Oil price shocks and agricultural output in an oil rich nation: Empirical insights from a fractional integration approach

The impact of oil price shocks on the economy of nations has attracted the attention of researchers for almost four decades. This article deals with modeling the relationship between shocks in oil prices and agricultural output series in Nigeria using a regression model that employs long memory and fractionally integrated methods. The data spans from 1991 to 2020. The results indicate that oil price shocks do not account for a significant proportion of observed movements in agricultural outputs. Apart from agricultural output and exchange rate, the lending rate also displays a significant (though negative) trend. The I(0) hypothesis cannot be rejected for the lending rate, and the I(1) or unit root case cannot be rejected for any of the remaining series. This pattern persists despite the introduction of some covariates in the analyses. Therefore, the need to spend oil revenue productively on agriculture is imperative if a favorable effect on real output growth is to be envisaged.   Key words: Oil price shocks, Nigeria, fractional integration, persistence.