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GOVERNMENT EXPENDITURE AND AGRICULTURAL PRODUCTION IN NIGERIA 2010-2017

ABSTRACT

Over the years, Agriculture has proved to be the strongest means of livelihood all over the world. The produce from agriculture has been immense and the growth has been steadily upward in the developed countries. Developed countries has given adept attention to agriculture as the population of its citizens ride on geometric progression. In Nigeria, we have witnessed an upward and downward syndrome in the movement of Agricultural production. One major way to boost this movement and increase significant production is through the government expenditure. Government expenditure in this case are the resources (financial and material) that is injected into the Agricultural sector. This study was therefore undertaken to examine the probably the relationship that exists between government expenditure and agricultural production in Nigeria. Is the level of Agricultural production in the country dependent on the pace of government expenditure? To find out this, the study adopted the Ordinary Least Square method to run this regression with data from 2010-2017. The study found out there is a positive relationship between both variables, as the level of Agricultural production is to a great extent dependent on the amount of resources injected into the sector.

CHAPTER ONE

INTRODUCTION

1.1   Background to the study

Agriculture as a sector is an instrumental factor for the development of the economy, as it sustains the livelihood of about 75 percent of the population, and according to World Bank estimates, increased at an annual rate of 2.9 percent in 1990-98 (Opportunities in Nigeria’s Agricultural Sector, 2005). The importance of the agricultural sector in any developing economy is generally well known. This is because it is expected to satisfy the bulk, if not the entire food requirement of the country, supply most of the agricultural raw materials needed by the manufacturing sector, provide adequate employment and income to farmers as well as earn substantial foreign exchange, for the execution of capital projects for developmental purposes. Over the years, inadequacy of agricultural infrastructure has hindered progress in agricultural development. While the use of such devices such as modern diggers, ploughs (instead of hand hoes), and non-harmful chemicals for containment of weed, fertilizers, etc. are unaffordable by most of the smallscale farmers. The importance of the agricultural sector in any developing economy is generally well known. This is because it is expected to satisfy the bulk, if not the entire food requirement of the country, supply most of the agricultural raw materials needed by the manufacturing sector, provide adequate employment and income to farmers as well as earn substantial foreign exchange, for the execution of capital projects for developmental purposes. As such, government expenditure, which is a public sector investment, in agriculture is crucial for the transformation of the sector and realization of development policy objectives.

Therefore public expenditure can be described to mean the cost or expenses the government incurs for its own maintenance and for the society, with expanding state activities. Therefore, government expenditure on agriculture especially in the area of development of infrastructure, such as irrigation, input distribution, construction of feeder roads, research and extension, are important. These investments have been left to the government, not just because of limited number of private investor willing to take part in the investment in the sector but due to the strong believer of the government that the availability of such infrastructure and improved technology will contribute immensely to the realization of the expected gains in productivity and output growth in the sector. Despite these, the performance of the sector has generally been considered unsatisfactory especially following the 1971-73 droughts and 1975 Rosette virus epidemic (Ukpong, 1993). The expected significant contribution was made towards the attainment of several national economic and social goals. The resultant effect is the huge importation of food, made possible by the enhanced crude oil export earnings, but which served as a disincentive to serious domestic farming. In line with the anticipated contribution agriculture makes to the overall development of the Nigerian economy, several measures were designed in the years preceding the Structural Adjustment Programme (SAP) to stimulate the growth and development of the sector. Such measures included subsidized/low interest rate policies of the 1970s and early 1980’s, establishment of specialized institutions to lend solely to the sector, funding agricultural production directly through budgetary allocation and by 3 establishing agricultural oriented institutions and progammes such as Nigerian Agricultural Credit Bank (NACB), Agricultural Credit Guarantee Scheme Fund (ACGSF), Agricultural Development Programmes (ADPS), River Basin Development Scheme (RBDS) and Operation Feed the Nation(OFN).

Following the adoption of SAP in 1986, Commodity Boards were abolished in order to provide productive incentives to the farmers through increased producer prices. Also, in the period 1970-82 annual production of major export crops such as cocoa, rubber, cotton and groundnuts fell by 43, 29, 65, and 64 percent respectively (Olomola, 1998). While, the average growth rate is the value of agricultural exports increased astronomically in 1986 to 1990 sub-period by 70.5 percent due to initial impact of SAP. It remained a little lower but still high in the 1991/95 sub-periods by 68.5 percent, again due to the effect of SAP but became relatively low in the 1996/2000 at 18.2 percent as the effect of SAP wore off (Manyong, 2003). Despite decade of public sector contribution to agriculture, there were evidences of unstable or fluctuating trends. In this research, efforts has been made to find out what is responsible for the downward trend in the contribution of agriculture to food supply, Gross Domestic Product (GDP), foreign exchange earnings and raw materials. Also, why there has been mixed result from the financing policies and programmes of government for agriculture in Nigeria.

1.2   Problem statement

The importance of agriculture to the economic development of Nigeria is enormous owing to the fact that agriculture was the main source of food and employment for a sizeable number of the people. Public expenditure, which serves as the bed rock of financing for the sector has consistently fallen short of the public expectation. For instance, a collaborative study carried out by the International Food Policy and Research Institute (IFPRI) and the World Bank in 2008, revealed that Nigeria’s Public expenditure on agriculture is less than 2% of total federal annual budget expenditure. This is significantly low compared to other developing countries like Kenya (6%), Brazil (18%) and 10% goal set by African leaders’ forum, under the comprehensive Africa Agricultural Development Programme (CAADP). In spite of poor investment, agriculture has on the average contributed 32% of the country’s GDP from 1996-2000 and 42% between 2001 and 2009 (CBN, 2010). According to CBN Governor in 2011, agriculture accounted for 40% of the nation’s GDP, yet it received only 1% of the total commercial Bank Loans (People’s Daily, 2011). Inadequacy of government funding of agricultural projects and programmes has been observed by researchers because lack of strong evidence of growth promotion externalities by deepening food insecurity, social inequality, rural poverty and hunger, are issues of funding (Ogiri, 2004; Ogbonna and Osondu, 2015). This study therefore is set to determine the contribution of government funding in terms of expenditure to agricultural production in Nigeria between 2010-2017 and compare with some other factors on which agricultural output depends. This will guide policy making for increased agricultural productivity in the nation.

1.3   Purpose of the study

The objective of this study is to examine the impact of government expenditure on agricultural production. Specifically, we aim at:

· Determining the relationship between government expenditure and agricultural output.

· Ascertaining the impact of government expenditure on agricultural production.

· Highlighting the challenges of Agricultural production.

1.4   Significance of the study

The agricultural sector has the potential to provide employment opportunities, it has the potential to eliminate hunger, and provide alternative foreign exchange for the Nigerian economy. This study is necessitated by an attempt to analyze the effect of government agricultural expenditure on agricultural output, to aid policy makers in making policies that will enhance agricultural productivity in Nigeria.

1.5   Study hypotheses

The study developed and formulated for testing the following hypothesis:

H0: There is no relationship between government spending and agricultural production in Nigeria.

Ha: There is a relationship between government spending and agricultural production in Nigeria.

H0: There is no significant impact of government expenditure on Agricultural production in Nigeria.

Ha: There is a significant impact of government expenditure on Agricultural production in Nigeria.

1.6   Scope and Limitations of the Study

The scope of this study is necessarily limited to the period 2010-2017; within this period, some new policies on agriculture has been made following the past administration of former President Goodluck Jonathan and the Buhari-led administration in 2015. It should therefore be acknowledged that the data used are derived from the Statistical Bulletin, National Office of Statistic, Journals, etc, and they are used to portray the significance or importance of government expenditure on agricultural output in Nigeria.

1.7   Organization of Study

The study is divided into five chapters. Chapter one deals with the study’s introduction and gives a background to the study. Chapter two reviews related and relevant literature. The chapter three gives the research methodology while the chapter four gives the study’s analysis and interpretation of data. The study concludes with chapter five which deals on the summary, conclusion and recommendation.