REVIVING AGRICULTURAL SECTOR TO CURB THE CURRENT DWINDLING OIL REVENUE ON THE ECONOMY
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REVIVING AGRICULTURAL SECTOR TO CURB THE CURRENT DWINDLING OIL REVENUE ON THE ECONOMY
Chapter one
INTRODUCTION
1.1 Background of the Study
Agriculture, in general, refers to the primary human activity of producing food and cash crops, livestock, fisheries, forestry, and product marketing. The role of agriculture in any economy is clearly described in the relevant literature.
For poor countries, it can boost economic development by boosting food availability and freeing up workers for industry. It may increase the size of the home market for industrial goods. It increases savings and capital formation while gaining foreign exchange through exports.
In Nigeria, the agricultural sector has also generated development capital, money for the government, and employment for workers because economic activities remain prevalent.
However, towards the beginning of the 1970s, the bubbles popped. Agriculture lost its leading position to crude oil and natural gas in terms of GDP contribution, export basket, foreign exchange earnings, government revenue, and so on.
Output deteriorated and the sector generally stagnated. The food situation grew troubling and nearly scary, to the point where Nigeria, which was previously a top producer of various agricultural items, became an importer of some of the same products, particularly food grains.
Oil revenue has been and continues to be the mainstay of the national economy, and it is expected to remain so for a long time to come, as it currently supplies the majority of government revenue and foreign exchange gains.
Currently, crude oil exports provide for around 90% of foreign exchange and 80% of government revenue. Thus, the country’s economy is strongly reliant on the petroleum sector.
This dominant role, combined with inadequate management of oil revenue during periods of windfall, has pushed other productive sectors like agriculture, the traditional mainstay of the economy from the early fifties and sixties, to the background, exposing the country to volatility in the crude oil market, which is not unusual for a monoproduct economy like Nigeria.
As a result, a sudden and continuous decrease in product price will have a detrimental impact on the country’s revenue. No surprise former Central Bank Governor Sanusi Lamido Sanusi remarked in 2011 that “our major concern is that a major decline in the price of oil will lead to a massive depreciation of the currency”.
This research will look into how strengthening the agricultural sector could help alleviate the economy’s diminishing oil revenues.
1.2 Statement of the Problem
One of the most pressing issues confronting the present administration is how to finance the 2016 budget in the face of low oil prices and mounting threats from diminishing revenue.
This is especially important given the country’s challenging economic conditions in recent months, particularly decreased crude oil and gas receipts and the Federal Government’s inability to satisfy some of its financial obligations.
This current quo is becoming unsustainable and dangerous because Nigeria is significantly reliant on oil money as its primary source of funding. As Chris Bredenhann (2016) correctly points out, “Those whose economies are not well diversified will be hardest hit and may have to consider austerity measures.”
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