Impact Of Agricultural Export In The Economic Growth Of Nigeria
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Impact Of Agricultural Export In The Economic Growth Of Nigeria
ABSTRACT
This study focused on the Nigerian economy’s agricultural sector growth. A significant policy objective of sustainable economic development, particularly in developing countries such as Nigeria, is to construct agricultural sectors that are both economically efficient and sustainable. However, this is highly dependent on the full utilisation of such resources.
This study uses an econometric approach to assess the impact and long-term viability of Nigeria’s economic growth. The regression results and co-integration test reveal that agricultural exports have a favourable and long-term impact on Nigeria’s economy.
On the other side, the data also shows that the agriculture sector has declined since the discovery of oil. Finally, the research provides consistent policy recommendations for optimal agricultural sector planning, management, and development in Nigeria.
Chapter One: Background of the Study.
Agriculture is intertwined with numerous industries around the world, including Nigeria, and is critical for producing broad-based growth required for economic development.
It is crucial to life and the foundation of economic prosperity, particularly in terms of providing appropriate and nutritious food, which is critical for human development and raw materials for industry.
Agriculture has and will continue to play an important role in the Nigerian economy. The sector holds the key to rapid economic transformation, poverty alleviation, democratic stability, and good governance. National security cannot exist without food security.
Economic growth is “a gradual and steady change in the long run, which comes by a gradual increase in the rate of saving and population” (Schumpeter 2005).
Gross domestic product (GDP) is the monetary worth of goods and services that serves as a key growth (economic) indicator. This assumes that all sectors of an economy contribute to the growth of the economy. Agriculture is one such area (Yakubu, 2006).
Agriculture was popular in Nigeria prior to the discovery of crude oil. In every section of the country, one cash crop or another produced enough foreign currency to keep the people happy while also meeting the country’s international commitments.
But with the discovery of oil and its commercial exploitation, agriculture was neglected, despite the fact that a large portion of the population was still engaged in agriculture, albeit at a slow pace. (Tell Nigeria. 2008).
A retrospective look at the Nigerian economy and its evolution reveals that agriculture was both the mainstay of the Nigerian economy and the primary source of foreign cash. It offered employment to a huge number of Nigerians. (Chigbu, 2005).
The primary barrier to agriculture sector growth is that the structure and manner of production have remained same since independence more than four decades ago (Ukeje 2005). The United Nations Food and Agriculture Organisation assesses Nigerian farmland production as low to medium; nevertheless, if properly managed, (Needs. 2004).
The fall in domestic output and poor export performance have been largely attributed to both internal and foreign causes. Ogbu (1991) ascribed the problem primarily to a bad macroeconomic and sectoral policy environment, which resulted in a deterioration in domestic terms of trade against the agriculture sector.
He also emphasised the relevance of foreign trade terms and weakening global demand. He contended that restrictive exchange rate regimes, inflationary pressures caused by imprudent monetary and fiscal policies, and emerging nations’ trade regulation policies all harmed the external terms of trade and the level of actual protection.
However, analysts disagree on the relative contribution of internal and foreign factors to developing countries’ current economic issues. While some followed the International Monetary Fund (IMF) and World Bank position
which largely blamed domestic factors and prescribed the removal of market distortions, returns to the neoclassical economic doctrine of free market determination of prices, exchange rates, and less state intervention in resource allocation, others, mainly structuralists, argued that the problems lay primarily on unequal trade relations between developed and developing countries.
The latter’s viewpoint is comparable to the “Lagos Plan of Action for Economic Development of Africa 1980-2000” adopted by African heads of state and the Organisation of African Unity (OAU). The Plan’s primary goals were to achieve food self-sufficiency and reduce reliance on exports (Brown and Cummings, 1984).
However, it is now commonly recognised that developing countries’ problems are multidimensional in character. Thus, in addition to evident external and internal imbalances, unseen or structural restrictions in economic institutions have been highlighted as contributing to crises. The structural constraints tended to reduce production and supply capacity.
Quarcoo (1990), Koester et al. (1990), and others highlighted the following structural constraints that hampered supply in the majority of developing countries:
(i) Excessive protection of private industries through an inward-oriented import substitution development strategy that includes tax breaks or holidays, accelerated depreciation, investment tax credits, and tariff concessions for imported raw materials, spare parts, and equipment, discouraging local sourcing. These added to the broad use of tariff and nontariff measures like import licensing and exchange restrictions.
(ii) Excessive government, which results in bloated public services, inefficiencies in investment, and output. This was largely responsible for developing countries’ yearly budget deficits, which resulted in excess demand and inflation, particularly when the deficit was financed by the Central Bank’s monetary accommodation.
(iii) Inefficient credit or financial systems unable to mobilise and deploy domestic resources as a result of financial repression. Credit systems primarily financed unproductive sectors while discriminating against productive sectors such as agriculture and small-scale enterprises (Ayichi 1987).
(iv) The internal imbalances were mostly manifested in the difference between domestic investment requirements and available savings. The evident external gaps were represented in recurrent deficits in trade and current accounts of the balance of payments, overvalued local currencies, and high parallel market premiums on foreign exchange.
The above situation was caused by the price inelastic demand of the populace; over concentration on a few primary commodity exports; deteriorating barter terms of trade for these commodities; domestic pricing policy through commodity boards that reduced incentives to increase production;
protective policies of the developed countries such as the European Economic Community (EEC) Common Agricultural Policy, which placed import quotas on products like sugar, meat, and substitutes
To address the aforementioned economic maladjustments and imbalances, the IMF-World Bank promotes structural adjustment programs (SAPs), which were widely undertaken by most developing nations in the 1980s.
The conventional and initial conception of structural adjustment policies in the Nigerian crisis was based on the assumption that economic crises were caused by excessive consumption of importables, so SAP’s orthodox prescriptions called for demand management through the implementation of stabilisation policies.
The stabilisation strategies used were primarily fiscal, monetary, and exchange rate policies (Oyejide 1989). Fiscal policies aimed to minimise budget deficits by cutting government spending and raising taxes. In the same vein, contractionary monetary measures were implemented to lower the money supply.
Monetary instruments employed include discount rates, credit ceilings, and reserve ratio increases. The currency rate was essential to economic stabilisation strategies.
The currency rate policy of devaluation was created as a stabilisation tool to reduce import demand, boost producer prices, stimulate output, and increase export supply of tradeable goods, particularly agricultural commodities.
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