Impact of Agricultural Value Added on Current Account Balances in Nigeria

Abstract

The aim of this research paper is to explore the relationship between agriculture value added and current account balances in Nigeria. The study therefore examines the agricultural value added on current account balances over 33 years in Nigeria using data from different sources, from 1980 to 2013. The study found that the variables of interest were stationary at first difference. The Engel Granger two step test of co - integration found that the variables have a long run relationship, while the Johansen test found at least one co-integration relationship among the variables. Agriculture value added has a negative relationship with current account balances in the country in both the long run and the short run. Terms of trade and per capita gross domestic product also have negative with the current account position, while net foreign asset, real effective exchange rate and the gross domestic output have positive effects on the current account position. The short run adjustment parameters however showed that agricultural value added as a percentage of the GDP as well as the net foreign assets are the only variables capable of adjusting to their long run equilibrium within the economy.

Keywords: Current account, Agriculture, Value added, Time series, Nigeria