ROLE OF AGRICULTURAL SECTOR ON ECONOMIC GROWTH AND DEVELOPMENT
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ROLE OF AGRICULTURAL SECTOR ON ECONOMIC GROWTH AND DEVELOPMENT
Chapter one
INTRODUCTION
1.1 Background of the Study
The importance of the agricultural sector in an economy cannot be overstated. The forward and backward linkages to the rest of the domestic economy, the worldwide market, and poverty reduction are quite strong.
A bad year in agriculture owing to natural disasters, such as drought, has a significant negative impact on GDP growth, population living standards, manufacturing production, industrial output, price level, exportable surplus, and balance of payments.
The major objective of agriculture in terms of development and expansion is to feed the country’s inhabitants. This function in food production is vital since an adequate food supply eliminates scarcity, which leads to increased prices, and most people must work to provide enough food for the population (Begg, 2003).
Maintaining a good food supply also means excellent health for people, resulting in higher productivity, which promotes economic growth. The agriculture sector’s output provides input for the manufacturing, external, and industrial sectors, all of which contribute significantly to economic growth.
For example, tree timber is used to manufacture paper, furniture, and other products. Secretions from certain plants and trees have healing properties and are used to manufacture medicine for the sick.
Agricultural products include export goods such as cash crops, which provide foreign currency for the country. In reality, these other sectors rely on agriculture to thrive. Prior to the discovery of petroleum in Nigeria, agriculture employed a larger proportion of the local population.
This is largely due to the shift from subsistence agriculture to commercial agriculture, which is concerned with producing food for a growing population, supplying raw materials for agro-allied industries (such as textiles, tobacco, sugar, leather, and so on), and generating foreign exchange earnings.
The agriculture industry is a key part of the Nigerian economy, and it has mostly stayed unchanged since 1960. This occurred before the discovery of oil. Sustaining agricultural productivity is one of the prerequisites for raising living standards in any economy.
“The Nigerian economy witnessed substantial structural changes in the 1970s and 1980s. It was previously a thriving agricultural economy that exported cocoa, peanuts, and palm products.
Nigeria currently relies heavily on oil for more than 90% of its export profits, 30% of its GDP, and 70% of its federal budget resources. Neglected areas such as agriculture have contributed to Nigeria’s economic stagnation and deterioration (Todaro and Smith, 2003).
Crude oil has been Nigeria’s principal export product since the mid-1970s. The economy is believed to be suffering from the Dutch Disease as a result of its over-reliance on the oil sector at the detriment of other sectors, highlighting the need for economic diversification.
Diversification is especially necessary given the volatility of the international oil market, which we rely completely on. This demanded an evaluation of our country’s agricultural sector.
Despite massive investments in agriculture and many policy measures aimed at reactivating agriculture, such as Operation Feed the Nation and the Green Revolution implemented by several administrations during the 1980s, no significant progress has been made. Food production has not kept up with the fast population growth rate.
The Babangida administration’s launch of the Structural Adjustment Programme (SAP) in 1986 placed a strong emphasis on sustaining agricultural production, and many initiatives were implemented to resuscitate this sector, which has yet to experience sustainable growth. The goal of this research is to look into the role of agriculture in Nigeria’s economic development.
1.2 Statement of the Problem
Although agriculture has a significant impact on an economy, neglect of this sector in Nigeria, particularly by the government, has resulted in a slew of issues, including rising food costs, unemployment, a low standard of living, and a low national income.
The agricultural sector’s neglect is reflected in the various problems it faces, such as farm mechanisation, primitive equipment, transportation and storage issues, low productivity, inadequate infrastructure, little or no credit/finance facilities, land tenure system, and so on.
It is unfortunate that, despite 37 years of oil and gas exploration in Nigeria, the country has been unable to properly develop other resources/sectors to supplement crude oil’s importance in the economy.
The economy’s backbone, as well as other sectors such as manufacturing and industrial, have been ignored, resulting in a total reliance on the oil sector.
The volatile and unpredictable character of the crude oil market, particularly lowering oil prices, has been shown to have a negative influence on the economy.
Experience has also demonstrated that the country cannot continue to rely on a single resource for economic success. As a result, the task is to expand and utilise the potential of Nigeria’s agricultural industry to drive economic growth.
Agricultural export revenues have steadily declined from $389.58 million in 1961, at a rate of 2.45% per year, to $218.41 million in 2008, which is less than 2%. (CBN Annual Report 2008; Statistical Bulletin 2008).
The slide grew rapid in the mid-1970s during the oil boom era. Foreign exchange earnings in millions of naira were rather stable until after 1985, when the naira fell significantly against the US dollar and other foreign currencies.
As a result, the nominal growth in earnings was negative in real terms since inflation rates outpaced it. As a result, there is a need for revolutionary change in policy formulation and implementation in this area.
1.3 GOALS OF THE STUDY
The overall goal of this research is to assess the agriculture sector’s contribution to Nigeria’s economic growth and development. The study’s particular aims are:
v To investigate the role that agriculture plays in the Nigerian economy.
v To evaluate the trend of government spending on agriculture in Nigeria.
v To investigate the influence that banks’ loans and advances have in the expansion of the agriculture industry.
v Make policy proposals for economic growth in the agricultural sector.
1.4 RESEARCH QUESTIONS.
The research questions important for this study are:
1. How does the agricultural sector impact economic growth?
2. How do bank loans and advances impact the agriculture sector?
3. What is the current trend in Nigerian government spending on agriculture?
1.5 Statement of Hypothesis
The following hypotheses will be empirically tested for these studies:
Hypothesis 1:-.
Ho: Nigeria’s agriculture sector has made minimal contributions to the country’s economic growth and development.
H1: The Nigerian agriculture industry has made important contributions to the country’s economic growth and development.
Hypothesis #2:
Ho: Agricultural earnings have no big impact on Nigeria’s economic growth.
H1: Agricultural profits have a substantial impact on economic growth in Nigeria.
Hypothesis #3:
Ho: There is no substantial association between government agricultural expenditure and agricultural earnings in Nigeria.
H1: There is a considerable link between government agricultural expenditures and agricultural incomes in Nigeria.
1.6 Significance of the Study
It is incorrect to believe that a lack of growth in the agricultural sector is completely responsible for Nigeria’s lack of economic growth and development; nonetheless, it can be used to determine the amount to which growth has occurred throughout time.
“Even with the discovery of the oil market in the mid- 1970s, the Nigerian economy has continued to perform below its capabilities characterised by low output growth, high unemployment rate and rising inflation” (Jhingan 2001; emphasis added).
The economy’s reliance on the worldwide oil market makes it susceptible to external shocks that can cripple it. It is consequently necessary to evaluate the contributions of the agricultural sector
which was regarded the mainstay of the economy. This study will demonstrate the relationship between the sector and the industrial sector of the economy.
This study will benefit government officials in charge of agriculture budget allocation. Understanding the importance and critical role of these sectors in the economy, particularly the industrial and manufacturing sectors, will cause the government to pay greater attention to the sector and the entire economy, resulting in more functional reforms.
This study will also indicate how much the agricultural sector has contributed to the economy in terms of export profits, food prices, inflation rate, and raw materials; hence, it will reveal the economy’s growth and how it can grow through the agricultural sector.
This study will disclose the numerous potential for expansion in the economy’s industrial sectors via the agriculture sector, as well as investment prospects for both private and state firms.
Furthermore, the findings of this study will guide society towards a more balanced economy, characterised by equal development of the economy’s many sectors.
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