Complement or substitute: Private investment, public expenditure and agricultural productivity in Nigeria

This study examines the complementarity and substitutability effect of private investment and public expenditure on agricultural productivity in Nigeria for the period 1978 to 2018. The study employs the vector error correction modelling (VECM) technique, and the estimate shows that government expenditure on the agricultural sector had the most significant effect on agricultural productivity, followed by commercial bank credit for the agricultural sector. Also, the study found that public expenditure (proxied by government expenditure on the agricultural sector) and private investment (proxied by commercial bank credit for the agricultural sector) are complementary investments in promoting agricultural productivity, while public expenditure on the agricultural sector and foreign direct investment are substitute investments. The study recommends that budgetary allocation to the agricultural sector should be increased, and that commercial banks should be strengthened through the monetary authority by advancing more loans to agricultural businessmen and businesswomen at a reduced lending rate.