THE IMPACT OF AGRICULTURAL DEVELOPMENT ON NIGERIA ECONOMIC GROWTH (1980-2010)

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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 pre-condition 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
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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 4.3.1 Test 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

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
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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
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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
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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