The effect of exchange rate devaluation on selected agricultural export commodities in Nigeria

Abstract

This work examined and evaluated in comparative terms, the effect of exchange rate devaluation on selected agricultural export commodities as well as on the total agricultural export commodities in the Pre-SAP  (1972-1985) and the SAP era (1986-2010) in Nigeria. Based on the data collected from Central Bank of Nigeria and Federal Office of Statistics, the Ordinary Least Squares (OLS) technique was employed to analyze the effect of exchange rate devaluation on agricultural export commodities. The overall results confirmed that in most cases, the lagged values of exchange rate devaluation had a significant and positive relationship with agricultural export commodities but of a higher magnitude in the Total agricultural export commodities than in the individual products, whereas the current values were not statistically significant at 5% level. The results also showed that exchange rate devaluation in the SAP and Pre-SAP eras had no significant effect on agricultural export commodities except in the case of Natural rubber export. This was attributed to the low level of agricultural output in Nigeria. The results also revealed that per capita World Gross Domestic Product in Naira which had no significant effect on the individual export commodities had a significant negative relationship with Total agricultural export commodities. This was attributed to the fact that the resources available were channeled into other sectors of the  economy other than the agricultural sector. It was recommended that while exchange rate devaluation should be encouraged, more resources should be channeled into the agricultural sector to boost productivity. Also, home based industries should be established to provide cheap agricultural inputs such as chemicals, fertilizers, tractors and spare parts in order to boost the level of agricultural productivity and further promote agricultural exports.

Key Word: Exchange-rate, Devaluation, Export.