Computable General Equilibrium Analysis of Increase in Government Agricultural Expenditure on Household Welfare in Nigeria

Abstract In spite of the renewed interest in agriculture as the main driver of the economic policy which focuses on diversifying the economy away from oil‐based to agriculture‐driven economy, there seems to be no evidence of the policy effect on the welfare of the people. This study aimed at investigating the effect of an increase in government agriculture expenditure on the well‐being of rich and poor households in Nigeria. The study employed a computable general equilibrium model given its appropriateness in handling economy‐wide and the welfare effect of specific policies. Simulations results reveal that the welfare of both rich and poor households improves with an increase in agriculture expenditure share. The improvement for both households as well as overall economic welfare was found to be highest under simulation one (25 per cent increase in agriculture expenditure share), followed by simulation two (10 per cent increase in agriculture expenditure share) and then simulation three (5 per cent increase in agriculture expenditure share). The study therefore recommends that government should significantly increase funding of agriculture through increased allocation to the agricultural sector in compliance with the Food and Agriculture Organization and the Maputo 2003 declarations on Agriculture.