The Impact Of Agriculture On Economic Growth In Nigeria

Project and Seminar Material for Agricultural Economics and Extension

Abstract

This study examined and analysed the impact of agriculture on economic growth in Nigeria. It adopted the secondary data sourced from Central Bank of Nigeria covering the period 1985 to 2010. The study employed the modern Time Series of the Ordinary Least Square to test for the relationship between agriculture and economic growth in Nigeria. The results derived infer that there exists a significant relationship between agriculture spending and economic growth. Thus, it is important that the government placed greater emphases on this sector by increasing budgetary allocation to agriculture in Nigeria in other to meet the recommendations of both Food and Agriculture Organization (FAO) and African Union (AU). It is recommended that more funding be provided for agricultural universities in the country to carry out more research on all aspect of agricultural output, such as livestock, crops, fishing and forestry, crop preservation and also establishment of more research institutes to improve seedling production, encourage the use of irrigation farming system and provision of storage facilities for seasonal products as means of improving the country’s agricultural output.

Chapter One

Introduction

1.1 Background to the Study

The term Agriculture is derived from the Latin words, “ager,” meaning field, and “Cultura”, meaning cultivation. This suggests that the earliest form of production agriculture was crop production (Are, Igbokwe, Asadu, Bawa, 2010; Erebor, 2003). It may be noted that Agriculture is more than crop production. It also includes animal production, processing of primary products (or value addition) and marketing of produce and products. Erebor (2003) defines agriculture as the art and science of cultivating the soil, processing crops and livestock products for man, and the process of selling excess crop and livestock.

Meanwhile, (Kricher,1997) defines agriculture in a more advanced way by saying that, agriculture or farming is the simplification of nature’s food webs and the rechanneling of energy for human planting and animal consumption. To simplify, agriculture involves redirecting nature’s natural flow of the food web. The natural flow of the food web is the sun provides light to plants convert sunlight into sugars which provide food for the plants (this process is called photosynthesis). Plants provide food for herbivores (plant-eating animals) and the herbivores provides food for carnivores (meat-eating animals). This simple illustration of food web provides the basis for analyzing the impact of agriculture on economic growth.

In literature, economic history provides us with ample evidence that agricultural revolution is a fundamental pre-condition for economic growth, especially in developing countries. Development economists have focused on how agriculture can best contribute to overall economic growth and modernization. Todaro and Smith (2003) look at Lewis theory of development, and reported that the underdeveloped economy consisted of two sectors. These sectors are the traditional agricultural sector characterized by zero marginal labour productivity and the modern industrial sector. In Rostow’s linear stages of economic growth, agricultural revolutions is a pre-condition for take-off and take-off stages

The importance of a vibrant and robust agriculture is reminiscent on its role in providing employment opportunities for the teeming population, eradicates poverty and contributing to the growth of the economy. The linkage between agriculture and economic growth is well documented in literature (Ogen, 2007; Okongwu, 1986; Atte and Muhammed- Lawal, 2006 to maintain few). According to Izuchukwu (2011), agriculture has been the backbone of the economy in Nigeria providing employment and source of livelihood for the increasing population,it accounts for over half of the GDP of the Nigerian economy as at independence in 1960.

However, the role it plays in the regional and economic development of the country has diminished over the years due to the dominant role of the crude oil sector in the economy. With the increasing food demand in Nigeria, the country has available natural resources and potential for increasing the volume of crop production towards meeting the food and nutritional requirement of the rapidly increasing population and guarantee food security in the country. Therefore, the source of national wealth is essentially agriculture.

Unquestionably, the neglect of agriculture in Nigeria owing to the discovery of oil has retarded the growth of the economy for the past decades. The effect of this neglect could be felt in the poor quality of life of people as average Nigerian was quoted as living in US$ 1 per day; if translated to Naira, this amount to N165 day at present. It may not be wrong to say that such a remark is a political cover. The faces we see daily on our streets and those we may not be able to see because of their inability to muster enough strength to walk up to the street as a result of several days of hunger and starvation, or even food associated ill-health and avoidable deaths of tens of people everyday, a better, more sincere and realistic assessment of the situation would be put an average income at US $0-0.5 per day. Studies in literature reveal that seven out of every 10 Nigerians live in abject poverty; hardly able to feed, cloth or house themselves. It is an indisputable fact that Nigeria and her sub-Saharan African neighbors have been dubiously christened by the world political and economic powers as citadels of hunger, poverty, ignorance, diseases, misery, debts, filths and crises. This unquestionable imagery will for long remain indelible in the world’s archives unless a reasonable step is taken by people and Government of this doomed sector of the global village. It is against this backdrop that the study seeks to assess the impact of agriculture on economic growth.

1.2 Statement of the problem

Besides oil, the major strength of the Nigerian economy is its rich agricultural resource base, its human resource and its huge markets. However, these resources have to be effectively mobilized so as to diversify the economic base and reduce dependence on oil and import. The economy remains vulnerable to external shocks emanating from fluctuation in the world prices of crude oil and the rising prices of imports. The resulting external and internal in balances are manifested in the adverse balance of payment position, unemployment and low capacity utilization in virtually all sectors as well as the deteriorating purchasing power of the populace (Atte and Muhammed- Lawal, 2006).

The contribution of agriculture to the Nigerian economic growth is very low compared to what it used to be in the past 14 years. Nigerian agriculture to a large extent still possesses the characteristics of a peasant economy that was prominent in the pre-independence period. Given the information above, this study seeks to assess the impact of agriculture on economic growth in Nigeria from 1985-2010

1.3 Objectives of the Study

The purpose of this study is to assess the impact of agriculture on economic growth in Nigeria.

However, the study will:

Examine the effect of agricultural practice in Nigeria on agricultural productivity.
Assess the impact of budgetary allocation and agricultural policies on agricultural productivity.
Estimate the trend of growth of agricultural sector in Nigeria since 1985 up to 2010.
Determine the relationship between agriculture and economic growth in Nigeria.

1.4 Research Hypotheses

Hypotheses One

Ho: There is no significant relationship between Agriculture and Economic growth in Nigeria.
Hi: There is a significant relationship between Agriculture and Economic growth in Nigeria.

Hypotheses Two

Ho: There is no relationship between agricultural practice and agricultural productivity.
Hi: There is a relationship between agricultural practice and agricultural productivity.

The following questions will guide the study.

What is the growth of Agricultural sector between 1985-2010?
To what extent has budgetary allocation and agricultural policies affected agricultural productivity in Nigeria?
Is there any significant relationship between agriculture and economic growth in Nigeria?

1.5 Significance of the Study

The study is relevant in a true sense that it will help to promote agriculture in Nigeria. The study will help bring radical transformation for national growth, especially through its effect on rural incomes and provision of resources for transformation into an industrialized economy. This present study will help policy makers and government to address the challenges of climatic change, global recession and dwindling revenue which threatens food security. The Nigerian populace will benefit from this study because agricultural revolution will be able to provide the quality and quantity of food.

Industrial and Manufacturing firms will also benefit from steady supply of raw materials and provide large markets for industrial products. Government will benefit because the study will help it to put political will in promoting agriculture in order to achieve full economic growth in Nigeria.

1.6 Scope and Limitation of the Study

This study is primary concerned with the impact of agriculture on economic growth in Nigeria. The researcher encountered some constraints, which limited the scope of the study. These constraints include but are not limited to the following

a) Availability of Research Material:

The research material available to the researcher is insufficient, thereby limiting the study

b) Time:

The time frame allocated to the study does not enhance wider coverage as the researcher has to combine other academic activities and examinations with the study.

c) Access to Data:

Gaining access to data was difficult for the researcher as security was high at the CBN.

1.7 Definition of Terms

Impact:

Measure of the tangible and intangible effects (consequences) of one thing’s or entity’s action or influence upon another.

Agriculture:

The science, art, or practice of cultivating the soil, producing crops, and raising livestock and in varying degrees the preparation and marketing of the resulting products

Economic Growth:

Economic growth is the increase in the inflation-adjusted market value of the goods and services produced by an economy over time.

1.8 Organization of the Study

This research work is organized in five chapters, for easy understanding, as follows

Chapter one is concerned with the introduction, which consist of the (overview, of the study), historical background, statement of problem, objectives of the study, research hypotheses, significance of the study, scope and limitation of the study, definition of terms and historical background of the study.
Chapter two highlights the theoretical framework on which the study is based, thus the review of related literature.
Chapter three deals on the research design and methodology adopted in the study.
Chapter four concentrate on the data collection and analysis and presentation of finding.
Chapter five gives summary, conclusion, and recommendations made of the study

Chapter Five

Summary, Conclusion and Recommendation

5.1 Introduction

It is important to ascertain that the objective of this study was to ascertain a critical analysis of the impact of Agriculture on economic growth in Nigeria.

In the preceding chapter, the relevant data collected for this study were presented, critically analyzed and appropriate interpretation given. In this chapter, certain recommendations are made, which in the opinion of the researcher will be of benefit in addressing the challenges of neglect of the agricultural sector in Nigeria.

5.2 Summary

This study aimed at having a critical analysis of the impact of Agriculture on economic growth in Nigeria. Four objectives were raised. These objectives include:

Examine the effect of agricultural practice in Nigeria on agricultural productivity. Assess the impact of budgetary allocation and agricultural policies on agricultural productivity, estimate the trend of growth of agricultural sector in Nigeria since 1985 up to 2010, determine the relationship between agriculture and economic growth in Nigeria.

5.3 Conclusion

Based on the above findings pertaining to the objectives of the study the following conclusions are drawn.
Therefore, we infer from our discussion in this section that based on past performance of agriculture in Nigeria, the sector has the ability to contribute to economic growth by its observed tendency to respond positively to investment be it in the form of progressive policies or funds. Also, the sector is able to serve as a buffer in the event of economic crisis; the strength of the buffer however depends on how strong the sector is. Finally, we observe the resilient nature of agriculture which emphasizes sector’s ability to recover more quickly from shock than other sectors.

5.4 Recommendation

These findings give strong evidence that support the need for increased investment in the agriculture sector. Nigerian agriculture has been typified as primitive and undeveloped, yet growth in the sector has been identified as an engine of economic growth. This implies that developing the sector will result in more profound contributions to the nation‟s economic growth. Development of the agriculture sector invariably will require more investment as we have repeatedly mentioned in this study. However, the aim of these investments should be clear and disbursement strategic. From the literature, we established five inter-sectoral linkages through which agriculture contributes to economic growth: provision of food, labour, market, domestic saving and foreign exchange. These linkages can serve as reference points through which the government can target development policies and disburse investment funds, tactically ensuring agriculture development. Focusing on crop production alone may result in lopsided contributions, neglecting the potentials of other subsectors of agriculture as we have seen in our study. Thus, the emphasis should be on developing all the subsectors- including livestock production, fishery and forestry; and strengthening their linkages to other sectors of the economy through value-chain development. This will create more employment opportunities and generate additional income, enhancing the industrialization process.
Furthermore, the lack of reverse causal flow from economic growth to agriculture strengthens the claim that agriculture sector has been neglected in Nigeria. Nigeria cannot achieve either economic growth or development without a developed agriculture sector. Our point of view on this subject is strengthened by our brief examination of the relationship between agriculture and development which emphasizes the linear relationship (see appendix). With evidence that agriculture has the potential to cause economic growth, spur industrialization as well as to enhance the living condition of the nation’s majority, increased investment in the development of the sector is justified.

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