The Moderating Role of Commodity Exchanges in the Production Volume–Agricultural Growth Nexus: Evidence from Sub-Saharan Africa

Abstract

Agricultural sector growth remains a critical driver of economic development in Sub-Saharan Africa, yet the region continues to underperform despite rising agricultural production. This paradox suggests that increased output does not consistently translate into sustained growth due to market inefficiencies, weak institutional frameworks, and limited price transmission mechanisms. Although prior studies have examined the agriculture growth nexus, findings remain mixed, and the role of market institutions, particularly commodity exchanges, has been largely overlooked. This creates a critical research gap regarding how institutional mechanisms influence the effectiveness of production in driving agricultural growth. This study examines the moderating role of commodity exchanges in the relationship between agricultural production volume and agricultural sector growth in selected Sub-Saharan African countries. Using a quantitative explanatory design, panel data from five countries, including Ghana, Nigeria, Ethiopia, Kenya, and Rwanda, covering 2018–2022, are analyzed. An instrumental variable/two-stage least squares (IV/2SLS) approach with fixed effects is employed to address endogeneity and estimate both direct and interaction effects. The results reveal that production volume alone does not significantly promote agricultural growth and may even exert a negative effect under market inefficiencies. In contrast, commodity exchange activity has a strong positive and significant impact by improving market coordination, liquidity, and price discovery. However, its moderating effect on the production–growth relationship is statistically insignificant, suggesting that existing exchanges lack sufficient institutional maturity. These findings indicate that productivity must be complemented by well-functioning market institutions. The study extends Agricultural Productivity Theory and supports Contingency Theory, emphasizing that growth outcomes depend on institutional context, while highlighting the need to strengthen commodity exchange systems to achieve sustainable agricultural transformation.