Foreign Exchange as a Binding Constraint on Agricultural Modernization: Evidence from Nigeria’s Rice Sector (2000–2023)

Nigeria is Africa’s largest rice consumer yet faces a persistent production deficit despite decades of agricultural policy intervention. This study examines whether foreign exchange reserve availability constitutes a binding structural constraint on domestic rice output, using annual time-series data spanning 2000–2023 from the Central Bank of Nigeria, FAO, and World Bank. Augmented Dickey-Fuller unit root tests confirmed mixed I(0)/I(1) integration consistent with the Autoregressive Distributed Lag (ARDL) bounds testing and Error Correction Model (ECM) framework. The bounds test F-statistic of 5.682 significantly exceeded the upper I(1) critical bound at the 1% level, with robustness confirmed against Narayan’s (2005) small-sample critical values. The long-run production elasticity with respect to foreign exchange reserves is 1.684 (p < 0.001), exceeding unity and confirming reserves as the sector’s primary structural leverage point. Real GDP exerts a significant negative long-run effect (−0.340, p < 0.01), consistent with Dutch disease dynamics. The ECM coefficient of −0.790 confirms 79% annual equilibrium adjustment. Limitations include a small annual sample (n = 24), absence of subnational disaggregation, and residual endogeneity concerns. A dedicated concessional foreign exchange window for agricultural inputs is recommended.