IMPACT OF MONETARY POLICY ON AGRICULTURAL FOREIGN DIRECT INVESTMENT IN NIGERIA: 1985-2020

Abstract

The study examined the impact of monetary policy on foreign direct investment in agricultural sector performance in Nigeria, using annual data spanning the period 1985 to 2020. Given its significant role in providing employment to about 60 % of the economically active population and 70% of the country's poorest communities, agriculture has huge potential for achieving poverty reduction in Nigeria as many live below $1 dollar a day. The sector is bedevilled by problems such as organisational and weak policy, limited access to improved technologies in the form of improved seeds and the use of mainly crude farm tools such as hoes and cutlasses and underfunding leading to the problem of high food importation. The objective of this paper is to find out the significant relationship between foreign direct investment in agriculture and exchange rate, interest rate and money supply which are monetary policy variables in Nigeria. In this regard, the study employed the Autoregressive-Distributed Lag (ARDL) approach and established a long- run relationship between agriculture and interest rate, exchange rate and money supply. Specifically, the findings suggested that in the long-run only interest rate and money supply have significant effects on foreign direct investment in agriculture. Given the important role of interest rate and money supply in promoting agricultural sector performance, the study recommends that a significant decrease in interest rate and an expansionary money supply will lead to an increase in investment to the agricultural sector of the Nigerian economy.