ABSTRACT

This study examined the impact of agricultural development on Nigeria’s economic growth (1980-2013) while the specific objectives were to: ascertain if there is long run relationship existing between agricultural development and economic growth in Nigeria and evaluate if there exist any significant causal relationship between agricultural development and economic growth in Nigeria. The study employed ex-post facto research design using Nigeria’s data obtained from CBN (1980-2013). The empirical results were on Augmented Dickey Fuller test. In the second step, Johansen cointegration test was conducted. The presence of long run equilibrium found led to the use of Error Correction Mechanism (ECM).  It was found that there is significant long run association existed between agricultural development and economic growth within the period under study. Granger Causality test conducted indicated the presence of one way causality running from agricultural development to economic growth. More so, it showed that government expenditure on agriculture preceded economic growth within the sampled period of study. In order to sustain long run positive relationship between agricultural development and economic growth inNigeria, policies which will gear up increase in agricultural output must be maintained. A general review and proper implementation of budgetary allocation of the government expenditure on agriculture must be undertaken. More so, government should always consider agricultural sector development as the hallmark for her expenditure in the sector. In so doing, her spending on the economy will promote growth.

CHAPTER ONE

INTRODUCTION

1.1       Background of the Study

          Agriculture is the foundation and bedrock upon which the development of stable human community has depended on throughout the whole universe. 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 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 ke 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.

 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 development. Through its spheres of activities at both the macro and micro levels, the agricultural sector is strategically positioned to have a high multiplies and linkage effect on any nation’s quest for socio-economic and industrial development. The growth of the agricultural sector inNigeriawas not smooth.

  Anyanwu (1967) held that during the colonial period between 1861 to 1960, attention was given to agricultural research and extension services. Among the activities that were done was the establishment of a research station inLagosby Sir Claude Mc. Donald in 1893: Landmark of10.4 kmwas acquired by the British Cotton Growing Association (BCGA) in 1899 for experimental purpose strictly for cotton and was named “Moor Plantation” inIbadan. In 1912, the Department of Agriculture was established in each of the then southern andNorthern 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 ofNigeria. This was the period of great price depression when the world price 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 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,Nigeriamade 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% ofNigeria’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, theNigeriaeconomy 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)Nigeriawas 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, 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 inNigeriacoincided 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, 2005). Ever since then,Nigeriahas been witnessing extreme poverty and insufficiency of basic food items. The agricultural sector contributions now accounts for less then 5% ofNigeria’s GDP (Olagbaju and Fashola, 1996). It is against this backdrop that the researcher set out to asses the impact of agricultural development onNigeriaeconomic growth.

          As noted earlier, the neglect of the agricultural sector and the dependence ofNigeriaon a mono-cultural crude oil based economy had not yielded any positive change for the well-being of the Nigerian economy. It becomes therefore imperative to asses the impact of agricultural development on theNigeriaeconomic growth.

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. Agriculture accounted for 30% of the GDP in 2010 (World Factbook,January 9, 2012).

         Nigeriais 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).

          Because of this backdrop, agriculture has not kept up with the rapid population growth andNigeriaonce a large net exporter food 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 includes the following:

1. 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.

2.  Also more than 90% of the consumed food inNigeriais provided by the small-scale farmers.

3.  The Nigerian agriculture lacks storage facilities and these have led to so much wastage and high cost of storage, thus hinder the availability of such perishable agricultural produce through year, round.

4. The problem of finance: The agricultural sector is poorly financed inNigeria. 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 results to a failure in paying back the loan.

5. Inaddition, the dependence on imported foods has disincentive  investment in local farming.

          Also, soil infertility is one of the problems of agriculture in Nigerian. Most of the farm land inNigeriacontains soil that is how to medium in productivity. According to the food and Agricultural Organization  (FAO) of United Nations with proper management, the soil can achieve medium to good productivity.

1.3     Research Question

          This research work therefore is aimed at answering the following questions:

(i) What is the effect of agricultural output on economic growth?

(ii) What is the effect of agricultural sector on employment creation?

1.4     Objectives of the Study

          The broad objective of this study is to determine the impact of agricultural development on economic growth inNigeria.

1. To determine the impact of agricultural sector on the economic growth inNigeria.

2. To determine if there exist a long —run relationship between the agricultural sector and economic growth inNigeria.

1.5     Statement of Hypotheses

          For the purpose of this study, the following hypothesis is tested;

1. H_o; Agricultural sector has no significant impact on economic growth inNigeria.

    H_i; Agricultural sector has significant impact economic growth in    Nigeria.

2. H_o: Agricultural sector has long-run relationship withNigeria economic      growth.

    H_i: Agricultural sector has no long-run relationship withNigeria economic growth.

1.6     Significance of the Study

          The significance of this study depends on the fact that with improved agricultural sectorNigeriastands to gain and improves the living standard of the masses.

This work stands to benefit:

1.Nigeriaas 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 favorable 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.

.3. The researcher will personally benefit from the study as the study was undertaking as a partial requirement for award of \bachelor of science \degree (B.Sc) in the department of Economics in Ebonyi State University Abakaliki. From the study, the operational mechanisms and technicalities of agricultural operations inNigeriawill be made known.

1.7     Scope and Limitations of the Study

          This research work focuses on the impact of agricultural development on the economic growth ofNigeriabetween the period of 1980 to 2013.

          There are some factors or constraints which hinder my achieving the whole intension of this work, these constraints are; time factor, inadequate finance, environmental constraints like free movement to research outside the school premises among other.