Government Expenditure And Agricultural Production In Nigeria

Project and Seminar Material for Agricultural Economics and Extension

Government Expenditure And Agricultural Production In Nigeria


This research work critically focused on the roles of government expenditure in the agricultural production in Nigeria for the period 1970 to 2010. Data on relevant variables were collected from the statistics Bulletin of the Central Bank of Nigeria. A functional relationship between Agricultural output and other explanatory variables, of which government expenditure is one, was specified and estimated using the OLS method and multiple regression analysis. It was found that adjusted R2 for the relationship was 85% and also that government expenditure has played a positive role in the development of the agricultural sector. Other major findings made were that the rate of inflation was very low throughout the period and did not cause much impact with regards to low productivity. The amount of rainfall during the period was very low and does not have any significant effect on agricultural output. Another observation was that the rising prices of agricultural products brought about increase in the performance of the sector, as more people were attracted to it. Again, low interest rate was an encouragement for investors to invest more on agricultural product.

Chapter One

1.0 Introduction

Background of the Study

The socio-economic development of any nation is usually dependent on many factors, which combine to ensure the successful attainment of set development goals. One of such factors is agriculture. Its discovery dates back to 800 BC period regarded as the new Stone Age, when man began to till soil and grow crops using crude implements made out of stone (Anderson, 1995). According to Maslow, 1954, food is one of the physiological needs of man, which must be satisfied before other needs could be attained. Supporting Maslow’s assertion, Morgan and Henson (1085) argue that agriculture will remain an indispensable factor until the end of human existence.

The importance of agriculture in the socio-economic development of every nation has made many countries of the world (i.e. developed and developing) to place more emphasis on its development. This is evident in the number of programmes that have been introduced by both international agencies and individual countries to ensure improvement in agricultural activities. In Nigeria for instance, successive governments have introduced and implemented programmes in this regard. Such programmes include Operation Feed the Nation (O.F.N.), Agricultural Research Policy, Agricultural Development Project, Agricultural Credit Government Scheme, The Green Revolution, River Basin Development Authorities (RBDA), National Agriculture Land Development, Nigeria Agricultural and Co-operative Bank (NACB), The Structural Adjustment Programme (SAP), Directorate of Food, Roads and rural Infrastructure (DFRRI), (Anyanwu, 1960-1997). It is however, disheartening that despite the laudable nature of these programmes and the huge financial resource expended on them, their impact on the economy remains as infinitesimal.

However, the problem, which the Nigeria agricultural sector suffers till date, could be traced to the discovery of crude oil. The discovery of crude oil deposit in various parts of the country in commercial quantities in mid 1960’s coupled with the oil boom of 1974 as a result of the America, affected adversely the agricultural sector. The economy therefore, became heavily dependent on oil. For instance, oil sector provides 20% of GDP, 95% of foreign exchange earnings, about 85% of total export and 65% of budgetary revenue (Anyanwu, 1997).

Agricultural contributions to the economy were instrumental in sustaining economic growth and stability, stable growth in agricultural exports was the backbone of favourable balance of trade. Primary processing of raw materials from the agricultural sector hence helped in the sectors through the imposition of taxes and accumulation of marketing surpluses, which were used to finance many development project.

Agricultural sector notwithstanding is more else degenerating to a type of peasant agriculture, which is caught in vicious cycle of poverty where destination caused by low income, and disguised employment lends to poor saving and little investment in technology. This therefore, calls for the attention of the government for the development of the sector. The development of agricultural sector is one of the crucial requirement for moving the economy forward. This study therefore, tends to investigate government expenditure on agricultural production in Nigeria and how to increase its productivity and role in the economy.

Statement of Problem

In recent years, especially since the inception of the present democratic government in Nigeria, the agricultural sector of the economy has continued to perform below expectation despite the huge sums of money being allocated to the sector in each year’s budget. In 2002, about N9.874 billion was mapped out for the sector. In the same 2002, over 72 million dollars donated by Food Agricultural Organization (FAO) was distributed to the 36 states of the federation in addition to that year’s allocation. According to Iheagu (2002) the money cannot be said to have a justifiable use. Rather, what one sees is the prevalent “Lack Luster” attitude of government to the total execution of the programme. He said that every thing is one side with increasing number of jobless youths roaming about. He also pointed out that across the state of the federation, warning signals are booming on the possibility of a butcher National Food Security programme, which may result in a situation similar to what are being continued on daily basis by price of food item in the market and the crude system of farming being practiced in the country. The situation raises questions as to the effectiveness of the various agricultural programmes in the country, thereby making it necessary and imperative to examine the effectiveness of government expenditure on agricultural production in the Nigeria economy.

Objective of the Study

The broad objective of this study is to analyze the relationship between government expenditure and agricultural production in Nigeria, the specific:

  1. To identify the problem of agricultural financing in Nigeria.
  2. Proffer policy recommendations on how to improve agricultural sector in Nigeria.
  3. To determine the effectiveness of government expenditure on agricultural production in the Nigeria economy.

Significance of the Study

The study is significant because it will help resolve the issue of the need for the federal government to finance and boast the sector and provide agencies for monitoring and maintenance of policies periodically for significant growth and development of the economy. Also, it will help resolve the serious attention as well as raw materials for infant industries in the country.

Scope of Study

This study is designed to assess the impact of government expenditure on agricultural development in Nigeria (1970 – 2010). This study will also examine the performance made by agriculture to the development of the economy over the years as stipulated above.

Statement of Hypotheses

Ho: Government expenditure in agricultural sector will not lead to agricultural development in Nigeria.


Hi: Government expenditure in agricultural sector will lead to agricultural development in Nigeria.

Limitation of Study

This work did not go all that economy, the problem of the allocation of time between the research study and other academic work was a serious limitation because the two activities went on simultaneously. Another major limitation was the one due to financial constraints to fund all the aspects of the work.

Definition of Terms

Some of the terms that will be used due to their involvement are as follows:


This is used in this study, as the cultivation of land resources, raising and rearing of animals for the purpose of food, feed and raw materials production for man, animal and industrial use respectively.


This literally serves as a collective designation given to those who found themselves in the agricultural field either as cultivation or harvesters.


This as used refers to the various institutions engaged in the production of either secondary or final goods for economic purpose, using agricultural output.


This simply means sudden increase in trade activities especially when money is being made quickly.


This is the act of making goods and services available to the public.

Chapter Five

Conclusion and Recommendation


The size of the government expenditure to agriculture is dependent on, among other things, the existence of an agricultural policy frame work which indicates its priorities within the agricultural sector, availability of funds and the sectoral priorities within the general economic policy frame work. There is no doubt that in Nigeria, government has always emphasized the importance of agriculture in the development policy. However, there have been indications that this overall position of the government was not supported in practical way by financial allocations for the development of the sector, for instance, total capital allocation to agricultural sectors was only 4.9 percent of its aggregate capital allocations to all sectors during the first plan period (1962-68). This must be considered low, given that agricultural production accounted for between 50-65 percent of the GDP during the period. Although, total allocation to the agricultural sector increased more rapidly within this period but the proportionate share of total agricultural sector allocations were on the decline. Therefore low capital expenditure on agriculture by the federal government was particularly unsatisfactory and this is not a surprise since its interest was in agricultural research as specified in the Nigerian constitution. Thought, that attitude of in-difference was short sighted and detrimental to food and agricultural production. Since it was obvious that agriculture was basically under develop and it needed just the minimum test to show its weakness. An example is the issue of the decline in rainfall in most part of Nigeria which ranged between 15-60 percent this led to the re-appearance of the drought of

1982-1983 which came with even greater severity than before. This drought was attributed to several features, the most important being metrological changes, poor land use and inadequate water control schemes. Also there was the recent incidence of bird flu in some part of the world, Nigeria inclusive, and it ravaged most of the poultry farm. This incidence discouraged most small- scale farmers in Nigeria from investing in poultry farming again, thereby causing a huge scarcity and also an increased in price of the few available poultry farm.

With regard to the research results, the amount of government expenditure to agriculture during the period under consideration had no effect on the agricultural output. Although, government made emphasis on the importance of agriculture in its development policy; however, agricultural policies, programmes were formulated by different regimes with the idea of stimulating and inducing a better agricultural production. Therefore it can be stated that the poor performance of the agricultural sector reflects largely not only on the expenditure allocation pattern but also as a result of defects in their conceptualization and in efficient implementation of some policies and programs.


It has been noted that while agricultural credit was increasing and multiplicity of government finance and other programmes observed since the 1970s, aggregate agricultural production tended to stagnate. Apart from finance, several factors such as credit supply to farmers by lending banks: improper monitoring of agricultural projects by the lending institutions have also contributed to the non-commensurate response of aggregate agricultural production to the various policy measures.

Some programmes have been ineffective in contributing to the growth of the agricultural sector as result of defects in their conceptualization and inefficient implementation. For example, programmes such as Operation Feed the Nation, National Acceleration Food Production Programme, River Basin Development Authorities, etc. were rather all embracing and too large in scope as to be efficiently implemented. A better approach is for project to be modest, sector- specific and for pilot programmes to be undertaken before replications if benefits are found out weigh costs.
Other areas that require considerable attention in view of their potential contribution to agricultural growth are input procurement/distribution and application of suitable technology. Adoption of modern farming/husbandry practices, such as the supply of improved seeds/seedlings, agricultural chemicals for pest and disease control and fertilizers to enhance yield/output. Yet the procurement and distribution of fertilizer have been characterized by bottlenecks resulting in inadequate quantities of the product-reaching farmers at more than twice the subsidized rates. It is suggested that fertilizer procurement and distribution be privatized and a better mechanism for providing fertilizer subsidy be evolved-preferably through ADPs or farmers associations. With the exception of the ADPs, it is difficult for any observer to believe that the food policy measures adopted for implementation were

preceded by thorough planning in the sense of a desire to follow a particular pattern of structural change in the food economy. A systematic planning of the food economy would have begun with on identification of appropriate instruments and policy measures for the attainment of stated objectives. There would also be on effective monitoring and evaluation system for ensuring that objectives were being achieved. Above all, in such an environment, government would clearly determine the extent of its intervention so as to produce the optimum results.

Similarly, research institutes should ensure that improved and high- yielding seeds and simple technologies capable of increasing output are made available to farmers at reasonable costs. For agricultural research to have development as its focus, a people centered approach is needed. This strategy should have a long-term perspective in terms of the factors that influence both the demand for and supply of food items. The strategy should also create a path through which shorter-term government priorities could dovetail into the long- term perspective. It should also identify the immediate and long-term skills required by the universities and research institutes to meet up with the public and private sectors.

Basically, the small-scale farmers are the major producers of food and fiber in Nigeria. Hence, research focus on how to improve their levels of efficiency should be the main priority for food security to be achieved.

Research in crops, mainly cowpea, maize, tubers and vegetables needs to focus on post-harvest preservation and storage to minimize, if not eliminate, the current high losses variously put between 20 and 35 percent.

Similarly, in the areas of animal production, emphasis needs to be put on poultry; cattle and piggery given their high demand elasticity and required supplies. Measures to improved breed of livestock and fisheries, improvement in the processing and storage of the agricultural enterprises are essential research areas, which should be a pedestal for achieving national and household food security.

It should be emphasized that agricultural development cannot take place without a vibrant rural development programme. Hence, research needs to be focused on rural-electrification, feeder roads, storage facilities, rural health programmes and credit institutions. These are some of the areas that can complement the efforts towards the attainment of food security within a short space of time.

Additional focus is necessary in the area of environmentally related measures designed to stimulate agricultural growth. Past efforts were largely concentrated on the provision of irrigational facilities, such as dams in drought- prone section of the country and on tree planting to slow down desert encroachment. A shift should be made to the less expensive but effective fadama-type irrigational facilities relaying on hand pumps and with the capacity for greater territorial coverage than dams. For the south, programmes would have to be developed to minimize damage to topsoil and resultant poor crop yield caused by erosion, floods and landslides.

Finally, more weight would have to be attached to data gathering, coordination and reconciliation to enhance planning and facilitate decision- making. Ultimately, a viable national agricultural data bank, capable of meeting the needs of relevant users, would have to be established and founded. Information sharing and utilization should attract stipulated and agreed user feeing in other to make such system self-sustaining in the long run.

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