ABSTRACT

The study evaluated the impact of monetary and fiscal policies on the production and trade of vegetable oil in Nigeria from 1980 – 2018. The study adopted ex-post-factor research design. Time series data that spanned for 39 years was obtained from the Central Bank of Nigeria, National Bureau of Statistics, Food and Agriculture Organisation (FAO) and Index Mundi bulletins. The data obtained were analysed with descriptive (percentage, mean, maximum, minimum, skewness, kurtosis) and inferential statistics (Autoregressive distributed lag (ARDL) analysis, correlation and quadratic trend analysis). The diagnosis, residual and the Toda-Yamamoto causality test of the model was carried out.  The result showed that the statistical distribution of the variables indicated that vegetable oil production and exchange rate do not deviate from a normal distribution while the vegetable oil export and vegetable oil import deviate from a normal distribution. The result of the quadratic trend analysis showed that the vegetable oil production (9.15E-05, P-value > 0.05) and the vegetable oil export (2.94E-05, P-value > 0.05) have stagnated growth while the vegetable oil import (4.89E-03, P-value < 0.05) has accelerating growth. The result further showed that there was a significant difference between the volumes of vegetable oil production; export; import and the balance of trade within the reference period in Nigeria since the F-test value (103.3) has P-value < 0.05. The stationary test using Ng-Perron approach indicated that the series have mixed order of integration. ARDL bounds test for co integration showed that the response of vegetable oil production to monetary policy have a long-run relationship, the residual test of the model indicated that the model met the assumption of the classical linear regression model.  The CUSUM test showed that the coefficients of the models are stable. For fiscal policy, the Toda-Yamamoto causality test result showed that inflation causes a significant impact on vegetable oil production. The negative balance of trade indicated that the volume of vegetable oil import was greater than the vegetable oil export, thereby leading to a trade deficit. Therefore the study strongly recommended that the monetary authorities should ease money supply through commercial loans for industries involved in production of vegetable oil at a single-digit prime lending rate in other to encourage growth and expansion in vegetable oil agribusiness. This becomes necessary as commercial loan has a positive effect on vegetable oil production. Also, the government should maintain expansionary fiscal policy through reduction in corporate income tax and increase spending in vegetable oil production and export to attain a favourable balance of trade and attain an accelerated rate of growth in vegetable oil production and export.