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IMPACT OF AGRICULTURE
ECONOMIC DEVELOPMENT
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND
OF THE STUDY
The study of economic history provides us with ample evidence
that an agricultural revolution is a fundamental pre-condition for economic
development (Eicher & Witt, 1964; Oluwasami 1966; Jones & Woolf, 1909).
The agricultural sector has the potential 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 critical need for rural transformation,
redistribution, poverty alleviation and socio-economic development (Stewart,
2000). Nigeria’s economic aspirations have remained that of altering the
structure of production and consumption patterns, diversifying the economic base
and reducing dependence on oil, with the aim of putting the economy on a path
of sustenance, all inclusive and non-inflationary growth. Despite Nigeria’s
vast agricultural resources both human and natural, we are still faced with
acute food crisis, the intensification of poverty and massive suffering of the
overwhelming majority of Nigerians. This situation is however typical of all
third world countries operating within the neo colonial capitalist system
(Akor, 2009).
Nigeria is generously endowed with abundant natural resources
including biological and non -biological resources. Resources depend on
importance attached to it, hence agriculture constitutes one of the most
important sectors of the Nigerian economy. The significance of the agricultural
resource in bringing about economic growth and sustainable development of a
nation cannot be under-estimated. Agriculture contributes to the growth of the
economy, provides employment opportunities for the teeming population, export
revenue earnings and eradicates poverty in the economy.
Abayomi (1997) stated that stagnation in agriculture is the
principal explanation for poor economic performance, while rising agricultural
productivity has been the most important concomitant of a successful
industrialization. The pervasive influence of agriculture on Nigeria’s economic
and social development has also been articulated by Oluwasanmi (1996) “A strong
and efficient agricultural sector could enable a country to feed its growing
population, generate employment, earn foreign exchange and provide raw
materials for industries”. The agricultural sector has a multiplier effect on
any nation’s socio- economic and industrial fabric because of the
multifunctional nature of agriculture (Ogen, 2007).
Agriculture has been defined as the production of food and
livestock and the purposeful tendering of plants and animals, (Ahmed, 1995). He
stated further that agriculture is the mainstay of many economies and it is
fundamental to the socio- economic development of a nation because it is a
major element and factor in national development. In the same vein, Okolo
(2004) described the agricultural sector as the most important sector of the
Nigerian 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.
Generally the agricultural sector contributes to the
development of an economy in four major ways ;product contribution, factor
contribution, market contribution and foreign exchange contribution (Abayomi,
1997; Abdullahi 2002 & World Bank 2007). The objective of this study is
therefore to examine the agricultural sector as the key to the diversification
of the Nigerian economy for sustainable development.
The definition of agriculture changes over time. Agriculture
is the cultivation of plants and husbandry of animals. That is, the management
of living things and eco systems to produce goods and services for the people.
Agriculture includes farming, ranching, aquaculture, apiculture, horticulture,
viticulture, animal husbandry, including but not limited to the care and
raising of livestock, poultry husbandry and
the production of poultry and poultry products, diary production, the
production of field crops, tobacco,
fruits, vegetables, nursery stock, ornamental shrubs, ornamental trees,
flowers, sod or mushrooms, timber,
pasturage, any combination of the foregoing, the processing, drying,
storage and marketing of agricultural products. When these activities are
conducted in conjunction with, but are secondary to such husbandry or
production.
The sustainability of agriculture in Nigeria cannot be
isolated from the sustainability of economic development. A number of other
related definitions are also in common usage. The American Society of Agronomy,
for example, defines sustainable agriculture as one that, over the long term,
enhances environmental quality and the resource base on which agriculture
depends, provides for basic human food and fiber needs, is economically viable,
and enhances the quality of life of farmers and society as a whole (Uptal,
2001).
Another definition by Macrae
(1990) posits that Sustainable agriculture is both a philosophy and a system of
farming. It is rooted in a set of values that reflects an awareness of both
ecological and social realities and a commitment to respond appropriately to
that awareness. It emphasizes design and management procedures that work with
natural processes to conserve all resources and minimize waste and
environmental damage, while maintaining and improving farm profitability.
Agricultural development, a subset of economic development,
implies a sustained increase in the level of production and productivity over a
reasonable length of time and the subsequent improved wellbeing of farmers as
reflected in their higher per capita income and standard of living. Rural
development relates not only to a sustained increase in the level of production
and productivity of all rural dwellers, including farmers, and a sustained
improvement in their wellbeing, manifested by increasing per capita income and
standard of living, but also leads to a sustained physical, social and economic
improvement of rural communities.
The colonial
government recognized the potential of the agricultural sector to improve the
Nigerian economy and therefore put in place policies aimed at increasing output
and to extract surpluses in the sector. The main focus of development in this
period was the surplus extraction philosophy or policy whereby immense products
were generated from the rural areas to satisfy the demand for raw materials in
metropolitan Britain (Ayoola, 2001). This early interest of the extractive
policy was on forest resources and agricultural exports like cocoa, coffee,
rubber, groundnuts, oil palm, and cotton. The capitalist agricultural policies
of Nigeria since 1900 have remained basically intact. No efforts have been made
to fundamentally change them. The nature of these agricultural policies and
their impacts led to Nigeria’s agricultural disorientation and the food crisis
(Akor, 2009).
Meanwhile, most of these policies were made without proper
institutional arrangement, programs, specific projects, strategies, goals or
targets and specific objectives geared towards the realization of these dreams
of the policies. This can be proved by the fact that there was only one
documented agriculture scheme that evolved towards the end of the era (early
1960s) called the farm settlement scheme (Iwuchukwu & Igbokwe, 2012). The
imperialistic theoretical framework of the notions of development and
modernization have decisively influenced the Nigerian agricultural policies
since the colonial era. The rate and direction of Nigeria’s agricultural
development were therefore, determined by the British colonialist and taken
over by the neo-colonial Nigerian ruling classes since 1960 (Akor, 2009).
The Nigeria’s agricultural development was fully
de-centralized with the regions and states carrying out all activities while
support was provided by the federal government and this enabled a state/region
specific approach. This approach involved the combined efforts of small scale
farmers/the private sector and the government. This approach was very
successful during the period and thus with agriculture remaining the mainstay
of the Nigerian economy; providing employment, raw materials for industries,
the main source of foreign exchange earnings and also sustaining the food
security status of the populace. The appropriation and utilization of Nigeria’s
economic surplus by the colonial and neo colonial imperialist powers is central
to the analysis of the structural distortions in the agricultural sector and
Nigeria’s food crisis. The central point in the imperialist relationship was
the transfer of economic surplus to strengthen the capitalist class and the
capitalist mode of production in Europe and North America (Akor, 2009).
However, with the onset of the 1970’s, there was a national
neglect of this sector due to oil boom which practically led to a decline in
the sector (Abimiku, 2009). Despite the drastic decline, no matter how much
development and structural transformation will be achieved in Nigeria,
agriculture will continue to retain its relative dominance in the economy for
many decades to come. More importantly, it is from agriculture and in
particular from agricultural exports that the country received its principal stimulus
for economic growth in 1950s and 1960s. It will remain a key factor in
Nigeria’s economic development as the largest employer of labour (about 72% of
the labour force in 1970-1971), the principal source of food and raw materials
for the population and industries and a significant though relatively declining
earner of foreign exchange. The acceleration of agricultural growth is
therefore crucial for the country’s future progress (Akor, 2009).
In the
1970’s, the policy instrument that was introduced by government included a
series of development plans at the national level. The Structural Adjustment
Program (SAP) in 1986 came up after this and efforts were made at making the
agricultural sector commercially competitive and remunerative and also tried to
redress Nigeria’s defective mono-economic imbalance by diverse diversifying
programs in order to reduce dependence on the oil sector and also on imports.
This policy package focused on a rapid improvement of domestic food production,
the domestic supply of agricultural raw materials, the production of exportable
cash crops and also rural employment. The client status of Nigeria in the
international capitalist system is the fundamental structural basis for
imposing the abuses of underdevelopment on the country (Akor, 2009).
The programs only succeeded in creating and raising the
awareness to diversify the economy through agriculture and the catalytic and
leading role the private sector must play in agricultural development which
renewed a general interest in agriculture. Despite its huge potentials, the
country is a net importer of food. The nation’s food import basket is made up
of items which can be produced locally in sufficient amount. In addition, the
economy is characterized by price volatility and high prices due to over
dependence on rain-fed agricultural output. Some of the problems faced by
agricultural sector include; Under-investment, low productivity, inadequate
input, poor and rudimentary storage culture, unfavourable exchange rate policy
among others. In addition, (Adesina, 2011), posited that only 1% of total
lending in banking sector goes to agriculture despite the fact that the sector
accounts for about 70% of employment opportunities and 44% of the Nation’s GDP.
The promotion of capitalist agricultural development in Nigeria led to heavy
reliance on imported agricultural inputs from the core capitalist countries
from 1970 to 1979, while the imported agricultural inputs increased, there were
no visible increase in both food and cash crop production .The rise in the
importation of agricultural inputs went hand in hand with the rise in food
imports, food shortages and negative output of cash crops. The poor performance
records of the agriculture in the face of massive imported agricultural inputs
imply that the strategy must be faulty and the solutions anticipated
misconceived (Akor, 2009).
According to (Sanusi, 2011), Nigeria is incurring a total
food import bill of $4.2billion about N638.4billion annually due to the neglect
of agriculture and partly due to insatiable appetite of Nigerians for foods not
locally produced. For instance, Nigeria is the only country in the world that
does not produce wheat and yet consumes 100% wheat bread. According to Okojie
& Mike (2006), the relationship between export performance and economic
growth has been a subject of considerable interests to development economists
especially those who believe that economic growth should be sustained and
maintained. Chenery & Strout, (1994)
asserted that for a long time, there was hardly any country which exhibited
sustained economic growth rate higher than its growth of exports. They also
claimed that growth rates of individual developing countries correlate better
with their export performance than with any other single economic indicator.
Nigerian government at different times have formulated and
implemented several agricultural policies aimed at addressing the myriads of
problems confronting the sector and ensuring food availability and foreign
exchange earnings for the country. However, for a policy to have a meaningful
impact, it must have strategies (that is, programs or projects) geared towards
the accomplishment of specific objectives and the ultimate goal of the policy.
To this extent, various policy programs and projects have been initiated in
Nigeria. Some of these policy programs recorded substantial success while some
were huge failures. Similarly, Offiong, (1980) opined that the general
obstacles that has frustrated the African match towards economic freedom
remained imperialism and dependency. Another impact of imperialism is seen
through the process of making and unmaking leaders .As illustrated by Onimode,
(1988) “there is no gain saying that most coups carried out in the African
continent were planned by the colonial imperialist powers to achieve their
purpose of dominance”.
1.2 STATEMENT OF
THE PROBLEM
Nigeria is yet to attain the ranks of a developed country due
to lack of structural changes among other factors. Also, it was observed that a
factor crucial to this lack of economic progress is the lack of economic
diversity which caused the economy to rely heavily on crude oil for revenues
and as a major export commodity in the economy (Osuntogun, 1997). Prior to the
1970’s, Nigeria’s exports were predominantly non-oil commodities with
agricultural commodities accounting for a lion share. However, in the 1970’s
when the price of crude oil in the international market skyrocketed, the share
of agricultural exports began to fall and have remained low ever since. This is
majorly due to the money spinning nature of oil export which makes it more
profitable to export oil and less profitable to export non-oil commodities.
This has caused a rather heavy dependence on the oil sector
and the proceeds from exportation of crude oil. This heavy reliance subjects
the country to difficulties when the price of crude oil, the major exports
commodity is low in the international market (as it is case presently). In
light of this, the government adopted various strategies to boost agricultural
exports and stabilize the economy. In spite of these efforts, the performance
and contributions of the agricultural sector has remained low. The sector has
continued to perform below its full potentials. This research is therefore
carried out to address the following issues/questions.
1. What are the
factors responsible for low agricultural output in Nigeria?
2. Why the less
emphasis on agricultural sector and much dependence on petroleum sector?
3. What measures should be taken by government
to enhance the performance of the agricultural sector towards diversifying the
economy for sustainable development?
4. Has
petroleum impacted positively or otherwise on the agricultural sector and the
development of the Nigerian economy?
1.3 OBJECTIVES OF
THE STUDY
In spite of Nigeria’s rich agricultural endowment, there has
been a gradual decline in agricultural contribution to the nation’s economy.
Low agricultural output has a negative effect on the Nigerian economy as a
whole. This research work is aimed at examining the agricultural sector as the
key to the diversification of the Nigerian economy for a sustainable
development. Other aims include:
1. To see how
Agriculture can be used for the diversification of the Nigerian economy in
order to achieve sustainable development.
2. To identify the
constraints hampering Agriculture as a tool for the diversification of the
Nigerian economy for sustainable development.
3. To suggest ways
of removing these constraints.
4. To suggest
other measures necessary for improving agriculture as a tool for the
diversification of the Nigerian economy for sustainable development.
1.4 METHODOLOGY OF
THE STUDY
This research is geared towards understanding the role of
agriculture in the diversification of the Nigerian economy for sustainable
development. This study will employ the use of quantitative statistical tools
and econometric method of analysis. An econometric multiple regression model
will be adopted to determine the impact of agriculture on Nigeria’s economic
growth. With the appropriate model, the following tests will be conducted to
test the statistical reliability and the significance of the estimated
parameters: the standard error test, t-statistics and f-test.
For the purpose of data analysis, a multiple regression model
will be used to show the relationship between the dependent variable (GDP) as a
proxy for economic growth and the explanatory variables, the revenue from
agricultural output, unemployment rate and inflation rate. The hypotheses to be
tested in this study are:
HO: There is no
significant impact of agricultural output on Nigeria’s economic growth.
H1: There is a
significant impact of agricultural output on Nigeria’s economic growth.
The hypotheses are to be tested at 5% level of significance.
This can be
represented mathematically as:
GDP = f (X1, X2, X3,)
This can be further expressed in an econometric model as:
GDP = β0 + β1X1 + β2X2 + β3X3+µ
Where:
GDP = Gross Domestic Product
X1 = Agricultural Output
X2 = Unemployment rate
X3= Inflation rate
β0 = Constant term
β1 = Parameter estimate of agricultural output
β2= Parameter estimate of unemployment rate
β3=Parameter estimate of inflation rate
µ = Error term or stochastic variable
The a priori expectation is that an increase in the independent
variable (agricultural output) will have an increase in the dependent variable
(GDP) while a decrease in the independent variable (unemployment rate) will
have an increase in GDP and an increase in inflation rate will have an increase
on the GDP. Hence, positive β1, negative β2, and positive β3.
This research work has six chapters, with chapter one
covering the general introduction, which includes introduction, background of
the study, statement of the problem, objectives of the study, methodology of
the study, sources of data, scope and limitations of the study.
Chapter two contains literature review which gives the
Classical’s, Neo-Classical’s, Keynesian’s, Neo-Keynesian’s, and Marxian views
about using agriculture for economic diversification.
Chapter three examined the Nigerian oil dominated economy and
the need for diversification. This contains the declining dominance of the
petroleum sector in the Nigerian economy, Alternative sources for the
diversification of the Nigerian economy for sustainable development and
agriculture as the main vehicle for the diversification of the Nigerian
economy.
Chapter four focuses on the agricultural sector as the key to
the diversification of the Nigerian economy for sustainable development; agriculture
as the main tool for increased revenue generation in Nigeria, agriculture as
the main tool for solving Nigeria’s unemployment problem, agriculture as the
main tool for curbing inflation in Nigeria, agriculture as the main source of
raw materials for industries in Nigeria, agriculture as the main tool for
reducing poverty, hunger and malnutrition in Nigeria and agriculture as the
main tool for remedying Nigeria’s balance of payment problems.
Chapter five deals with data presentation and analysis, model
specification, model estimation, test of statistical significance,
interpretation of results and discussion of findings.
Chapter six summarizes the research work. Conclusion and
recommendations are also contained in this chapter.
1.5 SOURCES OF
DATA
Data used in this research work are mainly secondary data
obtained from textbooks, journals, newspapers, government publications and
unpublished sources such as research projects of B.sc and M.sc students which
served as an important guide to this research work. Also, the internet provided
important and useful information that served as a source for this work.
1.6 SCOPE OF THE
STUDY
This research work focused on the diversification of the
Nigerian economy through the agricultural sector for sustainable development.
This study covers a period 24 years (1900-2013).The study will basically focus
on the agricultural sector in relation to economic diversification and
sustainable development, employment generation, foreign exchange earnings, as well
as the petroleum sector and its contributions to the economic development of
Nigeria.
1.7 LIMITATIONS
OF THE STUDY
The limitations encountered in this study include time,
administrative bureaucracy in government institutions where information were
sourced, limited and insufficient information. Also, there was the problem of
inadequate finance as well as poor power supply in the country.
Apart from the above
mentioned constraints which are capable of adversely affecting the result of
this research work, all the other errors and omissions are entirely those of
the researcher.
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