In recent decades, the potential contribution of agriculture to economic growth has been a subject of much controversy among development economists. While some contend that agricultural development is a pre-condition for industrialization, others strongly disagree and argue for a different path.
Taking advantage of Ordinary Least Square Method (OLD), the research carried out by means of secondary data and using independent variables: Agricultural Development, Capital Accumulation, Inflation Rate and Interest Rate re-examines the question of whether agriculture could serve as an engine of growth for the Nigerian economy
Results from the empirical analysis shows that the productivity in agricultural sector has not appreciably impacted positively on the economic growth in Nigeria.
Cover Page .. .. .. .. .. .. ..
Title Page .. .. .. .. .. .. .. ..
Certification .. .. .. .. .. .. .. .. i
Dedication.. .. .. .. .. .. .. .. .. ii
Acknowledgement .. .. .. .. .. .. .. iii
Abstract .. .. .. .. .. .. .. .. iv
Table of Contents .. .. .. .. .. .. v-vii
INTRODUCTION .. .. .. .. .. ..
1.1 Background of the Study .. .. .. .. .. 1
1.2 Statement of Problem.. .. .. .. .. .. 12
1.3 Objectives of the Study .. .. .. .. .. 15
1.4 Statement of Hypothesis ... .. .. .. .. 16
1.5 Significance of the Study .. .. .. .. 16
1.6 Scope and Limitations of the Study .. .. .. 17
2.1 Theoretical Literature .. .. .. .. .. 18
2.1.1Agriculture As A Passive Contributor to
Economic Development (Classical School
of 1950s and 1960s). .. .. .. .. .. .. 30
2.1.2 Agricultural led Industrialization
(Classical School of 1970s and 1980s).. .. .. 31
2.1.3 Agricultural Linkages And Growth and
Development .. .. .. .. .. .. .. 32
2.1.4 Problems Associated with Agricultural Development 36
2.1.5 Empirical Literature .. .. .. .. .. .. 45
2.2.1 Agriculture and Poverty Reduction .. .. .. 46
2.2.2 Agriculture and Nutrition .. .. .. .. .. 47
3.1 Methodology .. .. .. .. .. . . .. 51
3.2 Area of Study and Coverage .. ... .... .. 52
3.3 Model Specification .. .. .. .. .. .. 52
3.4 Data Sources .. .. .. .. .. .. .. 53
3.5 Method of Evaluation .. .. .. .. .. 54
PRESENTATION AND ANALYSIS OF RESULTS
4.1 Unit Root Test .. .. .. .. .. .. 59
4.2 Co-Integration Test .. .. .. .. .. .. 61
4.3 Economic Opinion, Interpretation .. .. .. 63
4.4 Statistical Criteria of the Result .. .. .. .. 65
4.5 Econometric Criteria of the Result .. .. .. 68
5.1 Summary of Findings .. .. .. .. .. 67
5.2 Policy Recommendation .. .. .. .. .. 68
5.3 Conclusion .. .. .. .. .. .. .. 70
Bibliography .. .. .. .. .. .. .. ..
Appendix .. .. .. .. .. .. .. .. ..
1.1 BACKGROUND OF THE STUDY
Agriculture is concerned with the husbandry of crops and animals for food and other purposes. It is the foundation upon which the development of stable human communities, such as rural and urban communities has depended on in many parts of the world. The study of economic history provides us with ample evidence that an agricultural revolution is a fundamental pre-condition 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 critical need for rural transformation, redistribution, poverty alleviation and socio-economic development.
The agricultural sector has the 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. 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.
Anyanwu (1967) held that during the colonial period between 1861 – 1960, attention was given to agricultural research and extension services. Among the activities that was done, the first was the establishment of a research station in Lagos by Sir Claude McDonald in 1893. Landmarks of 10.4 km was acquired by the British Cotton Growing Association (BCGA) in 1899 for experimental purposes strictly for cotton and was named Moor Plantation in Ibadan.
In 1912, the Department of Agriculture was established in each of the then Southern and Northern Nigeria, but the activities of the department were virtually suspended between 1912 and 1921 as a result of the First World War and its aftermath. The period 1929 and 1945 was a difficult one for the agricultural sector of Nigeria. This was the period of great depression when the world prices on commodities fluctuated. This affected the agricultural sector negatively because the volume of agricultural produce increased but the value did not increase proportionately.
The period 1945 – 1954 marked the period of export boom, because countries were just recovering from the Second World War and countries that needed to develop their destroyed industrial sector were many. They depended on primary product for the beginning stage of industrialization. They needed to revitalize their industrial sector by demanding primary goods. Prices of primary products rose higher again because there were speculations that there would be a Third World War due to the outbreak of the Korean War. However, after this period, there came another period of price instability. This made the reliance on agriculture and its products to fall, leading to the establishment of a market board. This board bought these products from the local farmers and sold them overseas.
In spite of all the periods, Nigeria made a great revenue from agriculture. In the pre-Independence era, the agricultural sector contributed most to the GDP of Nigeria. Helleiner (1966) said that in 1929, export production amounted to 57% of Nigeria’s revenue and in that 57%, agriculture made up about 80% of the export. On attainment of political independence in 1960, the trend was still very much the same, the Nigerian economy could reasonably be described as an agricultural economy, because agriculture served as the engine of growth of the overall economy (Ogen, 2003: 231-234), from the stand point of occupational distribution and contribution to the GDP. Nigeria was the world’s second largest producer of cocoa, largest exporter of palm oil. Nigeria was also a leading exporter of other major commodities such as cotton, groundnut, rubber and hides and skins (Alkali, 1997: 15-16). Between 1964 – 1965, agriculture accounted for 55% of GDP and employed 70% of the adult workforce (Matton, 1981). In 1970, agricultural export crops like cocoa, groundnut, cotton, rubber, palm oil, palm kernel, etc. accounted for an average of between 65% - 75% of Nigeria foreign exchange earnings and provided the most important source of revenue for the Federal as well as State governments through export products and sale taxes (Ekundare 1973), despite the reliance of Nigerian peasant farmers on traditional tools and indigenous faming methods, these farmers produced 70% of Nigeria’s exports and 95% of its food needs (Lawal, 1997: 195).
However, the 1967 – 1970 Civil War in Nigeria coincided with the ‘Oil Boom’ era, which resulted in extensive exploration and export of petroleum and its products. This led Nigeria to neglect its strong agriculture in favour of an unhealthy dependence on oil (United States Department of State, 2005). Ever since then, Nigeria has been witnessing extreme poverty and insufficiency of basic food items. The agricultural sector contributions now account for less than 5% of Nigeria’s GDP (Olagbaju and Fashola, 1996: 263). It is against this back drop that we set out to research on the impact of agricultural development on Nigeria economic growth.
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. In a bid to address this drift, the Nigerian government as from 1975 became directly involved in the commercial production of food and cash crops.
Several large scale agricultural projects specializing in the production of grains, livestock, dairies and animal feeds, to mention but a few, were established (Fasipe, 1990: 129-130). Sugar factories were also established at Numan, Lafiagi and sunti (Lawal, 1997: 196).
The Nigerian Agricultural and Co-operative Bank (NACB) was established in 1973 as part of government’s effort to invest oil wealth into the agricultural sector through the provision of credit facilities to support agriculture and agro-allied businesses (Olagunju, 2000: 90). By 1995 the bank had granted the sum of $3,179.6 million as loan to the Private Sector.
- The River Basin Development Authorities (RBDA) were conceived in 1963 and were to cater for the development of land and mineral resources potentials of Nigeria.
- Operation Feed The Nation (OFN) was commissioned in the 1970s with the main objectives of:
1) Mobilizing the nation towards self sufficiency and self reliance in food.
2) Encouraging the sector of population which relies on buying food to growing its own food.
3) Encouraging general pride in agriculture through the realization that a nation which cannot feed itself, cannot be proud etc.
The OFN which was launched in 1976 to generate public awareness of the importance of agriculture to national development, and mobilize both rural and urban dwellers to participate in agriculture, be it in conventional crop farms, fish farms, backyard gardens or poultry did not realize the objectives of reducing or eliminating food imports and achieving self-sufficiency so in 1980 it was replaced with the Green Revolution Programme.
- The Green Revolution; This was a more deliberate and calculated approach to the food production problem. The programme was followed by the mounting of food strategies mission for Nigeria by the Federal Ministry of Agriculture, which estimated the level of food production needed to achieve self-sufficiency. Much of the recommendations of the programme, such as the expansion of the Integrated Agricultural Development Programme (ADP) to cover all States of the Federation, support for artisanal fishers and aquaculture and the establishment of grain storage facilities, among others, are still being implemented.
- The Directorate of Food, Roads And Rural Infrastructure (DFRI): This was established by the Federal Military Government in 1986 and was intended to bring development to the rural areas where over 70% of the population reside and work principally as farmers. The mandate given to DFRI is as follows:
1) To improve the quality of life and standard of living of the people in the rural areas.
2) To use the enormous resources of the rural areas to lay a solid foundation for the security, socio-economic growth and development activities of the rural areas to those of the Local Government Areas; the States and the Federal Government.
3) To ensure a deeply rooted and self-sustaining development process based on effectively mobilized mass participation.
In spite of all these efforts, it is heartrending to note that as from the mid 70s, Nigeria became a net importer of various agricultural products. In 1982 alone, Nigeria imported 153,000mt tons of palm oil at the cost of 92 million USD and 55,000mt tons of cotton valued at 92 million USD (Alkali, 1997:10). Between 1973 and 1980, a total of 7.07million tons of wheat, 1.62 million tons of rice and 431,000 tons of maize were imported.
N47.8 million in the 60s, the cost of food imports in Nigeria rose to N88.2 million in 1970 and N1,027.0 million in 1988 (Alkali, 1997:19-21). Since the 1990s till the ban of rice importation, Nigeria has been spending an average of 60 million USD on the importation of rice annually. In 1994, the agricultural sector performed below the projected 7.2 per cent of budgetary output. (Lawal, 1997:197-198).
Beginning from year 2000, Nigeria import expenditure on both food and live animals rose to
N113,489.8 million in the year 2000 from N103,489.8 in 1999. The cost of importation continued in its upward trend, in 2002 it was N144,297.6, N201,648.3 in 2003, then N178,747.4 in 2004, N193,259.1 in 2005 and N235,440.0, N271,679.7 and N355,287.0 from 2006 to 2008 respectively. (National Bureau of Statistics, and CBN Statistical Bulletin Golden Jubilee Edition, 2008).
Between 1995 and 1998, the Government further embarked on the reformation of lending policies of the Agricultural Credit Guarantee Scheme (ACGS) for easier access to agricultural credit. It also established the Calabar Export Processing Zone (EPZ) and initiated the Enugu, Kaduna, Jos and Lagos EPZs with each specializing in specified food and export crops.
In fact, the National Rolling Plan for 1996 – 1998 assumed that by the year 2000, Nigeria would have been able to feed its population, develop the capacity to process agricultural raw materials both for local industries and for export and significantly increase the contributions of the agricultural sector to the GDP (Lawal, 1997:193). These objectives have turned out to be a mirage mainly because of official corruption.
In order to get out of this, the Nigerian Government need to actively promote the establishment of the kind of agro-based industries that are capable of processing Nigeria’s agricultural raw materials in a most efficient manner. Thus the emphasis should be on the local processing of raw crops for local industries as well as for exports. This will create more employment opportunities and additional income will be generated. The provision of agricultural subsidies for fertilizer, farm implements and equipment would also boost agricultural production. In addition, there is the need to protect the agricultural sector from foreign imports and competition. It is also necessary to provide replanting grants to cash crops farmers so that they can replace their old trees with newer varieties.
It has been observed that in spite of the fact that these newer varieties are higher yielding and relatively easy to maintain with a shorter maturation period, most farmers are reluctant to do away with their old, plantations because of the high cost of replanting new ones. (Ogen, 2004:135). It is equally important to provide special welfare schemes for farmers that will form part of a social policy to alleviate rural poverty and the redistribution of income in favour of the rural poor. Government should also strive to promote greater efficiency in the rural areas by extending equal social benefits, establishing national schemes for agrarian reforms and improving the quality of life in areas that are quite remote so as to alter the movement of people from rural communities to urban areas. Furthermore, the resuscitation and development of the critically ailing Nigeria Sugar Industry and its bye-products, especially ethyl alcohol (ethanol) which comes from molasses (a bye-product of sugar cane) is of an urgent and critical necessity. Given the intractable and embarrassing problem of fuel queues in Nigeria, ethanol could be used to produce a brand of automobile fuel known as alcogas or green petrol. Apart from being a renewable source of energy, and unlike fossil fuels, alcogas has little or no adverse effect on the environment.
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. Presently, it accounts for 40.6% of GDP and 65% of employment in the economy, (A.B. Sekumade, 2009, United States Department of State, 2005). Nigeria is no longer a major exporter of cocoa, groundnut, rubber and palm products. Cocoa production mostly from obsolete varieties and over-aged trees is stagnant at around 150,000 tonnes annually, 25 years ago, cocoa production was 300,000 tonnes. There has been a similar decline in groundnut, palm oil and the other major export crops (United States Department of State, 2005). The decline in agricultural production was largely due to the rise of oil shipments (A.B. Sekumade, 2009).
Because of this backdrop, agriculture has not kept up with the rapid population growth and Nigeria once a large net exporter of food now imports most of its food requirements.
Dependence on oil is not the only cause of the under-development of the Nigerian agricultural sector, but also:
Falusi and Olayiole (1980) observed that Nigerian agriculture is characterized by illiterate farmers who live in rural areas producing over 90% of the total food consumed and other agricultural products and with regards to their educational status give little or no room for improvement through scientific research. Olayemi (1985) noted that more than 90% of the consumed food in Nigeria is provided by the small-scale farmers.
- Again, the bulk of agricultural activities are done using crude implements which are relatively less efficient when compared with modern machineries such as tractors, ploughs etc.
- Another problem is the issue of finance. The agricultural sector is poorly financed. 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 result to a failure in paying back the loan.
- The lack of storage facilities have led to much wastage and high cost of storage. This hinders the availability of some perishable agricultural produce through the year, thereby hindering agricultural development.
- Dependence on weather is another problem that affects the increase in agricultural produce. Agriculturists still depend on rainfall to produce instead of the use of irrigation that supply water all through the year.
With all that has been said above, it is obvious that the agricultural sector, being one of the real sectors of the Nigerian economy, has got a lot to contribute to its economic growth. But these are not attainable because of the multifarious problems besieging this sector of the economy.
This work therefore is geared towards answering the patent question:
What impact has the agricultural sector made in the face of the dire need for food security, employment creation and in all increased economic growth of Nigeria?
1.3 OBJECTIVES OF THE STUDY
The broad objective of this study is to determine the extent to which agricultural development influences economic growth in Nigeria.
1) To determine the cause of decline in agricultural production today.
1.4 STATEMENT OF HYPOTHESIS
For the purpose of this study, the following hypothesis is tested;
Ho – Agricultural development has no significant impact on economic growth in Nigeria.
1.5 SIGNIFICANCE OF THE STUDY
The significance of this work lies on the fact that with improved agriculture, the Nigerian economy stands to gain in its efforts towards development. This study attempts to answer the question; what is the relevance of agriculture in economic growth, the cause of agricultural decline and how the present state of our agricultural productivity will be improved.
This will form the basis upon which suggestions will be made as to how the full potentials of agriculture can be harnessed.
This work stands to benefit:
- Nigeria as a whole. The research intends to bring forth ways to increase agricultural output both for the purposes of consumption and exportation which ultimately will bring an increased favourable Balance of Payment for the nation.
- The research will be beneficial to schools (teachers and students) and will help them understand the importance of farming no matter how small the scale of production.
1.6 SCOPE AND LIMITATIONS
This study focuses on Nigeria and on the impact of agricultural development on the economic growth of Nigeria.
The originality and reliability of any study or research work is based on the quantity and quality of available data. Though it is the duty and intention of any researcher to bring out and show everything the study is to have, but there are constraints which include, time, finance, difficulty in getting data, etc.