The Impact Of Government Expenditure On Agriculture On The Economic Growth In Nigeria

The Impact Of Government Expenditure On Agriculture On The Economic Growth In Nigeria (Charles)
Abstract
This study looked into the impact of government expenditure on agricultural on economic growth. Time series data were gathered from secondary sources on real GDP, government agricultural expenditure, agricultural output and agricultural credit from the CBN statistical bulletin covering the period between 1985 and 2023. Econometric methods such as Augmented Dickey-Fuller unit root test, Johansen Co-integration test, Ordinary Least Squares method and Granger Causality tests were used for data analysis. The study revealed that the overall model was statistically significant at 5% level of significance. Agricultural output and agricultural credit have a positive effect on economic growth whereas government agricultural expenditure has a negative effect on economic growth. Therefore, the study recommends that budget allocations to the agricultural sector should be closely monitored and ensured that they are channeled into the right targets. The government should also put forth policies that will promote good lending environment for agricultural related investments. Financial institutions should be made more available in rural areas where most farmers reside.
Table of Content
- Title Page
- Certification
- Dedication
- Acknowledgement
- Table of Content
- List of Tables
- Abstract
Chapter One:
Introduction
- 1.1 Background of the Study
- 1.2 Statement of the Problem
- 1.3 Objective of the Study
- 1.4 Research Questions
- 1.5 Research Hypothesis
- 1.6 Significance of the Study
- 1.7 Scope of the Study
- 1.8 Limitation of the Study
- 1.9 Definition of Terms
- 1.10 Organisations of the Study
Chapter Two:
Review of Literature
- 2.1 Conceptual Framework
- 2.2 Theoretical Framework
- 2.3 Empirical Review
Chapter Three:
Research Methodology
- 3.1 Research Design
- 3.2 Population of the Study
- 3.3 Sample Size Determination
- 3.4 Sample Size Selection Technique and Procedure
- 3.5 Research Instrument and Administration
- 3.6 Method of Data Collection
- 3.7 Method of Data Analysis
- 3.8 Validity of the Study
- 3.9 Reliability of the Study
- 3.10 Ethical Consideration
Chapter Four:
Data Presentation and Analysis
- 4.1 Data Presentation
- 4.2 Analysis of Data
- 4.3 Answering Research Questions
- 4.4 Test of Hypotheses
Chapter Five:
Summary, Conclusion and Recommendation
- 5.1 Summary
- 5.2 Conclusion
- 5.3 Recommendation
- References
- APPENDIX
- QUESTIONNAIRE
Chapter One
Introduction
1.1 Background of the Study
Agriculture is the practice of cultivating crops and rearing of animals for the purpose of producing food for man, animals, as well as the provision of raw materials for industries. Comprehensively, agriculture consists of crops and livestock, as well as marketing of agricultural products for the benefit of man. Agriculture is the largest economic activity in the rural area in Nigeria where almost 50% of the population lives (Cletus and Sunday, 2018).
Government’s expenditure on agriculture is the allocation of funds by the government to the agricultural sector to boost her productivity and output, thereby inciting economic growth. Furthermore, government’s spending on agriculture consists of all the expenses made by the government to the sector which include; expenses on policies and programmes, provision of grants and subsidies to farmers, pest control services, inspection services, irrigation and drainage system, crops inspection services, agriculture extension service, etc. Investing in agriculture by the government via increasing her expenditure is one of the most effective ways of promoting agricultural productivity thereby raising incomes, reducing poverty and food insecurity, as well as environment sustainability (FAO,2020).
Economic growth on the other hand, is the expansion of the productive capacity of a nation which brings about a better standard of living of the people through provision of better infrastructures, health, housing, education service, job creation, food security via improvement in agricultural productivity knowing that it is the base economic activity and the major foreign earnings of most countries, especially Nigeria in the 1960s (Cletus and Sunday,2018). Agriculture is the catalyst or base through which the growth and development of any economy like Nigeria must rely on. Nigeria being an agrarian economy is naturally blessed with various resources such as good atmospheric conditions, adequate rainfall, sufficient sunlight, a fertile and large land area of 910,770km2 and a population of 206,139,589. Over 50% the population lives in the rural areas that form the population responsible for these agricultural activities (Worldometer, 2020). For more emphasis, agricultural sector in Nigeria was the mainstay of the economy before the advent of the crude oil. Even now it is still the base through which the country’s food security and source of raw materials depend on. In 2016, NBS also estimated that 25% of the GDP of Nigeria was comprises the agricultural sector; and 70% of the Nigerian labour force was employed in agriculture (NBS, 2016). Thus, agricultural sector was the major employer of labour of about 70%, as well as the major source of foreign earnings. Some of the major exports were cocoa, groundnut, soya beans and palm oil.
However, in the mid-1970s Nigeria’s agricultural sector started experiencing problems of low production, as such agricultural exports and food supply began to decline. From 1975, as oil revenue began to increase the governments’ attention on agriculture in the form of agricultural expenditure as well as credit scheme on agriculture became to decline with very low follow up. As a result, there was a sharp decline in export crops’ production and domestic food supply. Thus, domestic supply had to be augmented with large imports. Between 2010 and 2018 Nigeria had imported products worth N231, 550,000 (CBN, 2018). This is due to the dependency of oil export together with the population increase as well as the diverted attention of the government from agriculture. Irrespective of the huge oil revenue, hunger, malnutrition, mass poverty, unemployment, inflation and low economic growth have continued to ravage the economy of Nigeria. This is because the mainstay of the economy that is capable of employing about 70% of the population has been given less attention such as inadequate supply of farm inputs, shortage of working capital, lack of credit facilities, lack of investment, lack of basic infrastructure, poor funding, etc., and by extension its contribution to the economy of the country becomes very low. Several researchers have investigated on the impact of government expenditure on agricultural productivity, but with conflicting results or findings, and the problem still persists so severely. Thus, there is the need to conduct further investigation on the impact of government agricultural expenditure proxy by agricultural expenditure and agricultural credit guarantee scheme on the Nigeria’s economy proxy by real GDP.
1.2 Statement of the Problem
The agricultural sector used to be the primary foreign exchange earner of Nigeria. Before the Nigerian civil war, Nigeria was self-sustaining in food production. However, agriculture has now failed to keep up with Nigeria’s fast growing population, and Nigeria now depends on food imports to sustain itself. Between 2010 and 2018, Nigeria has imported agricultural products worth a total of US$231,550,000 (Central Bank of Nigeria Statistical Bulletin, 2018). Regardless of the involvement of Nigeria in international trade, hunger, malnutrition, mass poverty and income among individuals, groups of businessmen and politicians, unemployment and lack of executive capacity, overdependence on petroleum and import goods and services continues to take a turn for the worse thereby delaying the economic growth in Nigeria (Ijirshar, 2015).
1.3 Objective of the Study
The general objective of this study is to examine the impact of government expenditure on agricultural on economic growth.
Other specific objectives are:
- To assess the impact of government agricultural expenditure on economic growth in Nigeria.
- To assess the causal relationship between government agricultural expenditure and economic growth.
1.4 Research Question
The following questions will guild this study;
- What is the impact of government agricultural expenditure on economic growth in Nigeria?
- Does a causal relationship exist between government agricultural expenditure and economic growth?
1.5 Research Hypothesis
- Ho1: Government agricultural expenditure has no impact on economic growth in Nigeria.
- Ho2: There is no causal relationship between agricultural expenditure and economic growth in Nigeria.
1.6 Significance of the Study
This research will also provide information to future researchers on matters concerning the relationship between government agricultural expenditure and economic growth.
The study will assist in disclosing the factors hindering the effective implementation of government policies and programmes on agriculture and will make practical suggestions towards ensuring the achievement of goals of such agricultural policies and programmes. This is important because it is only through feasible agricultural policies that the government can restore the agricultural sector and ensure its target goals and objectives in national development.
The study will add to existing knowledge and also of great use to students and scholars interested in carrying out similar research.
1.7 Scope of the Study
The general focus of this study boarders on the impact of government expenditure on agricultural on economic growth. the study will cover the period of thirty six years from 1985-2021.
1.8. Limitations of the Study
One cannot claim the preciseness of this research finding mainly because of the bias in data presentation by the government agencies in Nigeria. The general limitations of the study, is the fact that the work is limited to the scope of the study and there will be transfer of errors or mistakes in the reporting data that would affect the validity of this research result since some data would be sourced from existing work. While the specific limitations includes but not limited to the ones listed below:
Materials:
The sourcing of the relevant materials that will be used for the project will not be an easy task, because the researcher will have to visit office and libraries, in other to get first-hand information, and most of the times, these materials will not be easily accessible.
Time:
Since the research work has the highest unit load in the second semester course, the time that is allotted to it is usually not enough, the researcher will have to struggle with the limited time and still ensure that the best result is gotten for this research work, so time constraint is a major challenge.
1.9 Definition of Terms
Agricultural Credit:
This is a type of financing provided to individuals or businesses for use in the production activities related to agriculture, as well as storage and distribution of the agricultural produce.
Government Expenditure on Agriculture:
This is the allocation of fund to the agricultural sector in order to boost agricultural production and output thereby promoting economic growth.
Economy:
The state of a country or region in terms of the production and consumption of goods and services and supply of money.
Economic Growth:
This is the increase in the inflation adjusted market values of goods and services produced by economy overtime.
1.10 Organization of the Studies
The study is categorized into five chapters. The first chapter presents the background of the study, statement of the problem, objective of the study, research questions and hypothesis, the significance of the study, scope/limitations of the study, and definition of terms. The chapter two covers the review of literature with emphasis on conceptual framework, theoretical framework, and empirical review. Likewise, the chapter three which is the research methodology. The second to last chapter being the chapter four presents the data presentation and analysis, while the last chapter(chapter five) contains the summary, conclusion and recommendation.
Chapter Five
Summary, Conclusion and Recommendations
5.1 Introduction
This chapter consists of the summary of findings, conclusion and recommendations.
5.2 Summary of Findings
This study aimed at examining the impact of government agricultural expenditure on the Nigerian economy and how it can lead to growth and stability through the use of unit root test, co-integration test, ordinary least square method and granger causality test with time series covering the periods from 1985-2021.
The findings revealed that agricultural credit has a significant positive relationship with RGDP. This shows that financial institutions can play a positive role in financing the development in the agricultural sector.
Agricultural output also has a significant positive relationship with RGDP which could be attributable to farmers’ increased access to credit facilities.
Government agricultural expenditure however, has a significant negative relationship with RGDP. This indicates that debt-financed increase in government expenditure retards economic growth.
5.3 Conclusion
From the results obtained, it is clearly seen that adequate funding through provision of credit facilities can significantly increase the productivity and output of the agricultural sector in the economy. Debt-financed government expenditure can hinder growth as it tends to generate inflationary forces in the economy.
5.4 Recommendations
Based on the findings of the study, the following recommendations have been made:
- The fear of collateral security and heavy interest rates has discouraged most farmers from obtaining loans from financial institutions. Therefore, it is recommended that government should put forth policies that promote good lending environment for agricultural related investments. Financial institutions should be made more available in rural areas where most farmers reside. In addition, agricultural related banks such as Agricultural Development Banks (ADBs) and others in those categories should be allocated sizable budget with the directive to promote farming activities.
- For government expenditure to exhibit the desired results in the economy, government expenditure needs to be closely monitored. This will help ensure that budget allocations are channeled into the required targets that will help improve the economy.
- For local farmers to thrive there must be protection against external competition. Government should ensure stern regulation on importation of agricultural products.
- Government should open farm settlements across the nation. Vast hectares of land can be acquired by the government and allocated to farmers. This will reduce the barrier of access to farmland. Farming equipment such as machinery, tractors and inputs such as improved seeds, improved breeds of animals, fertilizers and modern storage facilities among others should be provided at subsidized rates.
- The infrastructures in rural areas should be developed. This will in turn reduce the rural- urban migration, increase retention of skilled labor in rural areas, reduce cost of production, thereby boosting the productivity of agricultural industries in the rural areas. This will greatly reduce poverty and unemployment levels in the economy.

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