Macroeconomic Factor Influence on Agricultural Program Sustainability in Kaduna State, Nigeria

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November 6, 2017 - Patrick L. Hatzenbuehler and George Mavrotas

Patrick L. Hatzenbuehler and George Mavrotas, 2017. Macroeconomic Factor Influence on Agricultural Program Sustainability in Kaduna State, Nigeria. Feed the Future Innovation Lab for Food Security Policy Research Paper 86. East Lansing: Michigan State University.

ABSTRACT
In this paper, we measure the degree to which a change in key macroeconomic variables, such as the global oil price, influences the ability of state Ministries of Agriculture in Nigeria to sustain agricultural program funding. More precisely, we estimate and compare the degree to which Nigerian federal and Kaduna state (hereafter Kaduna) government revenues co-move with the global oil price, assess the degree to which the Kaduna government has historically relied on federal allocations to fund its activities, and evaluate the share of the Kaduna Ministry of Agriculture and Forestry (KDMAF) budget that is provided by donors in order to measure how much the KDMAF budgetary condition can change due to adjustments in the global oil price or reductions in donor funds.

Historical fiscal data and empirical results show that the federal government structure and heavy reliance of the Nigerian federal government on oil sector fees and rents for its revenues mean that changes in the global oil price substantially influence budgetary conditions in all levels of government. The institutional structure of the federal government, however, also provides an opportunity for the Federal Ministry of Agriculture and Rural Development (FMARD) to provide a buffer to state Ministries of Agriculture during periods of poor state government funding conditions, such as when donor funds are reduced or removed. This is because FMARD has some autonomy regarding the allocation of its own budget and can reserve part of it to temporarily support programs of state Ministries of Agriculture that advance the FMARD policy agenda. Therefore, improving budgetary coordination between the federal and state government Agricultural Ministries would plausibly help sustain agricultural program funding levels over time.

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