Agricultural Development Drivers And Economic Growth Of Nigeria (1970-2015)

Project and Seminar Material for Economics

Agricultural Development Drivers And Economic Growth Of Nigeria (1970-2015)


Abstract


In recent decades, the main and potential contribution of agriculture to economic growth has been a subject of much controversy among development economists. As some contend that agricultural development is a pre-condition for industrialization, others strongly object it and argue for a different path. This study tries to look at the drivers of Agricultural development and its economic effect in Nigeria from 1970-2015 which will enable us proffer solution to Agricultural development in the economy since it is an important component of any economic growth of any country.

Taking advantage of ordinary least square method (OLS), the research carried out by means of secondary data and using the independent variables, Improved Agricultural Inputs (IAI), Real Exchange Rate (REXR), Real Interest Rate (RINTR) Government Expenditure in Agriculture (GEA) and Total credit to the Agricultural sector (ACCESS) to re-examine the question of whether agriculture could serve as an engine of Economic growth in Nigeria. The result gotten from the empirical analysis shows that the productivity in agricultural sector has appreciably affected positively on the economic growth in Nigeria.


Chapter One


Introduction

1.1 Background of the Study

Agriculture is said to be the foundation and bedrock upon which the development of stable human community has depended on throughout the whole universe such as rural and urban communities.

Agriculture is the cultivation of land, raising and rearing of animals for the purpose of production of food for man, animals and industries. It involves and comprises of crop production, livestock and forestry, fishery, processing and marketing of those agricultural production. The studyof the history of economics provides us with ample evidence that agricultural revolution is a fundamental pre- condition for economic development.

The agricultural sector has the potentials to be the industrial and economic springboard from which a country’s development can take off.

Indeed, more often than not, agricultural activities are usually concentrated in the less developed rural areas where there is a need for rural transformation, redistribution, poverty alleviation and socio-economic development.

Production is only complete when it gets to the final consumers. To this end, the role of agriculture in transforming both the social and economic framework of an economy cannot be over- emphasized (Simon kuznet 1966).

According to Jerzy W. (2013), agriculture is that kind of activity which joins labour, land or soil, live animals, plants, solar energy and so on; the Minister of Agriculture is the Minister of the beginning of life. So people who are involved with that kind of activity are involved in something special. In recognition of this prominent role the Minister of Agriculture and Federal Government of Nigeria has taken a giant stride to treat agriculture as serious political, economic and investment issue in Nigeria.

It is also a source of food and raw materials for the industrial sector; it is also essential for expansion of employment opportunity, for reduction of poverty and improvement of income distribution, also for speeding up industrialization and easing the pressure on balance of payment. In effect, it has been the source of gainful employment from which the nation can feed its teeming population, providing the nation’s industries with local raw materials and as a reliable source of government revenue.

The development of agriculture in Nigeria has been slow in spite of the various agricultural policies. In fact, the government recognized the unhealthy condition of Nigerian agricultural sector since 1970, and has formulated and introduced a number of programmes and strategies aimed at remedying this situation. These measures included the setting up of large-scale mechanized farms by state and federal government, introduction of scheme such as the River Basin Development Authority.

AgriculturalCredit Scheme was introduced by successive government (Omobowale 2009).

In spiteof these measures, the development of the agricultural sector has been slow and its effects on economic growth and development have been minimal.

In Nigeria, economic growth has largely been accounted for by resilient agricultural growth. According to the Nigeria vision 2020 first implementation plan for the period 2010-2013, the agricultural sector contributed 73%of GDP growth over the period 1999-2009. With real growth averaging about 70%per annum from 2004-2008 and value added to the tune of 42%of the gross domestic product (GDP) within the same period, the agricultural sector in Nigeria clearly stands out as the most dominant and leading component of economic growth (CBN Annual Report and financial statements2008).

Agricultural growth is associated with performance in four constituent sub-sectors: crops, livestock, fisheries, and forestry.

The crop sub- sector had an average the largest share of growth, followed by livestock, forestry and the fishery sector which grew substantially in the post 1974 period.

Among all these, the crops subsector overall remains the dominant agricultural economy of Nigeria. Accordingly, the growth performance of the agriculture sector has been largely driven by the performance of the crop sub-sector.

In the pre- independence era, the agricultural sector contributed most to the GDP of Nigeria.Helleiner(1966) said that in 1929, export production amounted to 57% of Nigeria’s revenue of which agriculture contributed about 80% of export. On attainment of political independence in 1960, the trend was still very much the same, the Nigeria economy could reasonably be described as an agricultural economy because agriculture served as the engine of growth of the overall economy (Ogen 2003).

However, the 1967 to 1970 civil war in Nigeria coincided with the oil boom era, which resulted in extensive exploration and exportation of petroleum products and its strong effect on independence on oil (United States department of state, 2005). Ever since then, Nigeria has been witnessing extreme poverty and insufficiency of basic food items. The agricultural sector contributions now accounts for less than 5% of Nigeria GDP (Olagbaju 1996).

Also this analysis shows that Nigerian agricultural sector is characterized by increasing return to scale, which implies that farmers are operating at the low end of the production function. This underscores the huge potential to raise agricultural output through increased use of the efficient inputs, rather than the mere expansion of cultivated land. The relatively more important factors that influence Nigeria’s agricultural value added include rainfall, technology (efficiency parameter) and fertilizer use.

It is against this backdrop that we set out to research on the agricultural development drivers and how agriculture in turn affects economic growth of Nigeria.


1.2 Statement of the Problem

While the agricultural sector may have in recent years contributed significantly to improved growth performance in Nigeria, its actual contribution appears to be much short of overall potential. The quality of agricultural growth remains questionable considering the ample evidence of low productivity, poor economic competitiveness and weak linkages to other sectors (Oni etal,2009, Nkonyaetal, 2010,Eboh,2011).

Also it has been affected by years of poor management, inconsistent and poorly implemented government policies, government neglect and lack of basic infrastructure. Agriculture accounted for 30%of the GDP in 2010(world fact book, January 9,2012).

Agricultural inputs and services including mechanical tools, seeds and fertilizers, amongst others; secure access to land and water resources, pre-and post-harvest support (storage, marketing and value addition);and rural microfinance services, especially microcredit which involves providing small loans to this rural farmers to help them boost their production. All these have not been adequately provided.

Nigeria is no longer a major exporter of cocoa, groundnut, rubber and palm products.Cocoa production mostly from obsolete varieties and over- aged trees are stagnant at around 150,000 tons annually. There is also a decline in groundnut, palm oil and other major export crops (United States department of State, 2005).

The decline in agricultural production was largely due to the rise of oil shipments (Sekumade2009). In this case the oil sector grew extensively, thereby slowing down the agricultural sector.

However, over the years the growth rate of agricultural production had failed to keep pace with the countries rapid population growth rate of about 3.2 percent resulting in perennial food shortage, continuous souring food prices and massive importation of food by government while food production increases at the rate of 2.5%food demand increases at the rate of more than 3.5 percent (Fos, 1996). It is very obvious that the sustainable growth of Nigerian economy cannot be achieved in the absence of increased agricultural output in the country.

Under the circumstances in Nigeria whereby agricultural growth is accounted for mostly by land expansion, there are lingering doubts about the longer-term sustainability of current growth records. Real agricultural GDP growth in quarter 1 of 2016 stood at 3.09%(year on year), a decrease of 1.61% points from growth recorded in the corresponding period of 2015 and also lower by 0.39% points from quarter 4 2015. Agriculture contributed 20.48% of real GDP during the quarter under review. Additionally agriculture contributed 28.65%, in real terms, to the GDP in the third quarter, a 6.10% increase from the preceding quarter (National Bureau of statistics NBS). In order to clarify the doubts and put the concerns in proper perspective, there is need for empirical research that inquires into the kind of growth being experienced, the drivers of growth and prospects for sustainability. Against this backdrop; this study tries to examine the drivers and sustainability of agricultural development and growth in Nigeria.

The study describes and explains agricultural drivers. Better understanding of the range and interactions of constraining influences on agricultural growth will help to inform and stimulate more appropriate agricultural policies into the future.

This research work therefore is aimed at answering the following questions


1.3 Research Questions

  1. To what extent is the effect of the drivers of agriculture on agricultural development?
  2. Does agriculture development have any effect on the economic growth of Nigeria?

1.4 Objectives of the Study

The broad objective of this study is to determine the agricultural development drivers and its economic growth in Nigeria.

  1. To determine the effect of the drivers of agriculture on agricultural development.
  2. To determine the effect of agricultural development to the economic growth of Nigeria.

1.5 Research Hypothesis

The working hypotheses of the study are stated as follows:

  1. Ho: Drivers of agriculture has no significant effect on agricultural development.
  2. Ho: Agricultural development has no significant effect on the economic growth of Nigeria.

1.6 Significance of the Study

The significance of this study depends on the fact that with improved economy, Nigeria stands to gain in its effects towards development. This work stands to benefit.

  1. Nigeria as a whole; The research work intends to bring forth ways to increase agricultural output both for the purpose of consumption and exportation which ultimately will bring an increased favorable balance of payment (BOP) for the nation.
  2. This work will be advantageous to schools (staffs and students) and will help them understand the importance of farming no matter how small the sale of production may be.
  3. Lastly it will add to already body of knowledge on this topic as it will provide for further research.

1.7 Scope and Limitation of the Study

The research work focuses on the agricultural development drivers and economic growth in Nigeria over the period (1970-2015).This researcher encountered the following constraints on the course of this work which include data constraints, limited time and also limited information due to the type of research work.

This research work is also limited to the use of secondary data gotten from secondary sources, as such if there are any errors made by those who generated these data; this research work incorporates such errors.


Chapter Five


Summary, Recommendation and Conclusion

5.1 Summary

The study examined the effect of agricultural development on economic growth of Nigeria capturing the various drivers that boost agricultural development in the economy over the period of 1970 to 2015. The study employs ordinary least square (OLS) method of estimation. The finding shows that agricultural development in Nigeria has positive effect on the economic growth in Nigeria. From the result of this finding, all the variables in the model proved significant, which show that agricultural development has positive effect on the economic growth in Nigeria over the period under study.


5.2 Policy Recommendation

From the findings and careful investigation of the contribution of agricultural development towards economic growth, it is therefore necessary to make the following policy recommendation to the government and all the agencies in-charge of economic growth in Nigeria thus:

Considering the fact that agricultural development from the result of our findings, has affected positively to the growth of the economy in Nigeria, The following recommendations were made:

  1. The government needs to develop a modernized policy to help the sector to keep growing steadily as time moves on.
  2. Also Government should help the agricultural sector as far as it is concerned through proper research and extension services that includes training of this rural farmers on better and improved ways of farming.
  3. Since agriculture has positive effect on the Nigerian economy, the government should see that a higher percentage of allocations are invested on agricultural sector so that the economy will keep on growing in an increasing rate.
  4. Influencing international policy processes will be important, but primarily to ensure access todeveloped country markets for more processed and high quality products from developing countries.
  5. The government should endeavor to increase an improved storage infrastructure to help the sector on the finished product in other to avoid wastage of agricultural products especially perishable products.
  6. The government should make policies that will enhance and support the small farmers to increase productivity to cope with producer services for example through improved varieties.
  7. The rural poor farmers will be best assisted by improving their access to health and education services to improve their human skills and through measures that increase their mobility so that they can move to take up opportunities in growth areas as they occur.
  8. Also there is need for government to raise agricultural output through increased use of more efficient inputs, rather than by mere expansion of cultivated land. Agricultural policies and measures to enhance increased applications of better and more efficient agricultural inputs are essential to break the lingering ‘low-input low-output’ cycle.

5.3 Conclusion

Under normal circumstances, agricultural development provides opportunities for economic growth. From the findings, agricultural development through its various drivers has provided the opportunities for economic growth within this year under study (1970 to 2015).


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