Exploring the Effects of Increased Government Agricultural Expenditure on Nigerian Economy Using Computable General Equilibrium Modelling Approach

Abstract

The study was conducted to examine the effects of increased government agricultural expenditure on Nigerian economy using computable general equilibrium (CGE) modelling approach. The research used simple, practically-oriented exposition of computable general equilibrium (CGE) modelling. The study relied strictly on secondary data, to estimate parameters of the model before simulation using the Nigerian Social Accounting Matrix (SAM) of 2012 as the base year data in General Algebraic Modelling System developed (GAMS) by IFPRI for this analysis. The 2012 SAM is the most recent SAM data for Nigeria. But after the parameters were estimated, the 2018 SAM data used for the simulation. This 2018 SAM data capture 83 activities, 84 commodities, 18 factors, 15 categories of households, 5 taxes, and 6 other accounts. The result shows that the introduction of 10% on government expenditure affects virtually many sector of Nigerian economy in a different ways. The findings of the study revealed that most macroeconomic variables have shown positive changes except for consumption in government investment which was reduce by 2.00%. The gross domestic product (GDP) at market prices increased by 0.28%, 1.05% on transport and communication and 0.73% for trade margin. On exports increase by 0.98 per cent, 0.36% and 0.59%. Other manufactured products increased by 2.1%, 0.7%, and 0.6%, other capital equally increases by 1.21%, 0.82% and 0.44%. Household income increase for rural for those with primary education at 0.22%, 1.7% and 1.72%. Changes in investment, affect rural labour for the non-school sector, which was reduced by 0.84%, although, the value of the land on government investments equally reduces by 0.69%, capital reduces by 0.76%, livestock equally reduces by 0.71%. The impact of 10.00% shock result in changes in urban household with primary education increases by 3.37% followed by labour household with secondary education with 3.17%. The study concluded, that application of 10.00% shocks impacted both positively and negatively on several sectors of the economy like GDP at market prices, sectoral GDP, prices, nominal household income and export. The study recommended the need for government at all tiers to examine the effect of such policy on other sectors of the economy. It is therefore recommended that Government should enhance expenditure by 10.00% to stimulate productivity, output and consumption, Govt. should support short term agricultural consumption subsidy policy measure, increase government investment on research and development (R&D).