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The Impact Of Agricultural Development On Nigeria Economic Growth, 1980– 2007

ABSTRACT

In recent decades, the potential contribution of agriculture to economic growth has been a subject of much controversy among development economists.  While some contend that agricultural development is a pre-condition for industrialization, others strongly disagree and argue for a different path. Taking advantage of Ordinary Least Square Method (OLD), the research carried out by means of secondary data and using independent variables: Agricultural Development, Capital Accumulation, Inflation Rate and Interest Rate re-examines the question of whether agriculture could serve as an engine of growth for the Nigerian economy Results from the empirical analysis shows that the productivity in agricultural sector has not appreciably impacted positively on the economic growth in Nigeria.

TABLE OF CONTENTS

Cover Page        ..        ..        ..        ..        ..        ..        ..                

Title Page  ..        ..        ..        ..        ..        ..        ..        ..

Certification        ..        ..        ..        ..        ..        ..        ..        ..        i

Dedication..        ..        ..        ..        ..        ..        ..        ..        ..        ii

Acknowledgement       ..        ..        ..        ..        ..        ..        ..        iii

Abstract               ..        ..        ..        ..        ..        ..        ..        ..        iv

Table of Contents                 ..        ..        ..        ..        ..        ..        v-vii

  CHAPTER ONE

          INTRODUCTION                  ..        ..        ..        ..        ..        ..

1.1       Background of the Study     ..        ..        ..        ..        ..        1

1.2       Statement of Problem..        ..        ..        ..        ..        ..        12

1.3       Objectives of the Study                  ..        ..        ..        ..        ..        15

1.4       Statement of Hypothesis      ...       ..        ..        ..        ..        16

1.5       Significance of the Study               ..        ..        ..        ..        16

1.6       Scope and Limitations of the Study       ..        ..        ..        17

CHAPTER TWO

          LITERATURE REVIEW

2.1       Theoretical Literature            ..        ..        ..        ..        ..        18

2.1.1Agriculture As A Passive Contributor to

Economic Development (Classical School

of 1950s and 1960s).  ..        ..        ..        ..        ..        ..       30                       

2.1.2  Agricultural led Industrialization

(Classical School of 1970s and 1980s)..        ..        ..        31

2.1.3  Agricultural Linkages And Growth and

Development      ..        ..        ..        ..        ..        ..        ..        32

2.1.4  Problems Associated with Agricultural Development                 36

2.1.5  Empirical Literature     ..        ..        ..        ..        ..        ..        45

2.2.1  Agriculture and Poverty Reduction                  ..        ..        ..        46

2.2.2  Agriculture and Nutrition       ..        ..        ..        ..        ..        47

CHAPTER THREE

          RESEARCH METHODOLOGY

3.1       Methodology                ..        ..        ..        ..  ..     . .     ..       51

3.2       Area of Study and Coverage                  ..        ...       ....      ..        52

3.3       Model Specification     ..        ..        ..        ..        ..        ..        52

3.4       Data Sources     ..        ..        ..        ..        ..        ..        ..        53

3.5       Method of Evaluation           ..        ..        ..        ..        ..        54

CHAPTER FOUR

          PRESENTATION AND ANALYSIS OF RESULTS

4.1       Unit Root Test    ..        ..        ..        ..        ..        ..                 59    

4.2       Co-Integration Test     ..        ..        ..        ..        ..        ..        61    

4.3       Economic Opinion, Interpretation           ..        ..        ..        63

4.4       Statistical Criteria of the Result     ..        ..        ..        ..        65

4.5       Econometric Criteria of the Result                   ..        ..        ..        68

  CHAPTER FIVE SUMMARY, RECOMMENDATION AND CONCLUSION

5.1       Summary of Findings           ..        ..        ..        ..        ..        67    

5.2       Policy Recommendation      ..        ..        ..        ..        ..        68

5.3       Conclusion                   ..        ..        ..        ..        ..        ..        ..        70

Bibliography       ..        ..        ..        ..        ..        ..        ..        ..

Appendix   ..        ..        ..        ..        ..        ..        ..        ..        ..

CHAPTER ONE

INTRODUCTION

1.1       BACKGROUND OF THE STUDY

Agriculture is concerned with the husbandry of crops and animals for food and other purposes.  It is the foundation upon which the development of stable human communities, such as rural and urban communities has depended on in many parts of the world.  The study of economic history provides us with ample evidence that an 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 critical 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.  Through its spheres of activities at both the macro and micro levels, the agricultural sector is strategically positioned to have a high multiplier and linkage effect on any nation’s quest for socio economic and industrial development.

The growth of the agricultural sector in Nigeria was not smooth. 

Anyanwu (1967) held that during the colonial period between 1861 – 1960, attention was given to agricultural research and extension services.  Among the activities that was done, the first was the establishment of a research station in Lagos by Sir Claude McDonald in 1893.  Landmarks of 10.4 km was acquired by the British Cotton Growing Association (BCGA) in 1899 for experimental purposes strictly for cotton and was named Moor Plantation in Ibadan.

In 1912, the Department of 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 1929 and 1945 was a difficult one for the agricultural sector of Nigeria.  This was the period of great depression when the world prices on commodities fluctuated.  This affected the agricultural sector negatively because the volume of agricultural produce increased but the value did not increase proportionately.

The period 1945 – 1954 marked the period of export boom, because countries were just recovering from the Second World War and countries that needed to develop their destroyed industrial sector were many.  They depended on primary product 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 periods, Nigeria made a 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 and in that 57%, agriculture made up about 80% of the export.  On attainment of political independence in 1960, the trend was still very much the same, the Nigerian economy could reasonably be described as an agricultural economy, because agriculture served as the engine of growth of the overall economy (Ogen, 2003: 231-234), from the stand point of occupational distribution and contribution to the GDP.  Nigeria was the world’s second largest producer of cocoa, largest exporter of palm oil.  Nigeria was also a leading exporter of other major commodities such as cotton, groundnut, rubber and hides and skins (Alkali, 1997: 15-16).  Between 1964 – 1965, agriculture 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% - 75% of Nigeria foreign exchange earnings and provided the most important source of revenue for the Federal as well as State governments through export products and sale taxes (Ekundare 1973), despite the reliance of Nigerian peasant farmers on traditional tools and indigenous faming methods, these farmers produced 70% of Nigeria’s exports and 95% of its food needs (Lawal, 1997: 195).

However, the 1967 – 1970 Civil War in Nigeria coincided with the ‘Oil Boom’ era, which resulted in extensive exploration and export of petroleum and its products.  This led Nigeria to neglect 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 account for less than 5% of Nigeria’s GDP (Olagbaju and Fashola, 1996: 263).  It is against this back drop 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.  In a bid to address this drift, the Nigerian government as from 1975 became directly involved in the commercial production of food and cash crops. 

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