The study examined the effects of government expenditure on the agricultural sector in Nigeria. The objectives were to; ascertain the effects of government expenditure (GEA), deposit money banks loan (DBA) and agricultural output (AGR) in Nigeria. The study employed time series data in its analysis. Data adopted in the study were generated from the Central Bank of Nigeria annual statistical bulletin 2016 and National Bureau of Statistics bulletin 2016. The ordinary least square (OLS) of multiple regression, the Johanson cointegration techniques, and the error correction model was used for the analysis. There is a positive relationship between GEA and DBA, while there is a negative relationship between real interest rate (RIR) and the dependent variable. Based on the above findings, the study recommends for an increase funding of the agricultural sector in Nigeria also ensure that the amount budgeted for the agricultural sector is actually spent on the development of the sector so that it can positively and significantly improve Agricultural production and output.
Keywords:-Production, Expenditure, Funding, Growth, Development.
- Background Of The Study
Nigeria is basically an agro-based economy with abundant land and water resources to enhance agricultural development. Agriculture contributes immensely to the Nigerian economy in the provision of food for the increasing population, supply of raw materials to industries, major sources of employment and generation of foreign exchange earnings (Okumadewa, 1997; world bank, 1998 and FAO, 2006).
Economic history has shown that agricultural revolution is a fundamental precondition for economic growth, especially in developing countries (Witt, 1964; Woolf and Jones, 1969). Agricultural sector in 1960s contributed up to 64% of the total GDP of Nigeria, but gradually declined to 48% in 1970s during the oil boom (Ukeje 2003).
Nigeria has diverse agro-ecological conditions that can support a variety of farming models,However, successive administrations over the years neglected agriculture and failed to diversify the economy away from over dependence on capital intensive oil sector.
Nigeria, which was the largest net exporter of agricultural produce in West Africa like, groundnuts accounting for 42% palm oil 27%, soya beans 28% and cocoa 18% in 1960s, now spends so much importing palm oil, canned beans and other food items (Akintola ,2011). The country has however, the potentials to return to its previous positions if adequate attention is given to agricultural growth policy through finance and the provision of rural infrastructure.
Although the major focus of the policy is aimed at establishing a system of sustainable agricultural financing schemes and programmes that could provide macro and micro credit facilities, but only a paltry evidence is witnessed in terms of agricultural output. It is sad that most of the small-holder farmers in Nigeria lack access to inputs to increase productivity, income and reduce poverty. Rural farmers that contribute about 80% of the farming population in the country lack access to credit facilities and inability to procure improved seeds, fertilizers, herbicides and cannot be or rent mechanized farming machineries like tractors (Alpuertoet al.,2009) despite numerous laudable agricultural programmes like Agricultural Credit Support Scheme of 2006; FADAMA development programmes; Agricultural Credit Guarantee Scheme Fund among others, productivity has not improved (Oriole, 2009).
Public expenditure, which serves as the bed rock of financing for the sector has consistently fallen short of the public expectation. For instance, a collaborative study carried out by the International Food Policy and Research Institute and the World Bank in 2008, revealed that Nigeria’s public expenditure on agriculture is less than 2% of total federal annual budget expenditure. This is significantly below compared to other developing countries like Kenya (6%), brazil(18%) and 10% goal set by African leaders forum, under the comprehensive Africa Agricultural Development Programmes.
In spite of poor investment, agriculture has on the average contributed 32% of the country’s GDP from 1996 to 2000 and 42% between 2001 and 2009 (CBN 2010). According to CBN governor, in 2011 agriculture accounted for 40% of the nation’s GDP, yet it received only one percent of the total commercial bank loans (peoples’ daily 2011).
- Statement Of Problem
One of the major challenges facing mankind is to provide an equitable standard of living, adequate food, clean water, safe shelter and energy, a health and secured environment, an educated public, and satisfying job for this and future generations. Of all theses necessities, the first and most basic to human life and survival is enduring food security; which may be defined as a situation in which majority of the populace of a country have access to domestically produced food at affordable prices at all times (Akinboyo 2008). It is not an overstatement to assert that the growth and development of a nation depend, to a large extent, on the development of agriculture.
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,2012).
Nigeria is no longer a major exporter of cocoa, groundnut, rubber and palm products. Cocoa 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.
The decline in agricultural production was largely due to the rise of oil shipments (Sekumade 2009). Because of this backdrop, agriculture has not kept up with the rapid population growth and Nigeria once a large net exporter of agricultural commodities for now imports most of its food requirements. Dependence on oil is not only the cause of the under- development of the Nigerian agricultural sector, but also:
Firstly, the Nigerian agriculture is characterized and surrounded by bunch of 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 giving little or no room for improvement through scientific research.
Secondly more than 90% of the consumed food in Nigeria is provided by the small-scale farmers.
The agricultural sector in Nigeria is undoubtedly the highest employer of labour, employing about 70 percent of the Nigerian labour force. The Nigerian agricultural sector has also suffered low output which has led to massive importation of food items to feed the ever increasing populance. The under productivity of this sector is experienced both in horticulture and livestock farming. However fish farming looks a bit more promising as recently there has been marked increase in fish farmers and awareness. This project work will seek to find the impact of government expenditure on Agricultural output in Nigeria.
- Research Questions
- What is the impact of Government expenditure on agricultural output?
- What are the long run relationship between agricultural output and public expenditure in Nigeria?
- Objectives Of The Study
The broad objective of this study is to analyze the impact of government financing on agricultural sector, and to what extent agricultural schemes, programmes and research institutes have contributed to boost agricultural output. Its hypothesis is to determine whether federal government’s expenditure on agricultural sector has impact on agricultural output in Nigeria or not.
Specifically, the study is set to:
- To examine the relationship between agricultural output and government expenditure in Nigeria from 1981 – 2015.
- To examine the long run relationship between agricultural output and public expenditure in Nigeria.
- Research Hypotheses
In line with the research questions, the following research hypotheses are formulated.
H0: there is no significant impact of government expenditure on agricultural output in Nigeria.
H0: there is no Long run relationship between agricultural output and public expenditure in Nigeria.
- Scope Of The Study
This study covers the impact of government expenditure on agricultural output in Nigeria from the year 1981 to 2015.In this study we will be looking at how government expenditures on the agricultural sector has increased the GDP of Nigeria within the year 1981-2015, also state the problems encountered over the years, how to solve them and advice the government as a policy maker.
1.7 Significance Of The Study
At the end of this study it will serve as a useful policy framework for policy makers of the country as well asother researcherswho may wish to work on other related areas.
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