ABSTRACT
In recent decades, the main and potential contribution of
agriculture to economic growth has been a subject of
much controversy among development economists. As
some contend that agricultural development is a precondition for industrialization, others strongly object it
and argue for a different path. Taking advantage of
ordinary least square method (OLS), the research carried
out by means of secondary data and using the
independent variables. Agricultural Development (AGD),
Capital Formation (CFN) Inflation Rate (INF), and Interest
Rate (INT) to re-examine the question of whether
agriculture could serve as an engine of Economic growth
in Nigeria. The result gotten from the empirical analysis
shows that the productivity in agricultural sector has
appreciably impacted positively on the economic growth in
Nigeria.
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TABLE OF CONTENTS
PAGE
Title Page ………………………………………….. i
Certification ……………………………………….. ii
Dedication……………………………………………. iii
Acknowledgements…………………………………… iv
Abstract………………………………………………… vi
Table of Contents…………………………………….. vii
CHAPTER ONE: INTRODUCTION 1
1.1 Background of the Study…………………….. 1
1.2 Statement of the Problem……………………… 6
1.3 Objectives of the Study………………………… 11
1.4 Statement of Hypothesis………………………. 11
1.5 Significance of the Study………………… ….. 11
1.6 Scope and Limitation………………………….. 13
CHAPTER TWO: LITERATURE REVIEW
2.1 Theoretical Literature………………………….. 14
2.1.1 Agricultural Linkages and Economic
Growth and Development…………………….. 18
2.1.2 Problems Associated with
Agricultural Development……………………… 19
2.1.3 Impact of Food Importation………………….. 22
2.2. Empirical Literature……………………………. 24
2.2.1 Agriculture and Poverty Reduction……… 25
8
2.2.2 Agriculture and Nutrition…………………… 26
2.2.3 Limitation of Previous Studies…………….. 31
CHAPTER THREE: RESEARCH AND METHODOLOGY
3.1 Area of Study and Coverage……………….. 33
3.2 Model Specification ………………………….. 34
3.3 Data Sources …………………………………. 36
3.4 Method of Evaluation ………………………… 36
CHAPTER FOUR: PRESENTATION AND
ANALYSIS OF RESULTS
4.1 Presentation of Result ……………………… 40
4.1.1 Analysis of Results Based on
Economic criteria …………………………… 41
4.1.2 Summary of the Aprior Signs…………….. 42
4.2 Analysis Based on Statistical
Criteria (1st Order Test) ……………………… 42
4.2.1 Coefficient of multiple determinations (R2) 42
4.2.2 Test of Significance of the Parameter (t-test) 43
4.2.3 The f-statistics test…………………………….. 45
4.3 Econometrics Test or (2nd Order Test)…….. 46
4.3.1Test for Autocorrelation ……………..……… 46
4.3.2 Heteroskedasticity Test…………………… 47
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4.3.3 Normality Test……………………………… 48
4.3.4 Multi-Collinearity Test …………………… 49
CHAPTER FIVE: SUMMARY RECOMMENDATION AND
CONCLUSION
5.1 Summary …………………………………. 50
5.2 Policy Recommendation………………… 50
5.3 Conclusion ……………………………… 53
Bibliography……………………………… 54
Appendix
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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 such as rural
and urban communities. 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 can 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 need for
rural transformation, redistribution, poverty alleviation
and socio-economic development.
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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 in
Nigeria was 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 in Lagos by Sir Claude Mc.Donald in
1893: Landmark of 10.4 km was acquired by the British
Cotton Growing Association (BCGA) in 1899 for
experimental purpose strictly for cotton and was named
“Moor Plantation” in Ibadan. In 1912, the Department of
13
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
between 1929 and 1945 was a difficult one for the
agricultural sector of Nigeria. This was the period of great
depression when the world princes 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 to 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
14
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, Nigeria made 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 of which agriculture
contributed about 80% of the export. On attainment of
political independence in 1960, the trend was still very
much the same, the Nigeria economy 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) Nigeria was 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,
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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 are 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 in Nigeria
coincided 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 of state, 2005). Ever
since then, Nigeria has been witnessing extreme poverty
16
and insufficiency of basic food items. The agricultural
sector contributions now accounts for less then 5% of
Nigeria’s GDP (Olagbaju and Fashola, 1996). It is against
this backdrop 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. It becomes therefore imperative
to study the impact of agricultural development on the
Nigeria economic 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).
Nigeria is no longer a major exporter of cocoa,
groundnut, rubber and palm products. Coca production
17
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 (A.B Sekumade 2009).
Because of this backdrop, agriculture has not kept
up with the rapid population growth and Nigeria once a
large net exporter of for 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:
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.
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And also more than 90% of the consumed food in
Nigeria is provided by the small-scale farmers.
2. The Nigerian agriculture lacks storage facilities and
these have led to so much wastage and high cost of
storage. This hinders the availability of source
perishable agricultural produce through the year,
therefore hindering agricultural development.
3. Another negative force is Dependence on weather
which affects the increase in agricultural produce.
Nigeria Agriculturists or farmers still depend on
rainfall only to produce instead of the use of
irrigation that supplies water all through the year.
4. The problem of finance: The agricultural sector is
poorly financed in Nigeria. 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
19
farmer because of low produce and low profit which
results to a failure in paying back the loan.
5. In addition, 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 farmable land in
Nigeria contains soil that is how to medium in productivity.
According to the food and Agricultural Organization of the
United Nations (FAO), with proper management, the soil
can achieve medium to good productivity. The movies
problem that affects soil fertility is soil erosion. Wind
erosion, strong winds expose seeding lings and crops root
system by blowing away loose, fine grain soil particles in
drifts, which can cover crops.
Another type of erosion that affect soil fertility is
water erosion. There are two types of water erosion:
Splash erosion and rill erosion. Splash erosion occurs
when rain drops impact the soil and rill erosion occurs
20
when channels of water carry soil downstream. This (water
erosion) is reduced when the soil is covered with a canopy.
6. Food processing problem is estimated that about 20
to 40% of the yearly harvest is lost during processing.
The primary cause is the lack of efficient harvesting
techniques.
According to and with the information above, it is
quite clear that the agricultural sector, as one of the
Nigeria economy has really got a lot to contribute to the
economic growth of the country.
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?
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