This research work investigates the
Roles of Agricultural sectors on Economic Growth and Development in
Nigeria using the multiple regression analysis method. The data utilized
spanned between 1981 - 2010.
The research work analyses and describes
the past methods of agricultural development In Nigeria and this helps
to know the current dispensation and the possible direction that could
be followed in the future.
From the finding of this research work,
it was observed that if the sector is well funded, it will provide the
needed raw materials for the industrial sector, increase capacity
utilization, reduce unemployment rate in the economy and will guarantee
food security. Also, the revenue from the sector has influence on
economic growth in Nigeria.
Thus, the paper conclude by recommending
that government needs to participate and play major roles in the
agricultural sector in other to promote and enhance the performance of
the sector and invariably add to economic growth of the nation
TABLE OF CONTENT
v Title Page
v Table of Content
CHAPTER ONE: INTRODUCTION
1.1 Background of the study
1.2 Statement of the problem
1.3 Objective of the study
1.4 Research Question
1.5 Research Hypothesis
1.6 Significance of the study
1.7 Scope of the study
1.8 Methods of Analysis
1.9 Structure of the study
1.10 Definition of terms
CHAPTER TWO: LITERATURE REVIEW
2.2 Overview of Government Policy on Agriculture 1986-2009
2.3 Problems of Nigeria Agricultural Sector
2.4 Roles of banks in financing the Agricultural Sector
2.5 Empirical Review of Literature
2.6 Theoretical Framework
CHAPTER THREE: RESEARCH METHODOLOGY
3.1 Restatement of Research Hypothesis
3.2 Data and Data Collection
3.3 Data Analysis Method
3.4 Variables in the Analysis
3.5 Model Specification
3.6 Limitation of Study
CHAPTER FOUR: DATA ANALYSIS & INTERPRETATION
4.1 Data Presentation
4.2 Analysis of Result
CHAPTER FIVE: SUMMARY, CONCLUSION AND POLICY
5.1 Summary of Findings
1.1 BACKGROUND TO THE STUDY
The role of agricultural sector in an
economy cannot be overemphasized. The forward and backward linkages to
the rest of the domestic economy, to the international market and with
poverty alleviation are very strong. A bad year for agriculture due to
natural calamities, like drought has extremely adverse effect on GDP
growth, living standard of the population, manufacturing output,
industrial output, price level, exportable surplus and balance of
The primary purpose of agriculture to
development and growth is to feed the people of the country. This role
in food production is irreplaceable because the availability of adequate
food supply disables scarcity that leads to higher prices and also most
people must work to produce enough food for the population (Begg,
2003). Also maintaining a good food supply implies good health for the
people hence increased, productivity which will promote economic growth.
Output from the agricultural sector serves as input for the activities
of the manufacturing, external and the industrial sector - which
contributes greatly to economic growth. For example timber from trees is
used to make paper, furniture, etc. Also secretions from some plants
and trees have healing capabilities and are used to make medicine for
the sick. Agricultural products include export goods like cash crops
which serve as a source of foreign revenue for the country. In fact
these other sectors need the agricultural sector in order to thrive.
Agriculture also employs a greater percentage of the inhabitants of the
area that is before the discovery of petroleum in Nigeria. This is
largely because of the transition from subsistence agriculture to
commercial agriculture which is concerned with the production for food
for the growing population, provision of raw materials for agro-allied
industries (like those engaged in textiles, tobacco, sugar, leather,
etc.) and generation of foreign exchange earnings.
The agricultural sector is a prominent
feature in the Nigerian economy and it has basically remained the same
since 1960. This was before the discovery of oil. Sustaining
agricultural production is one of the pre-requisites for improving the
living standard in any economy. "The Nigerian economy underwent profound
structural changes during the 70's and 80's. It was once an
agriculturally-based economy and a major exporter of cocoa, peanuts and
palm products. Today, Nigeria relies mostly on oil for more than 90% of
its export earnings, 30% of its GDP, and 70% of its federal budget
resources. Neglected sectors like agriculture has caused the Nigerian
economy to be in economic stagnation and decline" (Todaro and Smith,
From the mid-1970s, crude oil became the
main export product of the Nigerian economy. The economy has said to be
suffering from the Dutch Disease because of the over-reliance on the
oil sector at the expense of other sectors hence the need for the
diversification of the economy. The diversification is especially
important because of the volatility of the international oil market on
which we solely depend on. This has necessitated the examination of the
role of the agricultural sector in our country. Despite the huge amounts
invested in agriculture and the various policy measures aimed at the
re-activation of agriculture, such as the Operation Feed the Nation and
the Green Revolution by various governments since the 1980's, no
meaningful headway was observed. Food production has not been keeping
pace with the rapid population growth rate. The introduction of the
Structural Adjustment Programme (SAP) in 1986 by the Babangida
administration laid much emphasis on sustaining agricultural production
in which several measures were taken to revive this sector, to which no
sustainable growth has been recorded. The purpose of this study
therefore is to examine the role of agriculture in economic development
1.2 STATEMENT OF THE PROBLEM
Although the impact of agriculture in an
economy is great, the neglect of this sector in Nigeria especially by
the government, has led to many problems ranging from increased food
prices to unemployment, low standard of living, low national income. The
neglect of this sector is evident in the various problems that plague
the agricultural sector including farm mechanization, primitive
implements, transportation and storage problems, low productivity,
inadequate infrastructure, little or no credit/finance facilities, land
tenure system etc.
It is regrettable that after about 37
years of oil and gas exploration in Nigeria, the country has not been
able to effectively develop other resources/sectors to complement the
role of crude oil in the economy. The backbone of the economy plus the
other sectors, including the manufacturing and industrial sector, have
been neglected to cause the total reliance on the oil sector. The
volatility - unstable and unpredictable nature of the crude oil market
specifically the declining oil prices - has been known to impact the
economy adversely. Experience has also shown that the nation cannot
continue to rely on a single resource for its economic development.
Hence the challenge is how to develop and harness the potentials of
Nigeria's agricultural sector towards economic growth.
The agricultural export earnings have
been falling, virtually continually from a level of $389.58million in
1961, a rate of 2.45% per annum to $218.41million in 2008 which is below
2%. (CBN Annual Report 2008 and Statistical Bulletin 2008). The fall
became rapid in the mid-seventies of the oil-boom era. The foreign
exchange earnings in millions of Naira were more or less stagnant until
after 1985 when the Naira depreciated considerably against the US dollar
and other foreign currencies. So the nominal growth in earnings
represented a fall in real terms, as inflation rates exceeded this
growth. Hence there is the need for revolutionary change In policy
formation and implementation in this sector.
1.3 OBJECTIVES OF THE STUDY
The broad objective of this study is to
evaluate the role of the agricultural sector in the economic growth and
development in Nigeria. The specific objectives of the study are:
v To examine the impact that the agricultural sector plays in the Nigerian economy.
v To assess the trend of government expenditure on agricultures in Nigeria
v To examine the role that banks' loans and advances on agricultural sector plays in the growth of the agricultural sector
v To proffer policy recommendations for economic growth through the agricultural sector.
1.4 RESEARCH QUESTIONS
The research questions relevant to this study are:
1. How does the agricultural sector affect economic growth?
2. How do banks' loans and advances affect the agricultural sector?
3. What is the trend of government expenditure on agriculture in Nigeria?
1.5 STATEMENT OF HYPOTHESIS
The following hypothesis would be tested empirically for these studies are;
Ho: The Nigeria's agricultural sector has not contributed significantly to the economic growth and development of the country.
H1: The Nigeria's agricultural sector has contributed significantly to the economic growth and development of the country.
Ho: There is no significant impact of agricultural earnings on economic growth in Nigeria
H1: There is significant impact of agricultural earnings on economic growth in Nigeria
Ho: There is no significant relationship between government expenditure on agriculture and agriculture earnings in Nigeria.
H1: There is significant relationship between government expenditure on agriculture and agriculture earnings in Nigeria.
1.6 SIGNIFICANCE OF THE STUDY
It would be wrong to assume that lack of
growth of the agricultural sector is solely responsible for the lack of
economic growth and development in Nigeria; however it can be used to
know the extent to which growth has been achieved over the years. "Even
with the discovery of the oil market in the mid- 1970s, the Nigerian
economy has continued to perform below its capabilities characterized by
low output growth, high unemployment rate and rising inflation"
(Jhingan 2001). The economy's reliance on the international oil market
leaves it vulnerable to external shocks which can cripple the economy.
It is therefore essential to study the contributions of the agricultural
sector as it was considered the mainstay of the economy. This study
will show the interrelationship between the sector and the industrial
sector of the economy.
This study will be of benefit to the
government officials in charge of the budgetary allocation to the
agricultural sector. By understanding the importance and crucial role
played by the sector to the economy, especially to the industrial and
manufacturing sector, more attention by the government will be felt and
more functional reforms will be established in favour of the sector and
This study will also show how much the
agricultural sector has contributed to the economy in terms of export
earnings, food prices, inflation rate, raw materials, hence, it will
reveal the growth of the economy and how the economy can grow via the
This study will reveal the various
opportunities for growth in the industrial sectors of the economy
through the agricultural sector hence investment prospects for both
private and public enterprises. Also the results from this study will
lead the society into a more balanced economy i.e. equal development of
the individual sectors of the economy.
1.7 SCOPE OF THE STUDY
The study is limited to the years
1981-2010 on the role of agricultural sector in the economic growth and
development in Nigeria. It is limited to thirty years because of data
Another major limitation of this study
is the reliability on secondary data. Different governmental agencies
like the Central Bank of Nigeria, National Bureau of Statistics often
present similar data on the same items. Most government related data are
often influenced for political purposes and this may jeopardize the
findings of the study.
1.8 METHOD OF ANALYSIS
In order to analyze the data, it will be
estimated and interpreted using regression analysis. This is carried
out so as to know the relationship between the dependent and independent
variable. The model is later re-specified to get a true picture of the
event that has taken place between the variables by introducing the
standard error test which will help to justify the use of the ordinary
least square method of estimation.
Also, the coefficient of determinations
is estimated to know the percentage of total variation on the dependent
variable explained by the independent variable. The higher the
coefficient of determination the more useful the model will be for
policy and predictive purpose.
The F-Statistics helps to determine
whether or not the entire partial regression coefficient is equal to
zero. An evaluation of the model equation on these Criteria further
supports the significance of the explanatory variable.
1.9 SOURCE OF DATA
Secondary data will be obtained from the
Central Bank of Nigeria (CBN) - Statistical Bulletin, Annual Reports on
major economic indications and National Bureau of Statistics, Annual
Abstract of Statistics.
1.10 STRUCTURE OF THE STUDY
The study will be divided in to five chapters broken down as follows:
Chapter 1: Introduction consisting of
the background to the study, the statement of the problem, significance
of the study, the objectives, research questions, hypotheses, model
specification, source of data and method of analysis, definition of key
terms and the scope of the study. This chapter will provide the basis
for the study.
Chapter 2: Literature Review and
theoretical framework involving the perspective for the study and
topical consideration of previous research, comparisons and contrasts
among several studies. This is to make clearer the place of the present
study in the overall research effect.
Chapter 3: Methodology
Chapter 4: Data presentation, analysis and interpretation will be covered in this chapter.
Chapter 5: Summary, Conclusions and Recommendations
1.11 DEFINITION OF TERMS
v Agricultural Sector - the portion of
the economy comprising agriculture, forestry, hunting, and fishing.
(Todaro and Smith, 2003)
v Gross Domestic Product (GDP) - this is
the monetary value of the total goods and services produced in an
economy over a specific period usually one year. (Jhingan 2001)
v Dutch Disease - this is the economic
concept that tries to explain the apparent relationship between the
exploitation of natural resources at the expense of other sectors of the
economy specifically the manufacturing or industrial sector. (Wikipedia
v Agricultural extension services -
services offered to farmers, usually by the government, in the form of
transmitting information, new ideas, methods, and advice about, for
instance, the use of fertilizers, control of pests and weeds,
appropriate machinery, soil conservation methods, and simple accounting,
in a bid to stimulate high farm yields. (Todaro and Smith,