MACROECONOMIC DETERMINANTS OF AGRICULTURAL PERFORMANCE IN NIGERIA: THE ROLE OF EXCHANGE RATE DEPRECIATION AND FOREIGN DIRECT INVESTMENT

Abstract Macrostability continues to influence the performance of the agricultural industry within the economy through various macroeconomic factors. The performance of the agricultural industry in Nigeria is also influenced by the state of the macroeconomic environment since it is sensitive to the international business environment. Therefore, this study focuses on analysing the impact of particular macroeconomic factors on agricultural performance in Nigeria for the period of 1981 to 2024, considering the following independent variables: exchange rate, inflation rate, lending interest rate and foreign direct investments, while agricultural performance is measured through agricultural value added to GDP. The impact of exchange rates on agricultural performance is significant in the short run but insignificant over the long run. Agricultural performance is impacted by exchange rates in the short term through quick adjustments, but this influence fades over time because of economic adjustment mechanisms. Lending interest rate is significant in the long run, indicating that higher borrowing costs reduce agricultural performance over time. Inflation rate and foreign direct investment are insignificant in the long run, although inflation is significant in the short run, while foreign direct investment is only significant through lagged effects, indicating delayed transmission rather than immediate or sustained impact. The error correction term is negative and significant, confirming adjustment toward long-run equilibrium. The study concludes that lending interest rate plays a more important role in determining agricultural sector performance in Nigeria in the long run, while exchange rate and inflation mainly influence short-run dynamics, and foreign direct investment remains weak in both periods. This indicates that agricultural performance in Nigeria is more sensitive to credit conditions than to external capital flows or price level changes in the long term. As such, policies should be directed toward improving access to affordable credit, maintaining exchange rate stability in the short run, and strengthening financial conditions within the agricultural sector.