Effectiveness of Foreign Aid on the Growth of the Agricultural Sector in Nigeria

Abstract

This paper examined the effectiveness of foreign aid to the growth of the agricultural sector in Nigeria using the ARDL and the ECM approach and quarterly data covering the period 1981 to 2009. While all the variables used were found to be I(I), four cointegration relationships exist between the dependent and the independent variables. Contrary to expectation, the parameter estimate of foreign aid has a negative and insignificant relationship with agricultural output in the short and long run. On the contrary, savings and technological trend are significant and have positive relationship with agricultural output both in the short run and long run. A major policy implication of the result is that improved technology is imperative to the increase in agricultural output in both the short run and the long run rather than encourage foreign aid for agricultural growth in Nigeria.

Keywords: Aid, Autoregressive Distributed Lag, Error Correction Model