Oil Exploitation and Agricultural Commodity Export in Nigeria: An Empirical Evaluation of the Extent and Impact of the Dutch Disease

Abstract

The study examined the impact of crude oil discovery, exploitation and exportation on the agricultural commodity export (AGO) in Nigeria in the period 1970-2011. Specifically, the study sought to evaluate how the discovery and exportation of crude oil has impacted on the production and export of agricultural output. Annual time series data sourced mainly from the Central Bank of Nigeria (CBN) statistical bulletins for various years were analyzed using co-integration and vector error correction model in a bid to delineate the long run relationship between (AGO) and oil export (OX). Our results show that in the long run, Dutch disease (DD) is present in Nigeria. A 1% increase in OX will depress AGO by 16%, that is, the more Nigeria produces and exports oil, the lower the output and less competitive the traditional tradable sector (AGO) becomes. The paper recommends that policy makers should make considerable investments in developing other economic sectors, re-channel the extra revenue from oil to accumulate income-producing foreign assets, and come up with a number of tax and import duty waivers, import substitution and diversification measures in order to boost productivity in the “lagging” traditional tradable sector and develop other agro-allied industries to improve the value chain.

Keywords: Agricultural Export, Booming Oil Sector, Dutch Disease, Lagging Tradable Sector, Nigerian Economy