ECONOMETRIC ANALYSIS OF AGRICULTURAL RAW MATERIAL EXPORTS, EXCHANGE RATE AND EXTERNAL RESERVES IN NIGERIA

Abstract

This study examined the interrelationships among agricultural raw material exports, exchange rates and external reserves in Nigeria spanning 50 years from 1967 to 2017 using data from World Bank, International Monetary Fund and World Trade Organization. Due to the validation of a long-run relationship among the variables by the Johansen cointegration test which showed 2 cointegrating relations significant at 1%, the vector error correction model was adopted. The results showed that agricultural raw materials export has positive effect on external reserves while external reserves have adverse effect on agricultural raw materials export. Exchange rate simultaneously affects agricultural raw material export and external reserves negatively. The Wald test revealed a bi-directional causality between agricultural raw materials export and external reserve as well as a unidirectional causality running from agricultural raw materials export to exchange rate and exchange rate to external reserve. The findings, therefore, provide suggestion that exports should be encouraged.

Keywords

• agriculture
• exchange rate
• export promotion
• international reserves
• time series analysis