO_) -0.938963 -0.491185
(0.17827) (0.08854)
D(DOM_) -0.193305 -0.135181
(0.14829) (0.07365)
D(EXTD_) -0.410591 -0.069140
(0.34496) (0.17133)
D(PDS_) -0.116929 0.042033
(0.06904) (0.03429)

3 Cointegrating Equation(s): Log likelihood -226.3512

Normalized cointegrating coefficients (standard error in parentheses)

AGO_ DOM_ EXTD_ PDS_
1.000000 0.000000 0.000000 1.252546
(0.43067)
0.000000 1.000000 0.000000 -4.574004
(0.69209)
0.000000 0.000000 1.000000 -5.352684
(0.92513)

Adjustment coefficients (standard error in parentheses)

D(AGO_) -0.935901 -0.507365 0.252176
(0.17776) (0.09589) (0.07567)
D(DOM_) -0.201215 -0.093386 -0.019451
(0.14305) (0.07717) (0.06090)
D(EXTD_) -0.442051 0.097086 -0.024845
(0.30739) (0.16583) (0.13085)
D(PDS_) -0.112088 0.016455 0.111602
(0.06472) (0.03491) (0.02755)
 92

APPENDIX V:

Vector Error Correction Estimates

Date: 08/29/23 Time: 08:46
Sample (adjusted): 1992 2022
Included observations: 31 after adjustments
Standard errors in ( ) & t-statistics in [ ]

Cointegrating Eq: CointEq1 CointEq2

AGO_(-1) 1.000000 0.000000

DOM_(-1) 0.000000 1.000000

EXTD_(-1) -0.510800 0.502653

(0.07337) (0.19906)
[-6.96180] [ 2.52518]

PDS_(-1) 3.986697 -7.264546

(0.49169) (1.33394)
[ 8.10818] [-5.44593]

C -25.15158 -3.721205

Error Correction: D(AGO_) D(DOM_) D(EXTD_) D(PDS_)

CointEq1 -0.938963 -0.193305 -0.410591 -0.116929

(0.18195) (0.15135) (0.35208) (0.07046)
[-5.16065] [-1.27721] [-1.16619] [-1.65949]

CointEq2 -0.491185 -0.135181 -0.069140 0.042033

(0.09036) (0.07517) (0.17486) (0.03499)
[-5.43560] [-1.79838] [-0.39540] [ 1.20112]

D(AGO_(-1)) 0.502357 0.128456 0.348006 -0.083767

(0.16506) (0.13730) (0.31939) (0.06392)
[ 3.04355] [ 0.93559] [ 1.08958] [-1.31051]

D(DOM_(-1)) 0.178498 0.129368 0.262171 0.025990

(0.25466) (0.21183) (0.49278) (0.09862)
[ 0.70093] [ 0.61071] [ 0.53203] [ 0.26354]

D(EXTD_(-1)) -0.144875 0.038285 -0.050579 -0.008944

(0.08465) (0.07042) (0.16381) (0.03278)
[-1.71139] [ 0.54369] [-0.30877] [-0.27283]

D(PDS_(-1)) -0.201243 0.159602 -0.068215 -0.006583

(0.38534) (0.32054) (0.74566) (0.14923)
[-0.52224] [ 0.49792] [-0.09148] [-0.04411]

C 0.046295 -0.108787 -0.844695 -0.125964

(0.41178) (0.34253) (0.79683) (0.15947)
[ 0.11242] [-0.31759] [-1.06008] [-0.78991]

R-squared 0.579868 0.201036 0.145735 0.587815

 93

Adj. R-squared 0.474835 0.001295 -0.067831 0.484769

Sum sq. resids 119.8314 82.91628 448.7043 17.97113
S.E. equation 2.234497 1.858721 4.323889 0.865331
F-statistic 5.520826 1.006484 0.682387 5.704388
Log likelihood -64.94463 -59.23668 -85.40894 -35.53617
Akaike AIC 4.641589 4.273334 5.961867 2.744269
Schwarz SC 4.965392 4.597138 6.285670 3.068073
Mean dependent 0.070112 -0.159226 -0.876290 -0.135729
S.D. dependent 3.083416 1.859926 4.184303 1.205539

Determinant resid covariance (dof adj.) 119.6095

Determinant resid covariance 42.96985
Log likelihood -234.2361
Akaike information criterion 17.43459
Schwarz criterion 19.09986
Number of coefficients 36

APPENDIX VI:

VEC Residual Serial Correlation LM Tests

Date: 08/29/23 Time: 08:52
Sample: 1990 2022
Included observations: 31

Null
hypothesis
: No serial
correlation
at lag h

Lag LRE* stat df Prob. Rao F-stat df Prob.

1 16.05362 16 0.4492 1.016239 (16, 52.6) 0.4555

Null
hypothesis
: No serial
correlation
at lags 1 to
h

Lag LRE* stat df Prob. Rao F-stat df Prob.

1 16.05362 16 0.4492 1.016239 (16, 52.6) 0.4555

*Edgeworth expansion corrected likelihood ratio statistic.

APPENDIX VII:
VEC Residual Heteroskedasticity Tests (Levels and Squares)
Date: 08/29/23 Time: 08:54
Sample: 1990 2022
Included observations: 31
 94

Joint test:

Chi-sq df Prob.

119.7959 120 0.4881

Individual components:

Dependent R-squared F(12,18) Prob. Chi-sq(12) Prob.

res1*res1 0.309474 0.672256 0.7560 9.593680 0.6516

res2*res2 0.355436 0.827153 0.6240 11.01850 0.5273
res3*res3 0.602106 2.269850 0.0564 18.66529 0.0969
res4*res4 0.563165 1.933787 0.0999 17.45810 0.1332
res2*res1 0.268952 0.551849 0.8520 8.337518 0.7582
res3*res1 0.606093 2.308007 0.0529 18.78889 0.0938
res3*res2 0.352503 0.816612 0.6329 10.92759 0.5351
res4*res1 0.438218 1.170077 0.3708 13.58477 0.3280
res4*res2 0.228239 0.443606 0.9228 7.075403 0.8526
res4*res3 0.698721 3.478774 0.0085 21.66035 0.0415

APPENDIX VIII:

APPENDIX IX:
VEC Residual Normality Tests
Orthogonalization: Residual Correlation (Doornik-Hansen)
Null Hypothesis: Residuals are multivariate normal
Date: 08/29/23 Time: 08:57
 95

Sample: 1990 2022

Included observations: 28

Component Skewness Chi-sq df Prob.*

1 -0.078461 0.039952 1 0.8416

2 -0.055959 0.020338 1 0.8866
3 0.397964 0.990251 1 0.3197
4 0.213352 0.292495 1 0.5886

Joint 1.343037 4 0.8540

Component Kurtosis Chi-sq df Prob.

1 2.518304 0.016761 1 0.8970

2 2.353911 0.035886 1 0.8498
3 2.641520 0.017320 1 0.8953
4 3.267164 1.631206 1 0.2015

Joint 1.701174 4 0.7905

Component Jarque-Bera df Prob.

1 0.056713 2 0.9720
2 0.056224 2 0.9723
3 1.007572 2 0.6042
4 1.923701 2 0.3822

Joint 3.044211 8 0.9316

*Approximate p-values do not account for coefficient

estimation