THE IMPACT OF AGRICULTURAL OUTPUT ON THE ECONOMY OF NIGERIA
CHAPTER ONE
INTRODUCTION
1.1 Background of the study
Agriculture is 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. It is concerned with the husbandry of crops and animals for food and other purpose. The study of the history of economics provides us with ample evidence that can proof that agricultural revolution is a fundamental precondition 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.
Agriculture in the context of the economy is tied with the various sectors and is essential for generating broad based growth necessary for development. Agriculture is fundamental to the sustenance of life and it is the bedrock of economic development, especially in the provision of adequate and nutritious food so vital for human development and industrial raw materials. Sustainable agricultural development is propelled by agricultural policies. The first national on agriculture was adopted in 1988 and was accepted to remain valid for about fifteen years, that is, up to year 2000. Also, in year 2001, a new document on agriculture, was lunched. The new document has most of the features of the old ones, but with more focused direction and better articulation. Agricultural policies are supported by sub-policies that facilitate the growth of the sector. Implementation of agricultural policies is however moderated by macro-economic policies which provide the enabling environment for agriculture to grow pari passu with the other sectors. These policies usually have major impact on profitability of the agricultural system and the welfare of farmers as they affect the flow of funds to the sector in terms of budgetary allocation, credit, subsides, taxes and therefore, must be in harmony and mutually reinforcing with the agricultural policies. The macro-policies comprise the fiscal, monetary, trade budgetary policies and other policies that govern macro-prices.
The agricultural sector has potentials to shape the landscape, provide environmental benefits such as conservation, guarantee sustainable management of renewable natural resources, preserve biodiversity and contribute to the viability of rural areas development. Through its spheres of activities at both the macro and micro levels, the agricultural sector is strategically
positioned to have a high multiplier and linkage effect on any nation�s quest for socio-economic and industrial development. The growth of the agricultural sector in Nigeria was not smooth. Adubi (2000) defined agriculture as the cultivation of soil for crop production and of looking after animals to produce better meat and other food products and also a process by which farm products are sold.
According to Anyanwu (1997), the role of agriculture in transforming both the social and economic framework of an economy cannot be overemphasized. in effect it has been the main source gainful employment from which the nation can feed its teeming population providing the nation industries with local raw materials and as a reliable source of government revenue
The agriculture sector in the 1960�s was contributing 85 percent of Nigeria foreign
Exchange earning 90 percent employment generation, and about 80 percent to gross domestic product (CBN, 2010).
However, the sector since the discovery of oil has witnessed lots of neglect from the various successive governments. At present, agriculture accounts for only 35 percent of the real sector, while crude oil accounts for about 55 percent and above.
The role of the agricultural sector in bringing about economic growth and sustainable development of a nation cannot be underestimated. Okolo (2004) described agricultural sector as
the most important sector of the Nigeria�s economy which holds a lot of potentials for the nation as it had done in past. The agricultural sector is arguably the most important sector of economy. Abayomi (1997) once averred that the principal explanation for poor economic performance, is the negligence of the agricultural sector, while rising agricultural productivity has been the most important concomitant of successful industrialization. Thus, it is not an overstatement to assert that the growth and development of Nigeria depend to a large extent on development of the agricultural sector.
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 the growth of the overall economy (Ogen 2003). According to Alkali (1997) Nigeria was the world�s second largest producer of cocoa, largest exporter of palm oil during the period. And was also a leading exporter of other major commodities such as cotton, groundnut, rubber, hides and skins. Despite the reliance of Nigerian peasant farmers on
traditional tools and indigenous farming methods, these farmer produced up to 705 of Nigerian�s exports and 95% of its food needs (Lawal, 1997).
However, the 1967 to 1970 civil war in Nigeria coincided with the oil boom era, which resulted in extensive exploration and exportation of petroleum and its strong agriculture in favour of an unhealthy dependence on oil (United States Department of state, 2005). Ever since then,
Nigeria�s GDP (OLagbaju and Fashola, 1996). It is against this backdrop that we set out to research on the impact of agricultural development on Nigeria economic growth.
Although, agriculture no longer serves as the leading foreign exchange earner due to phenomenal growth in the petroleum sector of the economy as observed; still it is the dominant economic
activity in terms of employment, leading contributor to Nigeria�s gross national product and linkages with the rest of the GDP, it remains the leading employment sector of the vast majority of the Nigerian population of it employs two-third of the labor force (Ekpo and Umoh, 2012,Noko 2016).
The Agricultural Credit Guarantee Scheme Fund (ACGSF) was established by the federal Government in 1978 to encourage dank to extend credit to the agricultural sector, provide a 75 percent guarantee in respect of bank loan to agriculture in the event of default. in the second half of 2011, a total of 44,918 loans valued N2.19 billion guaranteed in the first half representing an increase of 74.6 percent in number and 72.6 percent in value. The accumulative number and value of loans guaranteed under the scheme since its inception stood at 754,528 and N52.34 billion respectively.
The Transformation agenda of the formal President Jonathan administration identified seven sectors as the main growth drivers during the transformation period, 2011-2015, via; agriculture, Water resources, solid minerals, manufacturing, oil and gas, trade and commerce as well as culture and tourism. 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 Nigerian economy as at independence in 1960 (Tonuchi 2017).
The literature has established a relationship between agriculture sector and economic growth(Gallup et al., 1997; Thirtle, Lin & Piesse, 2003; Awokuse, 2008; Irz et al., 2001). We contribute to this literature using Solow?s growth accounting framework and estimate our model with time series data on the Nigerian economy from 1960 to 2011. Similar to Collins & Bosworth (1996) and Iyoha & Oriakhi (2002), we consider the contributions of agriculture sector as a source of growth in the economy. In our model, aggregate output growth is conceptualized as the sum of growth contributions from each sector of the economy. We further modify the model to provide evidence on the importance of the agriculture subsectors in the growth of the sector. In this second model, growth in the agriculture sector is taken to be the weighted sum of
the growth in the sub-sectors of the agriculture sector � namely, crop production, livestock production, fisheries and forestry. We also expect that disaggregating the agriculture sector will provide clearer evidence on how agriculture contributes to economic growth by highlighting the sources of growth in the agriculture sector. Furthermore, we conduct Granger causality test to investigate a bidirectional causality relationship between GDP growth and agricultural growth. This will give additional evidence on the contribution of agriculture to economic growth on Nigeria.
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However, the role it plays in 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.
As noted earlier, the neglect of the agricultural sector and the dependence of Nigeria on a mono-cultural crude oil based economy had not augured well for the well-being of the Nigerian economy. It becomes therefore imperative to study the impact of agricultural development on the Nigeria economic growth.
1.2 Statement of problem
The agricultural sector has suffered from years of poor management, inconsistent and poorly implemented government policies, government neglect and lack of basic infrastructure. Agriculture accounted for 30 percent of the GDP in Nigeria 2010 (World Fact Book, January 9, 2012).
Nigeria is no longer a major exporter of cocoa, groundnut, rubber palm products. Coca 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
( States Department,U.S.A 2005).The decline in agricultural production was largely due to the rise of oil shipments ( Sekumade 2009).
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Because of this backdrop, agriculture has not kept up with the rapid population growth and Nigeria once a large net exporter of agricultural produce, for now imports most of its food requirements. Dependence on oil is not only the cause of under-development of the Nigerian agricultural sector, but also;
a. The Nigerian agriculture is characterized and surrounded by bunch of illiterate farmers who live in rural areas, producing over 90 percent of the total food consumed and other agricultural products and with regards to their educational status giving little or no room for improvement through scientific research. And also more than 90 percent of the consumed food in Nigeria is provide by the small-scale farmers.
b. The Nigerian agricultural lacks storage facilities and these have led to so much wastage and high cost of storage. This hinders the availability of source perishable agricultural produce through the year, therefore hindering agricultural development.
c. Another negative force is Dependence on weather which affects the increase in agricultural produce. Nigeria Agriculturists or farmers still depend on rain fall only to produce instead of the use of irrigation that supplies water all through the year.
d. The problem of finance: The agricultural sector is poorly financed in Nigeria. They do not get credit easily from financial institutions, like commercial banks. The agriculturists find it difficult to finance projects which are capital intensive. The commercial banks cannot grant loans easily to a small scale farmer because of low produce and low profit which results to a failure in paying back the loan.
e. In addition, the dependence on imported foods has disincentive investment in local farming. Also, soil infertility is one of the problems of agriculture in Nigeria. Most of the farmable land in Nigeria contains soil that is low in medium in productivity. According to the food and Agricultural Organization of the United Nations (FAO), with proper
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management, the soil can achieve medium to good productivity. The movies problem that affects soil fertility is soil erosion. Wind erosion, strong winds expose seedlings and crops root system by blowing away loose, fine grain soil particles in drifts, which can cover crops. Another type of erosion that affects soil fertility is water erosion. There are two types of water erosion: Splash erosion and rill erosion. Splash erosion occurs when rain drops impact the soil and rill erosion occurs when channels of water carry soil downstream. This (water erosion) is reduced when the soil is covered with a canopy.
f. Food processing problem alone is estimated that about 20% to 40% of the yearly harvest is lost during processing. The primary cause is the lack of efficient harvesting techniques. According to and with the information above, it is quite clear that the agricultural sector, as one of the major contributor to the Nigeria economy has really got a lot to contribute to the economic growth of the country.
g. Again the activities of oil majors in Nigeria and the attendance negligence on the part of the oil companies has led to several oil spillages which to a large extent has done a lot damages to both toura and forma and the other agricultural means of livelihood of the common man especially in rural areas where agricultural practice and cultivation are mostly carried out both for subsistence and commercial purposes as indicated earlier.
1.3 Research questions
This research work therefore is aimed at answering the following questions:
i. What is the effect of agricultural output on economic growth?
ii. What is the effect of agricultural sector on employment creation?
iii. How can agricultural improve the standard living of Nigeria?
iv. The benefit of going into agriculture sector in Nigeria?
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1.4 Objectives of the study
The broad objective of this study is to determine the impact of agricultural development on economic growth in Nigeria.
i. To determine the damage that neglect of the agricultural sector has done to the economic growth in Nigeria over the period.
ii. To determine the impact of neglect on employment generation in Nigeria over the period.
iii. To propose or recommend measures to be adopted to reverse the trend in order to improve the economy of Nigeria through effective involvement and increase in agricultural activities.
1.5 Research of Hypotheses
For the purpose of this study, the following hypotheses id tested;
i. Hypothesis one
ii. Ho: Agricultural development has no significant impact on economic growth in Nigeria.
Hi: Agricultural development has significant impact on economic growth in Nigeria.
iii. Hypothesis two
iv. Ho: Agricultural development has no significant effect on employment creation in Nigeria,
Hi: Agricultural development has greater significant impact on employment creation in Nigeria.
1.6 Signification of the study
The significance of the study depends on the fact that with improved economy, Nigeria stands to gain in its effects toward development. This work attempts to answer the question: What is the relevance of agriculture in economic growth? The cause of agricultural backwardness and how the present state of our agricultural productivity will be improved. This will form the basis upon which suggestions and contributions will be made as to how the full potentials of agriculture can be harnessed.
This work stands to benefit:
i. Nigeria as a whole: The research work intends to bring firth way 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.
ii. This work will be advantageous to schools (staffs and students) and will help them understand the importance of farming no matter how small the scale of production may be.
1.7 Scope and Limitations of the study
This research work focuses on the impact of agricultural development on the economic growth of Nigeria between the periods of 1990 to 2017.
There are some factors of constraints which hinder my achieving the whole intension of this work, these constraints are; time factor, poor finance, environment constraints like free movement to research outside the school premises ect. It is therefore suggested that further research be continued whereby more time will be allowed for the researcher, as well as other impediments as pointed out above will be taken care of by relevant authorities.
1.8 Organization of the study
The research work is divided into five main chapters, including the references, and appendices. Each chapter is divided into subdivisions. Chapter one is Introduction, Background to the study, statement of problem, Research Questions, Objectives of the Study, Research of Hypothesis, Significance of the Study, Scope and Limitations of the Study, Organization of the Study, Contextual Definition of the Study.
Chapter two contains the Literature, Theoretical Framework, and Empirical Literature Chapter three contains the Research Methodology.
Chapter four is Data presentation and analysis of results while Chapter five is the Summary, conclusion and recommendations.
1.9 Definition Terms
i. AGRICULTURE: is 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. It is concerned with the husbandry of crops and animals for food and other purpose.
ii. ECONOMY: An economy consists of the economic system of a county or other areas, the labour, capital and land resources, and the economic agents that socially participate in the production, exchange, distribution and consumption of goods and services of that area.
iii. ECONOMIC GROWTH: Thus is defined as the increasing capacity of the economy to satisfy the wants of goods and services of the members of society. Economic growth is
enabled by increase in productivity which lowers the inputs (labor, capital, material energy etc) for a given amount of output. Economic growth is concerned with he log run trend in production due to basic causes such as industrialization.
