Impact Of Public Agriculture Expenditure On Agricultural Output And Economic Growth

Project and Seminar Material for Economics

Abstract

The impact of public expenditure on agriculture in Nigeria is enormous. Government having recognized agriculture as the second highest sector after oil of which the country depends for food, employment and foreign exchange. This project work would summarize the magnitude and composition of governments’ expenditure on agricultural sector since 1960

The project also examines that contribution of agriculture towards Gross Domestic Product (G.D.P), between the year 1960 when Nigeria got independent and up till the beginning the oil boom in the early 1970s. Underutilization of revenue derived by the government could bring about a downturn in the economic growth, it is with this in mind that the study intend to achieved by examine the impact of public Agriculture Expenditure on the Agriculture output and the economic growth (G D P), an objective was set to address the problem stated;

The review of the Theoretical and Empirical literature provided a basic for the selection and specification of the model that was used to ascertain whether public Agriculture Expenditure have any significant impact on Agricultural output and Economic Growth or not. To put an abrupt end to the problem, policies were recommended as a lasting solution to the deficiencies recorded over the years.

Table of Content

Title page
Approval
Dedication
Acknowledgement
Abstract
Table of contents

Chapter One

Introduction

1.1 Background of Study
1.2 Statement of Problem
1.3 Objective of Study
1.4 Hypothesis of Study
1.5 Significant of Study
1.6 Scope and Limitation of Study

Chapter Two

Literature Review

2.1 Theoretical Literature Review
2.2 Empirical Literature Review
2.3 The Role of Agriculture on an Economy
2.4 Public Policies on Agricultural Development in Nigeria
2.5 The Government Impact on Agriculture
2.6 Agriculture and Nigeria Economy 2
2.7 Performance of Agriculture in Nigeria
2.8 The Pre-oil Boom Era
2.9 The Post Oil Boom and Agriculture
2.10 The Incentives to Developed Agriculture in Nigeria
2.11 The Role of Government in Resource Mobilization for Agricultural Development
2.12 Encourage foreign investment on Agriculture

Chapter Three

Research Methodology

3.1 Methodology
3.2 Model Specification
3.3 Method of Evaluation
3.4 Data Required and Source

Chapter Four

Presentation and Analysis of Result

4.1 Presentation of Result
4.2 Economic Interpretation
4.3 Statistical Criteria of the Result
4.4 Econometric Criteria of the Result
4.5 Evaluation of Hypothesis

Chapter Five

Summary, Conclusion and Policy Recommendation

5.1 Summary of Findings
5.2 Policy Recommendation
5.3 Conclusion
Bibliography
Appendix

Chapter One

Introduction

1.1 Background of the Study

Agriculture, in whatever form it comes or exists-food and cash crops production, livestock, poultry, animal husbandry, hunting and Horticulture-has its roles to play in any Nations Economic growth and devolvement is crucial. Among these roles are sources of food for the growing population, raw material for the manufacturing sector, reduction of inflationary pressure, earner of foreign exchange, empowerment of the labour force, source of income and savings for the farmer and improvement in their living standards, and market for products of the manufacturing sector. (Jhingan M.L 1975).

But, unfortunately for Nigeria as a developing Nation, these roles are hardly met by the Agricultural sector because of the internal and external factors facing farmers in Nigeria. A catalogue of reasons have been advanced for the relative poor performance of Nigeria’s agricultural sector. Key among these macroeconomic disequilibrium including interest and foreign exchange rate volatilities, poor infrastructure base, policy inconsistency and unnecessary intervention by the public sector which sends wrong (crowding out) signal to the private sector. (Eboh E.C, 2003).

Other important constraints include inadequate public agricultural expenditure, over dependence on crude oil revenue, rural-urban migration, inadequate processing and storage capacity, smallness of farm holdings, ageing population, use of inefficient traditional technology, inadequate agricultural extension services, policy inconsistency and increasing population pressure etc.

In an attempt to solve these problems of agricultural sector, the Federal and State governments of Nigeria intervene through some agricultural policies and programmes. Notable among the these policies are the operation field the Nation (OFN), the Green revolution (GR), land use degree, fertilizer company of Nigeria (NAFCON) and the National Agriculture land development authority (NALDA) and the latest is the agriculture development project (ADP). Meanwhile, these policies have not helped much in improving significantly the agricultural sector as the costs involved are still more than the benefits realized.

Perhaps, for the impact of public expenditure, surplus public agricultural expenditure allocation on the sector itself in Nigeria, is to be more effective, efficient workable and successful in some of these agricultural policies.

1.1 Statement of the Problem

The agricultural sector has been affected with numerous problems which has been the result of the poor performance of the sector itself.

This has attracted various strategies including expansion of public expenditure on agricultural activities. Overtime this expenditure has been on the increase without expressly translating to a corresponding expansion in agricultural output. The question that comes to mind are:

What is the impact of public agricultural expenditure on agricultural output in Nigeria?
What is the impact of public agricultural expenditure on economic growth in Nigeria?

1.3 Objectives of the Study

The overall objective of this study is to determine how public expenditure can improve agricultural output.

However, the specific objectives are as follows:

To determine the impact of public agricultural expenditure on agricultural output.
To determine the impact of public agricultural expenditure on economic growth.

1.4 Hypothesis of the Study

The hypothesis tested in this study are as follows:

Public agricultural expenditure has no significant impact on agricultural output.
Public agricultural expenditure has no significant impact on economic growth.

1.5 Significance of the Study

Once regarded as the mainstay of the economy and also the provider of employment, food and foreign exchange thus; adequate public agricultural expenditure on the agricultural sector is significant.

This study is intended to determine the trends of public agricultural expenditure on agricultural output in Nigeria in order to ensure food security to and reduce poverty in the economy.

This study will also show the impact of public agricultural expenditure on the economic growth of Nigeria over time. The result of the study will be of great benefit to the federal republic of Nigeria because economic growth is the vehicle of development. Development is the sustained elevation of an entire society and social activities towards a better and more human life.

The result of this study will be significant in the following ways:

It will help the Nigerian government and her policy makers to restore fiscal discipline in Nigeria.
The study will be important in debt management in Nigeria.
It will also have implications for formulating a workable model.

1.6 Scope and Limitation of the Study

This study covers the period of 1978-2007, a period of twenty-nine years; basically this research focuses on the trend of public agricultural expenditure and some contributions of agriculture to the economy itself (GDP).

The scope also comprises of some inherent problem facing the agricultural sector, its prospects and policy recommendation to attain a high level of productivity.

There is no end of knowledge and like( Anumudu C.N) will say; there is no failure anywhere only that people have just failed to succeed. In the bead of trying to succeed and failing to fail that this work become a success if not many factors without our ability to achieve a desired result some of which include the bottlenecks prevalent in the mobilization of data, which was a major concern to the essence of this work.

There is also lack of strong evidence in the theoretical framework of this topic that would have provided a reliable foundation for us to stem from a particularly Nigerian case. There is also the limitation of the small sample size which has its attended drawbacks.

The dearth of required statistics and limited access to literature, some journals and publications which could have been of immense help to this work were unavailable.

Chapter Five

Summary of Findings, Policy Recommendation and Conclusion

5.1 Summary of Findings

The study examines the impact of public agricultural expenditure on economic growth in Nigeria over the period of 1978-2007. The study employs ordinary least square (OLS) method of estimation. The findings shows that public agricultural expenditure in Nigeria has not responded to the desired levels that will impact positively to the agricultural output and to the entire economic growth. This finding was supported in literatures, where they attributed the problem of agricultural development to be more acute when the needed funds to approve this sector are readily available, and where the impact of new technologies has been less apparent and agricultural productivity has generally stagnated and even fallen in some areas, like the case of Nigeria. Apart from the insignificant of this core variables (agricultural development), every other variables included in the model proved insignificance in impacting to the growth of the economy in Nigeria.

5.2 Policy Recommendation

Sequel to the findings and careful investigation of the contribution of public agricultural expenditure towards improving agricultural output and economic growth, it is therefore pertinent to make the following policy implications to the government and all the agencies in charge of economic growth in Nigeria, that ;

Urgent attention should be given towards addressing critical constraints challenges to current agricultural production and agricultural development.
As far as agriculture is concerned, efforts should be focused on encouraging commercial production by making funds available for evolvement of large scale and mechanized farming system, as this will be the major provider of employment for the rural poor. Influencing international policy processes will be important, but primarily the rural poor will be best assisted by improving their access to health and education services to improve their human capital and through measures that increases their mobility so that they can move to take up opportunities in growth areas as they occur. Provide support for small farmers to increase productivity to cope with downward pressure and producer prices- for example through improved varieties.
Invest in agriculture that reflects existing domestic production patterns thereby reduce costs of food items.
Decentralize processing capacity to have the greatest impact on rural employment, incomes and economic diversitification.
Centralize processing capabilities to achieve cost-effectiveness through economies of scale.

5.3 Conclusion

From the finding of the work, public agricultural expenditure under normal circumstances’ provides opportunities for output growth as well as economic growth. This is not the same with the evidence of public agricultural expenditure in Nigeria economy. The nature of agricultural expenditure in Nigeria showed to have not given any positive impact to its output as well as economic growth over the period in course. As proving before, this fats is supported by the report published in 2004 by agriculture and natural resources team of the UK department for international development (DFID) in collaboration with Anne Thomson of oxford policy management, oxford, that the problem of agricultural development is particularly acute where they entire agricultural sector is particular sub-Saharan Africa lack funds that will lift it to the expected level. They warned that achieving the millennium development goals (MDGs) of halving the the proportion of people living in absolute poverty by 2015 will depend largely on increasing agricultural productivity , which remains perhaps the single most important determinant of economic growth and poverty reduction.

Though going by the data set of Nigeria, total government expenditures increased over time. Macroeconomic adjustment does not seem to adversely affect total government spending. However, when we control for other variables and disaggregate the analysis into different economy, structural adjustment programs increased total government spending in almost all regions. Structural adjustment programs had different consequences for different sectors. In Nigeria, governments reduced shares for agriculture, education, and infrastructure. Several lessons can be drawn from the study. First, various types of government spending have differential impacts on economic growth, implying greater potential to improve efficiency of government spending by reallocation among sectors. Second, government should reduce their spending in unproductive sectors such as defense, and curtail excessive subsides in fertilizer, irrigation, power, and pesticides. Third, all regions should increase pending in agriculture, particularly on production-enhancing investments such as agricultural R&D. this type of spending not only yields high returns to agricultural production, but also has a large impact on poverty reduction since most of the poor still reside in rural areas and their main source of livelihood is agriculture.

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