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THE IMPACT OF AGRICULTURAL OUTPUT ON THE NIGERIAN ECONOMY
CHAPTER ONE
1.1 General introduction
One of the important objectives of macroeconomic policy in has been the rapid economic growth of an economy. Economic growth is defined as “the process
whereby the real per capita income of a country over a long period of time.” Economic growth is measured by the increase in the amount of goods and
services produced in a country. A growing economy produces more goods and services in each successive time period. Thus growth occurs when an
economy’s productive capacity increases which in turn is used to produce more goods and services. In its wider aspect, economic growth implies raising the
standard of living of the people and reducing Inequalities of income distribution. Economic growth is a desirable goal for a country. But there is no agreement
over the annual growth rate which an economy should attain. (Jhingan, 2000).
Generally, economists believe in the possibility of continual growth .This belief is based on the presumption that innovations tend to increase productive
technologies of both capital and labour over time. But there is every possibility that an economy may not grow despite technological innovations. Production
might not increase further due to lack of demand which may retard the growth of the productive capacity of the economy. The economy may not grow
further if there is no improvement in the quality of labour in keeping with the new technologies.
Economic growth is usually measured in terms of an increase in real gross national product (GNP) or gross domestic product (GDP) over time or by an
increase in income per head over time. GDP measures increase in total output to a change in population. Thus, if total output rises higher as compared to
population, then theirs an improvement in the average living standards. Growth is desirable because it enables the community to consume more private
goods and services and the provision of a greater quantity of social goods and services such as health, education, etc. in this manner improving living
standards. Government can also stimulate economic growth by increasing its current spending in the economy and through tax cuts (fiscal policy), and by
increasing money supply and reducing interest rates (monetary policy).
Principally, there are three main determinants of economic growth, which are; the growth of its labour force, the growth of capital stock, and technical
progress.
Nigeria used to be heavily dependent on the agricultural sector prior to the oil boom. In the early 1950’s up to the early 1970’s before the discovery of crude
oil, agriculture was the mainstay of the economy, employing 70 per cent of the total population. Although subsistence farming was predominant, it was a
major revenue earner for the country. In the early 1980’s, it became more apparent that the agricultural sector could no longer perform its traditional role of
meeting domestic food requirement, raw materials for industry and started to decline as a major foreign exchange earner through exports due to economic
, social and political problems.
Nigeria’s soils and climate allow cultivation of a wide variety of food crops, including cassava (of which Nigeria is the largest world producer), millet, sorghum
and maize. Agriculture is Nigeria’s biggest employer of labour, accounting for about 60 per cent of the workforce, working mainly in small-holdings using
basic tools. Together with livestock rising, it provides a third of gross domestic product.
Growth in agricultural output averaged 3.5 per cent over 1993-1997, higher than the population growth rate, 4.0 per cent, 5.2 per cent, 2.9 per cent, 5.1 per
cent from 1998-2000 respectively (CBN 2000). This compares with a period of stagnation in the first half of the 1980’s when growth averaged just 0.5 per cent,
due to low producer prices, marketing restrictions and a drought. Agriculture picked up aer
the economic reforms introduced in 1986, which included trade
liberalization, dissolution of price-fixing marketing boards and improved producer prices facilitated by devaluation of the naira. Growth in the sector
averaged 3.8 per cent in 1986-92, and there was a burst of activity in the cash crop sector, with many farmers returning to previously abandoned fields.
However, the renewed interest was not sustained, nor did it result in increased investment in cash crop production, mostly carried out by smallholders.
Improved food crop production contributed to a sharp fall in food imports, from 19.3 per cent of total imports in 1983 to 7.1 per cent in 1991, although this crept back up to 13.1 per cent in 1996. Much of the increase in agricultural output in recent years has resulted from expansion of the area under cultivation,
rather from increased productivity. The sector has been hampered by lack of investment in improved farming technology. Over-farming of fragile soil has
worsened.
The share of agricultural products in total exports has plummeted from over 70 per cent in 1960 to less than 2 per cent today. The decline was largely due to
the phenomenal rise of oil shipments, but also reflected the fall in the output of products like cocoa, palm oil, rubber and groundnuts, of which Nigeria was
once a leading world producer. For example, production of cocoa, currently Nigeria’s biggest non-oil export earner, has remained around 160,000 tonnes per
year since 1995, compared with an annual average of 400,000 tonnes at its peak before the oil boom. The government has made some to encourage private investment in agriculture and agro-industries by providing incentives, including tax breaks, finance credit and extension services, but without much
success
1.2 Background of the study
This area of study is quite broad and as such various studies have been carried out in the area in general and other sub-sectors, highlighting the relevance of
the sector towards economic growth. With the understanding been identified, many researchers, scholars have developed models on improving and
developing the agricultural sector especially in developing countries. However the study will attempt to review available literatures within its reach.
1.2.1 Socio-economic and development challenges in Nigeria’s agriculture
Nigeria is one of the largest countries in Africa, with a total geographical area of 923 768 square kilometres and an estimated population of about 126 million
(2006 estimate). It lies wholly within the tropics along the Gulf of Guinea on the western coast of Africa. Nigeria has a highly diversified agro ecological
condition, which makes possible the production of a wide range of agricultural products. Hence, agriculture constitutes one of the most important sectors of
the economy. The sector is particularly important in terms of its employment generation and its contribution to gross domestic product (GDP) and export
revenue earnings. Despite Nigeria’s rich agricultural resource endowment, however, the agricultural sector has been growing at a very low rate. Less than 50% of the country’s cultivable agricultural land is under cultivation. Even then, small holder and traditional farmers who use rudimentary production techniques, with resultant low yields, cultivate most of this land. The small holder farmers are constrained by many problems including those of poor access to modern inputs and credit, poor infrastructure, inadequate access to markets, land and environmental degradation, and inadequate research and extension services.
Since the collapse of the oil boom of the 1970s, there has been a dramatic increase in the incidence and severity of poverty in Nigeria, arising in part from the
dwindling performance of the agricultural sector where a greater majority of the poor are employed. Furthermore, poverty in Nigeria has been assuming
wider dimensions including household income poverty, food poverty/insecurity, poor access to public services and infrastructure, unsanitary environment,
illiteracy and ignorance, insecurity of life and property, and poor governance. In response to the dwindling performance of agriculture in the country,
governments have, over the decades, initiated numerous policies and programs aimed at restoring the agricultural sector to its pride of place in the economy.
But, as will be evident from analyses in the study, no significant success has been achieved due to the several persistent constraints inhibiting the
performance of the sector. From the perspective of sustainable agricultural growth and development in Nigeria, the most fundamental constraint is the
peasant nature of the production system, with its low productivity, poor response to technology adoption strategies, and poor returns on investment. It is
recognized that agricultural commercialization and investment are the key strategies for promoting accelerated modernization, sustainable growth and
development and, hence, poverty reduction in the sector. However, to attract investment into agriculture, it is imperative that those constraints inhibiting the
performance of the sector are first identified with a view to unlocking them and creating a conducive investment climate in the sector.
The development challenges of Nigeria’s agriculture are, therefore, those of properly identifying and classifying the growth and development constraints of
the sector, unlocking them, and then evolving appropriate strategies for promoting accelerated commercialization and investment in the sector such that, in
the final analysis, agriculture will become one of the most important growth points in the economy.
In spite of the existence of a well-articulated agricultural policy document for Nigeria since 1988, the country has never established a systematic focus
in her agricultural planning history that shows a conscious eort
to purposely prioritize her agricultural development based on the generally identified
components that constitute modern agriculture. Over the years, there has been the development and adoption of programs that tended to generally support
only increased production of commodities in the country. Such programs have included, among others :
a. Farm settlement schemes (FSS) in the early to mid 1950s for creating farmsteads of the Israeli Moshav-type agriculture intended to increase commodity
output and create employment for young school leavers.
b. River basin development authorities (RBDA’s) for the purpose of harnessing water resources for farmers throughout the country.
c. Green revolution scheme (GRS) that encouraged all Nigerians in both urban and rural areas to go into agriculture for both commerce and provision of
food for home consumption.
d. Agricultural development programs (ADP’s) in all states of the .federation to help organize farmers into more productive agriculture through the
provision of modern inputs.
Each of these programs/schemes succeeded in momentarily increasing food production only. There were no inbuilt components that purposely catered for
the processing and/or commercialization of the food output. Thus, understandably, they failed as aimed at developing the agriculture sector. Recent
attempts that have recognized agriculture’s current level of performance and the fact that every aspect of Nigeria’s agriculture sector needs attention have
only listed specified areas that require attention. For instance, the 2001 Rural Development Sector Strategy identifies the following areas for immediate
attention if agriculture and rural development in Nigeria are to make the desired impact on the lives of the people:
a. Institutional restructuring and role reassignment in the agricultural extension sub sector.
b. Agricultural technology development and natural resource management
c. Physical and social infrastructural development.
d. Public intervention in specified areas of rural agriculture to measure eectiveness.
e. Human capacity building in the agriculture sector.
Similarly, the 2002 Agricultural Policy document that listed the new directions that agricultural development in the country should take has also only listed
the various components of the agricultural sector without any attempt at prioritizing the components.
1.3 Statement of the problem.
The specific problems to address include;
Inadequate investment opportunities in the sector.
What steps have been taken in past years and in recent times to fuse agricultural proceeds into a source of economic growth
In what ways have the government policies on agriculture aid and encourage private and public participants in the agricultural sector.
The damaging of inadequate storage facilities which has caused great post-harvest loss.
1.4 Objectives of the study
The purpose of the study is to examine the impact of agricultural output on the growth of the Nigerian economy, specifically. The objectives are:
To know if there are government policies that support agriculture in Nigeria and if there are, how eective
and eicient.
To also help in highlighting alternative procedures that can be taken to improve methods of enhancing agricultural output eectively.
To make policy recommendations based on the findings of the study.
1.5 Scope and limitation of the study.
The study focuses on the Nigerian economy as a whole. That is agricultural sustainability in Nigeria, Institutional reforms, Financial Reforms, Agricultural
development programmes, analysis of selected agricultural indicators, constraints of agricultural output and strategies for maintaining agricultural growth in
Nigeria. Limitations are bound in the time series data available.
The study covers a span of 34 years; the values are all evenly distributed about the mean.
1.6 Significance of the study
It is believed that the discovery of the study will benefit the government tremendously, in terms of agricultural policies, budgetary allocation on agricultural
expenditure, the importance of agriculture and its eects
on economic growth, also to encourage participants both public and private alike, provision of adequate subsidies , will enable the farmers achieve whatever goals and objectives . Furthermore, most areas of output have their benefit as well as challenges in Nigeria thus the study renders adequate solutions to such challenges. The
literature review will serve as a useful source of secondary database for the academic world and Nigeria at large
1.7 Formulation of hypothesis
In an attempt to achieve the above objective, the study is going to test the hypothesis:
H0: Agricultural output has no impact on economic growth in Nigeria.
H1 : Agricultural output has an impact on economic growth in Nigeria.
1.8 Methodology
This study relies heavily on the use of secondary data. These will be obtained from the CBN statistical bulletin as well as its annual report and statement of
accounts, and economic reports on agriculture. Data from the Ministry of Agriculture will also be used in our analysis.
The ordinary least squares econometric technique will also be used to analyse our data. This method has been chosen because of its BLUE (Best Linear
Unbiased Estimate) properties. The regression approach in general is adopted since we are assessing the impact of an independent variable on a dependent
variable.
1.9 Organization of the study
In addition to this introductory chapter, the essay has four other chapters. Chapter two presents review of the literature surrounding the study as well as
enlightenment on some basic concepts pertaining to the study. Chapter three presents a theoretical framework, estimation of the models and model
specification of the study, while chapter four presents the empirical analysis on the findings of the study.
Furthermore, chapter five discusses the summary of the research findings
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