ABSTRACT

 This study investigated the effect of crude oil price fluctuations and selected macroeconomic variables on Nigerian agriculture and environment. Time series data, covering the period of 1970 - 2016, culled basically from the Central Bank of Nigeria Statistical Bulletin, 2017 were used. Descriptive statistics, simple reaction function, simultaneous equation system model (Two stage least square approach), and analytical techniques in multivariate time series which included Unrestricted Vector autoregression (VAR), Vector error-correction model (VECM) and Generalized Autoregressive Conditional Heteroscedasticity (GARCH) models were adopted and fitted to the data. The result showed that crude oil price and its generated revenue exacted a significant degree of procyclicality on government total expenditure, economic growth, agricultural real GDP, and the volume of government resource allocation in agriculture at 1 percent. Economic growth proxied as total real GDP was found as the most important and statistically significant selected macroeconomic variable to influence agricultural real GDP whereas cumulative foreign private investment in agriculture was the least. In addition, crude oil price was found as the most significant contributor to environmental degradation proxied as carbon dioxide emission intensity while total government expenditure was the least significant. However, the Z - statistics of the modeled explanatory variables in the estimated economic growth function, showed that the estimated coefficient of service real GDP (which encapsulates the oil sector, education, health, entertainment and hospitality, etc) was the most statistically significant of all the modeled explanatory variables in the function. Thus, it is the most important estimated macroeconomic variable required to spur growth and development in Nigeria, followed by agricultural real GDP (AGRt), industrial real GDP (INDt), exchange rate (EXRt), financial deepening (FDt), degree of economic openness (DEOt), carbon dioxide emission intensity (CO2t), foreign private investment (FPIti), and Lending rate (LRt) arranged in descending order ofimportance. Moreover, previous year’s value of agricultural real GDP (AGR lag - 1) was found to be a significant variable to explain the fluctuations in current year’s AGR at 5 percent. Therefore, it is recommended that Nigerian government should double its efforts in reducing the effect of crude oil price shocks on economic planning and implementation especially in agriculture. This can be achieved by strategically transforming the resource wealth generated from crude oil into other assets that support sustained development by breeding more sustainable livelihood opportunities that absolutely reduce environmental degradation. Thus, effective macroeconomic policy strategies that ensures adequate properly targeted investment in the agricultural sector, boost economic growth, maintains favourable exchange rate that protects domestic producers from external price shocks, increases environmental quality by reducing carbon dioxide emission intensity should be effectively made and sustained. In addition, efforts should be towards controlling the degree of economic openness in such a way as to spur exportation of agricultural produce and make agricultural credit widely accessible from commercial banks at low interest rates.