THE REGIME AND CONTRIBUTION OF AGRICULTURAL SECTOR ON ECONOMIC GROWTH IN NIGERIA.

THE REGIME AND CONTRIBUTIONS OF AGRICULTURAL SECTOR TO ECONOMIC GROWTH IN NIGERIA.

CHAPTER ONE

   INTRODUCTION

1.1             Background to the Study

Agriculture is the foundation and bedrock upon which the development of stable human community has depended on throughout the whole universe such as rural and urban communities. It is concerned with the husbandry of crops and animals for food and other purpose. The study of the history of economics provides us with ample evidence that can 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 need for rural transformation, redistribution, poverty alleviation and socio-economic development.

Agriculture has often been touted crucial in the economic development of most third world countries. Recent researches on the causes of development and underdevelopment have identified agriculture as key to the economic emancipation of ailing states. In this perspective, the words of Gunner Myrdal that “it is in the agricultural sector that the battle for long-term economic development will be won or lost”, could be considered a truism. However, how we go about the contest for economic development using agriculture as weapon, and how we hope to win, indeed, remains a moot issue. Okolo (2004) described agricultural sector as the most important sector of the Nigeria economy which holds a lot of potentials for the future economic development of the nation as it had done in the past. Notwithstanding the enviable position of the oil sector in the Nigerian economy over the past three decades, the agricultural sector is arguably the most important sector of the economy. Agriculture’s contribution to the Gross Domestic product (GDP) has remained stable at between 30 and 42 percent, and employs 65 per cent, of the labour force in Nigeria (Emeka 2007).

 Nigeria is generously endowed with abundant natural resources including biological and non-biological resources. The resources of the entire world should be developed to the fullest extent possible with available means as a whole can progress only by the efficient and rational use of the natural resources. Resources depend on importance attached to it. Hence, agriculture constitutes one of the most important sectors of the economy. The significance of agriculture resource in bringing about economic growth and sustainable development of a nation cannot be underestimated. Agriculture contributes to the growth of the economy, provides employment opportunities for the teaming population, export revenue earnings and eradicates poverty in the economy.  Oji-Okoro (2011) is of the opinion that agriculture resource has been an important sector in the Nigerian economy in the past decades, and is still a major sector despite the oil boom; basically it provides employment opportunities for the teeming population, eradicates poverty and contributes to the growth of the economy.

In Nigeria agricultural policies and programmes have undergone changes especially in the postcolonial era. These changes have been a mere reflection of changes in government or administration (Amalu, 1998). This is because these policies and programmes vary only in nomenclature and organizational network. They emphasize almost same objectives like: to provide food for the inhabitants of the nation (food security and sufficiency) and export excess to other countries and to provide rural dwellers and farmers with extension services, agricultural support and rural development services etc. Despite all the policies and laudable programmes with challenging themes, Nigeria is yet to achieve food security. Agriculture also continues to suffer from inertia associated with these policies and programme reformation that pervade Nigeria. To be successful, Nigeria’s reform and agricultural programmes in particular need to be backed up or initiated through a policy or policies coupled with increased and better co-ordinated technical and financial assistance. It should also be a programme selected based on a rational, national and institutional structure that come from a national consensus on how best to achieve sustainable and equitable rural/ agricultural development.

Even though Nigeria has a high poverty rate, it still has a higher GDP in comparison to other countries of Africa. Till now Nigeria has been trailing behind Western economies. Today, almost fifty years after gaining independence, Nigeria should compete with economies of the world rather than just African economies. The country is rich in natural resources and has identified the fact that taking appropriate measures can speed its economic development. With this foresight, it crafted the vision 20-20-20 program. This program aims to make Nigeria one of the twenty largest world economies by the year 2020. The seven points in the 20-20-20 program are: power and energy, food security and agriculture, wealth creation and employment, mass transportation, land reforms security and functional education.

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 between 1929 and 1945 was a difficult one for the   agricultural sector of Nigeria. This was the period of great depression when the world princes on commodities fluctuated. This affected the agricultural sector negatively because the volume of agricultural product increased but the value did not increase proportionally. The period 1945 to 1945 marked the period of expert boom, because counties were just recovering from the Second World War and these countries needed to develop. They depended on primary production 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 period, Nigeria made 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 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). According to Alkali (1997) Nigeria was the world’s second largest producer of cocoa, largest exporter of palm oil during the period. And was also a leading exporter of other major commodities such as cotton, groundnut, rubber and hides and skins. Between 1964 and 1965, agricultural output 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% and 75% of Nigerian foreign exchange earnings and provided the most important source of revenue for the federal as well as state government through expert products and sale taxes (Ekund are 1973). Despite the reliance of Nigerian peasant farmers on traditional tools and indigenous farming methods, these farmers produced 705 of Nigerian’s exports and 95% of its food needs (Lawal, 1997). However, the 1967 to 1970 civil war in Nigeria coincided with the oil boom era, which resulted in extensive exploration and exportation of petroleum and 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 accounts for less than 5% of Nigeria’s GDP (Olagbaju and Fashola, 1996). It is against this backdrop 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. It becomes therefore imperative to study the impact of agricultural development on the Nigeria economic growth.

1.2             Statement of the Problem

The literature has reported that inspite of Nigeria’s rich agricultural resource endowment, there has been a gradual decline in agriculture's contributions to the nation's economy (Manyong et al., 2005). 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 65-70% of total exports in 1960s, fell to about 40% in the 1970s, and collided to less than 2% in the late 1990s. Nigeria is no longer a major exporter of cocoa, groundnut, rubber and palm products, cocoa production mostly from outdated varieties and over-aged trees are stagnant at around 150,000 tones annually.  Low agricultural output has a negative effect on the Nigerian economy as a whole. Several factors have been identified to enhance or retard growth in the agricultural sector;

1.      The problem of finance: The agricultural sector is poorly financed in Nigeria. 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

2.      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.

3.      The Nigerian agriculture lacks storage facilities and these have led to so much wastage and high cost of storage. This hinders the availability of source perishable agricultural produce through the year, therefore hindering agricultural development.

     Another problem of Agriculture in Nigeria is soil infertility, the major problems that affects soil fertility is soil erosion, wind erosion, strong winds expose seeding lings and crops root system by blowing away loose, fine grain soil particles in drifts, which can cover crops. Water erosion is another type of erosion that affects soil fertility; we have two types of water erosion: rill and splash erosion. Rill erosion occurs when channels of water carry soil downstream and Splash erosion occurs when rain drops impact the soil. It is quite clear that the agricultural sector, as one of the Nigeria economy has really got a lot to contribute to the economic growth of the country.

In view of the problem above, the following research questions were raised;

1.      What is the trend of agricultural on Nigerian economy?

2.      What is the effect of agricultural sector on employment creation?

1.3             Objective of the Study

The broad objective of this study is to examine the regime and contributions of agricultural sector to economic growth in Nigeria. and the study thus seeks specifically to;

1.      To determine the trend of Agriculture in Nigeria Economy.

2.      To determine the effect of agricultural sector on employment creation in Nigeria.

1.4              Significance of the Study

The fundamental importance of this study is to examine the regime and contributions of agriculture on economic growth in Nigeria. So far, little has been done to determine the impact of agricultural sector on economic growth in Nigeria, but a number of studies have been carried out on cross country analysis of less  developed countries. This approach assumes that the impact of foreign inflow is constant across countries that are the same in all less developed countries (L.D.C’s). Most studies in this area consider only a small number of variables trying to establish agricultural growth.

The basic significance of this study is that it employs econometric models with strong theoretical under pinning that relate agriculture and economic growth in Nigeria and that growing concern of the agricultural sector. 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.

1.5     Research Hypothesis

Hypothesis One

Ho: There is no significant contribution of Agriculture on Nigeria economic growth.

H₁:  There is a significant contribution of Agriculture on Nigeria economic growth.

Hypothesis Two

H_O: There is no significant impact of Agriculture on unemployment in Nigeria.

H₁:  There is a significant impact of Agriculture on unemployment in Nigeria.

1.6    Scope of the Study

This research work focuses on the impact of agricultural development on the economic growth of Nigeria. Its objectives roles and modus operandi and also what it can do as an economic sector in the development process in Nigeria. This research will be between the periods of 1980-2010. It covers the period before and after economic reform (SAP). The study is, however, constrained so as to reduce the biased level that may arise when a short period is researched.

1.8 Plan of the Study

The remainder of the project is organized as follows: In chapter two, we present a discussion on the prior literature review, which include the conceptual issues, theoretical framework and the review of empirical study, chapter three focuses on research methodology, chapter four focuses on the quantitative presentations and interpretations of empirical findings for stock returns and trading volume. Finally, chapter five entails summary, conclusion and recommendations of the study.