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Impact of the Agricultural sector on Nigeria’s economic growth

Impact of the Agricultural sector on Nigeria’s economic growth

CHAPTER ONE

INTRODUCTION

1.1   Background of the study

Agriculture is the cultivation of land, raising and rearing of animals for the purpose of production of food for man, animals and industries. It involves and comprises of crop production, livestock and forestry, fishery, processing and marketing of those agricultural production.

Ighodo (2011) defined agriculture as the art and science of the cultivation of crops and rearing of animals for man’s use.  He also emphasized that agriculture is also the production of fibres for industries, processing of farm produce, packaging and marketing of farm products. Similarly, Ogwuma (2009) defines agriculture as production of field crops, forestry, fishing and livestock, research and training of extension workers. Simon Kuznet (1973) defined economic growth as a long term rise in the capacity to supply increasingly diverse economic goods to its population.  It entails a sustainable rise in national output which is a manifestation of economic growth.

Production is only complete when it gets to the final consumers. To this end, the role of agriculture in transforming both the social and economic framework of an economy cannot be over-emphasized.  It is a source of food and raw materials for the industrial sector, it is also essential for expansion of employment opportunity, for reduction of poverty and improvement of income distribution, also for speeding up industrialization and easing the pressure on Balance of  Payment. In effect, it has been the source of gainful employment from which the nation can feed its teeming population, providing the nation’s industries with local raw materials and as a reliable source of government revenue.

The development of agriculture in Nigeria has been slow inspite of the various agricultural policies. In fact, the government recognized the unhealthy condition of Nigerian agricultural sector since 1970, and has formulated and introduced a number of programmes and strategies aimed at remedying this situation. These measures included the setting up of large-scale mechanized farms by state and federal government, introduction of scheme such as the River Basin Development Authority. Other measures include, National Accelerated Food Production (NAFP), Operation Feed the Nation (OFN), Green Revolution (GRP) and the Directorate for Food, Roads and Rural Infrastructure. In addition to these measures, financial measures such as the establishment of agricultural credit scheme were introduced by successive governments.

Inspite of these measures, the development of the agricultural sector has been slow and the impact of this sector on economic growth and development has been minimal. This slow growth of agricultural production has generated some issues, among them are, the role of agriculture in providing food for the population; its role in supplying adequate raw materials to a growing industrial sector, its roles as a major source of foreign exchange earner.

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 of which agriculture contributed about 80% of the export. 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 growth of the overall economy (Ogen 2003).

However, the 1967 to 1970 civil war in Nigeria coincided with the oil boom era, which resulted in extensive exploration and exportation of petroleum products and its strong effect on 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 accounts for less than 5% of Nigeria’s GDP (Olagbaju 1996).

It is against this backdrop that we set out to research on the impact of agricultural sector on Nigeria’s 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. It becomes therefore imperative to study the impact of agricultural sector on the economic growth of Nigeria.

1.2   Statement of the 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% of the GDP in 2010 (World Factbook, January 9, 2012).

Nigeria is no longer a major exporter of cocoa, groundnut, rubber and palm products. Coca production mostly from obsolete varieties and over-aged trees are stagnant at around 150,000 tones annually. There is also a decline in groundnut, palm oil and other major export crops (United States Department of State, 2005). The decline in agricultural production was largely due to the rise of oil shipments (Sekumade 2009).

However, over the years the growth rate of agricultural production had failed to keep pace with the countries rapid population growth rate of about 3.2percent resulting in perennial food shortage, continuous souring food prices and massive importation of food by government while food production increase at the rate of 2.5%, food demand increases at a rate of more than 3.5percent (FOS 1996). It is very obvious that the sustainable growth rate of the Nigeria economy cannot be achieved in the absence of increased agricultural output in the country.

Harsch (2004) noted that higher output would directly reduce hunger and bring down the costs of food import as well as have wider economic benefits, stimulating rural incomes and provide raw material for African countries.

In the 1960s, agriculture accounted for 65-70% of total exports; it fell to about 40% in the 1970s, and crashed to less than 2% in the late 1990s. The decline in the agricultural sector was largely due to rise in crude oil revenue in the early 1970s. Less than 50% of the Nigeria’s cultivable agricultural land is under cultivation. Even then, smallholder and traditional farmers who use rudimentary production techniques, with resultant low yields, cultivate most of this land. The smallholder 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. The inability to capture the financial services requirements of farmers and agribusiness owners who constitute about 70 percent of the population is inclusive (Lawal, 2011).

The share of government total agricultural spending in Nigeria was 1.67% of government total spending in the economy in 1978. It increased to 2.50% in 1983 and increased further to 4.59% in 1989. In 1995, it declined to 1.90% and dipped further to 0.59% in 1996. In 2001, it increased to 6.38% and slumped again to 1.31%. It increased again in 2005 to 3.99% and increased further to 5.28% in 2008. In the entire period of the study covered (1978-2008), the average share of government total agricultural spending in the total government spending in the economy was 3.11% (CBN, 2009). And this share of government total agricultural spending in the total government spending reveals large fluctuations. It also points to the inconsistency in government agricultural policy in Nigeria (Garba, 1998).

The share of agricultural output in the total Gross Domestic Product (GDP) of the Nigerian economy in 1978 was 23.28% and increased further to 33.21% in 1983. It increased further to 40.60% in 1988 and increased again to 48.57% in 2002 before declining to 32.85% in 2008. The average share of the agricultural out in the total national output in Nigeria for entire period of study (1978-2008) is 33.02% (CBN, 2009).

The problem therefore is that, how can an extreme important sector like the agricultural sector of the Nigerian economy that contributes more than 30% of national output receive less than 5% of government total spending. This study therefore seeks to evaluate the impact of the agricultural sector on the economic growth of Nigeria.

1.3   Research Questions

To serve as study guide, we provide the following lead questions for which this study seeks to provide the answers:

  • What degree of causality exists between the Agricultural sector and Economic growth in Nigeria?
  • To what extent does long-run relationship exist between the Agricultural sector and economic growth in Nigeria?
  • Does the Agricultural sector have any significant impact on the economic growth of Nigeria?

1.4   Objectives of the study

The general objective of this study is to examine the impact of the Agricultural sector on Nigeria’s economic growth. The specific objective includes

  1. To establish the degree of causality existing between the Agricultural sector and economic   growth in Nigeria.
  2. To determine the extent to which long-run relationship exists between the Agricultural sector and economic growth in Nigeria.
  3. To ascertain if the Agricultural sector can contribute significantly to Nigeria’s economic growth.

1.5   Research Hypothesis

The working hypotheses of the study are stated as follows:

H0: There exist no significant causal relationship between the Agricultural sector and economic growth in Nigeria.

H0: There is no long-run relationship existing between the Agricultural sector and economic growth in Nigeria.

H0: The Agricultural sector does not significantly impact economic growth in Nigeria.

  • Significance of the Study

The significance of this study depends on the fact that with improved economy Nigeria stands to gain in its effects toward development. This work stands to benefit:

  1. Nigeria as a whole: The research work intends to bring forth ways to increase agricultural output both for the purpose of consumption and exportation which ultimately will bring an increased favourable balance of payment (BOP) for the nation.
  2. 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.
  • Lastly, it will add to already existing body of knowledge on this topic as it will provides a new window for further research.
    • Scope/Limitation of the Study

This study will focus on the impact of the Agricultural sector on Nigeria’s economic growth over the period (1981 – 2012). The researcher encountered the following constraints in the course of this work, data constraint, financial constraint, limited information due to the type of research work. This research work is also limited to the use of secondary data gotten from secondary sources, as such if there are any errors made by those who generated these data; this research work incorporates such errors.

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