AKSU Journal of Agricultural Economics, Extension and Rural Development

IMPACT OF FINANCIAL VOLATILITY ON AGRICULTURAL INVESTMENTS IN NIGERIA FROM 1970-2023

Author:  Archibong, M. Nkamenyin, Akpaeti, A. Jim and Patrick, I. Vincent

Abstract
This study examined the impact of financial volatility on agricultural investment in Nigeria from 1970 to 2023 using time-series data sourced from FAOSTAT, NBS, UNCTAD, and the CBN Statistical Bulletin. Volatility in exchange rate, interest rate, inflation rate, and commodity prices were modeled using the Generalized Autoregressive Conditional Heteroskedasticity (GARCH) framework, while long- and short-run relationships between financial indicators and agricultural investment were analyzed with the Autoregressive Distributed Lag (ARDL) approach. The results show a unidirectional causality from exchange rate to agricultural investment, indicating that exchange rate movements significantly predict investment behavior in the sector. GARCH estimates reveal consistent and persistent volatility in exchange rate (α+β = 3.49), inflation rate (α+β = 1.23), commodity prices (α+β = 1.62), and interest rate (β = 1.23), suggesting prolonged instability in Nigeria’s financial environment. In the long run, commodity prices (0.0712) and money supply (0.9654) exert positive and significant effects on agricultural investment, while inflation and interest rate exert negative influences. Short-run dynamics indicate that increases in commodity prices, agricultural productivity, and population growth tend to reduce agricultural investment, reflecting adjustment pressures within the economy. Overall, persistent financial volatility undermines investor confidence, raises borrowing costs, and constrains agricultural capital formation. The study recommends policies that stabilize exchange and interest rates, control inflation, and enhance access to affordable credit to promote sustainable agricultural investment in Nigeria.