The study examined the impact of agricultural output on economic growth in Nigeria for the period 1980 to 2016 using secondary time series data to conduct an empirical investigation. A multiple linear regression model was estimated using the OLS estimation technique and the study revealed that agricultural sector plays a significant role on economic growth in Nigeria and as such recommended that government should encourage agricultural activities as it will help reduce poverty and increase economic growth in Nigeria. It is thus concluded that agricultural output is a significant determinant of economic growth in Nigeria… Agricultural output has a positive and statistically significant effect of economic growth in Nigeria as such improvement in agriculture will bring about increase in economic growth. Commercial banks credit to agricultural sector is positive and statistically significant to economic growth in Nigeria thus while increase in commercial banks loan to agricultural sector will improve economic growth, such growth is insignificant. Government expenditure is a positive and significant determinate of economic growth in Nigeria for the period understudy. Thus as government expenditure on agriculture increases, economic growth also increases significantly.
1.1 Background to the study
The relationship between agriculture and economic growth and development, especially in Sub-Saharan Africa, cannot be overemphasized. As a roadmap to attaining development, the Millennium Development Goals (MDGs) was adopted in year 2000 and in Africa, 70% of the development target group live in rural areas and are dependent on agriculture for a living (IFPRI, 2004). Invariably, reducing poverty, improving nutrition and general well-being of the population would imply improving the livelihood of this majority and this hinges critically on the performance of the agriculture sector. For example, using World Development Indicator (WDI) data from Nigeria for selected periods, we find a strong positive correlation between food production and primary school enrollment ratio and gender equality while there is a strong negative correlation between food production and child mortality rates. This gives some evidence on the importance of agriculture in economic growth, Tolulope et al(2013).
MDG’s goal is to eradicate poverty and extreme hunger. This is directly linked to agriculture through availability and access to food. Increased food production can only be achieved through agricultural growth.
However, sustained economic development cannot be achieved without economic growth. As expressed by the World Bank (2006), high poverty level will lead to low growth and low growth will lead to high poverty level. Thus, economic growth is necessary for sustained economic development (Akanbi & Du Toit, 2011; World Bank, 2006). This project work investigates the contribution of agriculture to aggregate economic growth in Nigeria. The fact that economic growth is necessary for sustained development, coupled with data limitation, informs our focus on investigating the contributions of agriculture to economic growth, as measured by Gross Domestic Product (GDP) in Nigeria.
The importance of this study stems from the role of agriculture in Nigerian economy based on its size, potential and prospects. In Nigeria, because 70% of the population is employed in the agriculture sector, economic growth will be almost impossible to achieve without developing the sector. Furthermore, the importance of agriculture to the Nigerian economy is evident in the nation’s natural endowments in production factors – extensive arable land, water, human resources, and capital. Exploring the nation’s productive advantage in this sector is the fastest way to stimulate growth in the economy. Research on this issue is therefore important to help inform policy decisions regarding resource allocation in agricultural growth and development to achieve rapid economic growth.
Nigeria is one of the largest countries in Africa, with a total geographical area of 923,768 square kilometers and an estimated population of about 167 million (NBS, 2014). 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. Over the past two decades, agricultural yields have remained the same or worse still declined. Nigeria’s agriculture to a large extent still possesses the characteristics of a peasant economy that was prominent in the pre-independence period (Adewumi & Omotesho, 2002).
More than 70 per cent of the farming population in Nigeria consists of smallholder farmers, each of whom owns or cultivates less than 5 hectares of farmland (NARP, 1994). Less than 50% of the country’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, inadequate research and extension services, etc.
Although there has been a recent rise in agricultural productivity, such improvement is derived more from expanded planting areas for staple crops than from yield increases. Howbeit, agriculture constitutes one of the most important sectors of the economy. The sector is primarily important, given its employment generation potential and its contribution to gross domestic product (GDP) and export revenue earnings (Ogen, 2002; Essien, 2005). A vibrant agricultural sector is capable of ensuring the supply of raw materials for the industrial sector as well as providing gainful employment for the teeming population (Ukeje, 2007).
The emergence of the petroleum sector in the early 1970’s resulted in significant structural changes in the Nigeria economy which negatively affected the agricultural sector. In response to the oil boom, public expenditures grew, fostering many other economic activities, including infrastructural development, creation of new institutions and expansion of existing ones, and importation of all kinds of consumer goods (Essien, 2005; Ukeje, 2007). Earnings from petroleum resources favoured these developments, but tradable agricultural commodities did not experience similar growth. The share of the oil sector in the total value of exports, which was under 60 per cent in 1970, rose to over 90 per cent after 1973. The non-oil exports declined from about 30 per cent in 1970 to less than 10 per cent by 1980 (Ojo, 1992). Agricultural productivity estimates for Nigeria showed a decline in productivity growth from the 1960s to the 1980s. Nigeria has witnessed strong economic growth in the past few years, averaging 8.8 per cent real annual GDP growth from 2000 to 2007. However, the agricultural sector has lagged behind GDP growth at 3.7 per cent in 2007.
In spite of the various agricultural programmes and policies initiated by different administrations for the development of Agriculture in Nigeria, there has not been any phenomenal growth in agricultural output since the 1970s. Agriculture’s contribution to the non-oil gross domestic product (GDP) was stable at about 40 per cent in recent years (FDA/FMARI, 2005). The index of agricultural output declined from 75.5 in 1970 to 35.2 in 1979. Although the index increased steadily from 35.2 in 1979 to 40.10 in 2005, the growth rate shows complete absence of sustainability. For instance, the growth rate was negative throughout the 1970s, declined from 6.34 to 3.04 between 1982 and 1986, and then fluctuated to 8.33 in 2003 and -3.24 in 2005. The rate was worsened in 2010 (4.2) due to the high price of oil. The question agitating the minds of scholars is why agricultural output is low amidst the huge expenditure via the different programmes implemented in Nigeria.
Consequently, 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 preponderant 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. Arising from this backdrop, this study is carried out to investigate the agricultural sector and economic growth in Nigeria. Also, the study is apt to assess the relationship between agricultural credit financing and the sector’s productivity, while attempting to unravel the major determinants of agricultural output in Nigeria.
1.2 Statement of Problem
A strong and efficient agricultural sector would enable a country to feed its growing population, generate employment, earn foreign exchange and provide raw materials for industries. This sector of any economy has multifunctional roles to play. These roles it play generally permeates the fabrics of the socio-economic aspects of that country.
In Nigeria, this ideal situation has been lacking due to certain factors. Agriculture in Nigeria has been grossly limited since the oil boom of the 1970’s. The Nigerian economy during the first decade after independence was an economy balanced with agriculture playing a dominant role. Nigeria was the largest producer of cocoa, largest exporter of palm oil and palm kernel. Agriculture contributed well over 60% of the GDP in the early 1960’s ( Alkal, 2006).
Presently, agriculture holds little quota in the distribution of the GDP of Nigeria due to our over dependence on oil. Hitherto, the price of oil has fallen drastically, foreign exchange earnings are low, companies are laying off their workers and the economy is going into deep recession. This ugly state has created a gap to be filled. A gap which this work seems to fill. That gap is “the impact of agricultural sector on the on the economy of Nigeria”. This is what this work will seek to address while using the output of the sector, gross domestic product and other variables to provide empirical justification for the study.
1.3 Objectives of the Study
The broad objective of this study is to determine the impact of agriculture on the growth of the Nigerian Economy.
- to determine the impact of agricultural sector on the economic growth in Nigeria.
- to examine the relationship between government expenditure and agricultural growth in Nigeria.
1.4 Research Questions
This research work therefore will aim at answering the following questions:
- What is the effect of agricultural output on economic growth in Nigeria?
- What is the relationship between government expenditure and agricultural growth in Nigeria.
1.5 Research Hypothesis
For the purpose of this study, the following hypothesis will be tested;
- H0; Agricultural sector has no significant impact on economic growth in Nigeria.
- H0; government expenditure, has no significant effect on agricultural growth.
1.6 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 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:
- Nigeria as a whole: The research work intends to bring firth ways 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.
- 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.
- Scope of the Study
This research work aim to focus on the impact of agriculture on the growth of Nigeria between the periods of 1980-2016.