TABLE OF CONTENT

1.0 Introduction

1.1 Theoretical Issues

2.0 Agriculture and Economic Development in Nigeria

2.1 The National Accelerated Food Production Programme (NAFPP)

2.2 The Nigerian Agriculture and Co-operative Bank (NACB)

2.3 Operation Feed the Nation (OFN)

2.4 Agricultural Credit Guarantee Scheme Fund (ACGSF)

2.5 The River Basin Development Authorities (RBDA)

2.6 The Green Revolution (GR)

2.7 National Agricultural Land Development Authority (NALDA)

2.8 Special Programme for Food Security (SPFS)

3.0 Contributions of Agriculture to Economic Development in Nigeria

4.0 Data Collection and Analysis

4.1 Estimation and Results

5.0 Conclusion

6.0 Recommendation

References

Appendix
AGRICULTURE AND ECONOMIC DEVELOPMENT IN NIGERIA

1.0 Introduction

The role of agriculture in Nigeria cannot be over emphasized. Agriculture is a source of

food for consumption by man, foods for animals and raw material for the agro-based

industries. Agriculture contributes to the growth of the economy and also provides

employment opportunities for the teaming population and eradicates poverty in the

economy. An articulated agricultural revolution and increased value addition activities in

the downstream agro-processing sub-sector present a potential platform for effective

wealth generation and consequently, sustainable poverty eradication.

Before and immediately after independence in 1960, agriculture contributed up to 64%

to the total GDP, but during the 1970s, the contribution of agriculture to the GDP decline

to 48%. The decline continued in 1980 to 20% and 19% in 1985. The uncertainty

associated with the oil glut of the 1980s, which has great negative impact on the

Nigerian economy, resulted in increased Federal and State government attention

toward the development of agriculture. However, during the 1990s, the contribution of

agriculture to the GDP increased due to the shift of emphasis to agricultural

development.

The paper examined the impact of agriculture on economic development in Nigeria. The

Ordinary Least Square regression method is used to analyse the data. The results

indicated that a positive relationship exist between gross domestic product (GDP) and

agricultural output . Agriculture contributed 5.6 percent on gross domestic product

(GDP) between 1985 and 2005. In order to improve agriculture , public authorities
should see that special incentives are given to farmers, encourage economic co-

operation among regions and states, create markets for agricultural outputs, provide

extension services to farmers and also provide adequate funding.

This study attempts to examine the impact of agriculture on the development of the

Nigerian economy for the period 1985 to 2005.

1.1 Theoretical Issues

The physiocrats laid more emphasis on agriculture in the development of an economy.

In their views, the development of an economy depends on the growth of the

agricultural sector. The source of national wealth is essentially agriculture. The

physiocrats believe that the fate of the economy is regulated by productivity in

agriculture and its surplus is diffused throughout the system in a network of

transactions. The agricultural sector to the physiocrats is the only genuinely productive

sector of the economy and the generator of surplus upon which all depends. Todaro

and Smith (2003), while looking at Lewis theory of development, assume that the

underdeveloped economies consists of two sectors. These sectors are the traditional

agricultural sector characterized by zero marginal labour productivity and the modern

industrial sector. The primary focus of the model is the labour transfer and the growth of

output and employment in the modern sector.

the state of agriculture is of paramount importance to the development process.

agriculture provides the basis for the world’s great civilization in the past and the

increase in agricultural productivity in England laid the basis for, and sustained the first

industrial revolution. The agricultural sector is known to employ over 75 percent of the
labour force in developing countries and provide the purchasing power over industrial

goods.

Rostow (1960) as cited in Tamuno (1996), argued that in the process of economic

development, nations pass through several stages namely; traditional stage, the

precondition for take off, the take off stage, drive to maturity and the high mass

consumption stage. Agriculture played crucial roles in the first three stages.

Again, Todaro and Smith (2003) put it that if development is to take place and become

self-sustaining, it will have to include the rural area in general and the agricultural sector

in particular. “Traditionally, the role of agriculture in economic development has been as

passive and supportive’’. Based on the historical experience of Western countries

economic development was seen as requiring a rapid structural transformation of the

economy focused on agricultural activities to a more complex modern industrial and

services society. As a result, agriculture’s primary role is to provide food and manpower

to the expanding industrial economy.

2.0 Agriculture and Economic Development in Nigeria

2.1 The National Accelerated Food Production Programme (NAFPP)

This programme was established in 1973 with the aim of distributing to those who

involve themselves in packaging information and raw materials in order to improve the

production of wheat, sorghum, millet, rice, maize and cassava.

2.2 The Nigerian Agriculture and Co-operative Bank (NACB)

The establishment of this bank owes to the fact that the agricultural sector lacked

finance. The bank is charged with the responsibility of disbursing loans to agricultural

projects. As a programme the bank faced some problems such as;

2.2.1 inadequate financial resources to meet with agriculture loan demand,

2.2.2 non-fulfillment of security or collateral requirements necessitated bad debt,

which could not be recovered at the time of maturity,

2.2.3 lack of disposition of the bank to modern loan appraisal techniques which

resulted in poor loan management,

2.2.4 diversion of fund by the bank for non-agricultural purposes, and

2.2.5 late disbursement of agricultural loan arising from bureaucratic

impediment.

2.3 Operation Feed the Nation (OFN)

This programme was established in 1976 which was aimed at self-sufficiency in food

and to ensure that the objective was realized. Some of the products of this programme

include; subsidized supplies of fertilizers, seeds, insecticides and pesticides. Every one

was encouraged by this programme to cultivate their back gardens intensively and to

keep chickens, whose eggs and meat would provide an important source of protein and

whose dropping could be used as fertilizer. However, the success of this programme

was limited because about two-third of the entire funds were spent on student wages,
living little for farmers. The programme also collapsed because of timing related

inadequacies.

2.4 Agricultural Credit Guarantee Scheme Fund (ACGSF)

In 1979 the ACGSF was established by the Federal Government of Nigeria as an

inducement to commercial and merchant banks to increase credit purveyance on their

part to actively engage in agricultural lending. The Fund was under the management of

the Agricultural Credit Scheme Fund Board with the CBN acting as managing agent for

its day-to-day administration. It is worthy to note that though ACGSF had limitations, its

operation improved significantly in 1994.

2.5 The River Basin Development Authorities (RBDA)

The RBDA were also established in 1978. The authorities were established to provide

all year round water through irrigation to farmers. This period also witnessed the

establishment of various other programmes such as the Grain Boards and the World

Bank Assisted Agricultural Development Projects (ADP).

2.6 The Green Revolution (GR)

This programme was established at the wake of the third republic after the Operation

Feed the Nation (OFN) in 1983. This programme was managed by the National Council

for the Green Revolution. It was operated on green revolution principles that is, the use

of high yielding varieties of seed, high inputs of fertilizers, irrigation, etc.

2.7 National Agricultural Land Development Authority (NALDA)

NALDA was established in 1990 for the purpose of making land available to those

interested in farming. The Authority was intended to reduce the prevalence of

subsistence agriculture in the country and in its place infuse large-scale commercial

farming by assisting farmers with inputs and developing land for them to the point of

planting at subsidized rates. On its establishment, the government allocated a take off

grant of N30million in order to acquire 50,000 hectres of land in each state of the

federation for agricultural activities.

2.8 Special Programme for Food Security (SPFS)

This programme was introduced in 2002 by the Federal Government and the Federal

Ministry of Agriculture and Rural Development was given the responsibility of its

implementation through its project coordinating unit. The size of the programme, the

general capital outlay channeled to it and the built in implementation and monitoring

mechanism made this programme a potent weapon for heralding a meaningful agrarian

revolution in the country within the shortest period of time.

A critical look at the programme reveals that the success of this programme had been

minimal because the government had failed to maintain consistency in its investment,

implementation and monitoring the activities in the agricultural sector in general.

3.0 Contributions of Agriculture to Economic Development in Nigeria

Agriculture helps to provide food for the teeming population of the country. When output

increases, the incomes of the farmers increase thereby leading to an increase in the

standard of living.
Similarly, agricultural development is of vital importance due to the fact that a rise in

rural purchasing power as a result of the increase in the agricultural surplus is a great

stimulus to industrial development and expansion in the size of the market. The market

size for manufactured goods in Nigeria is very small because a large proportion of the

population is poverty ridden. However, the demand for such input like fertilizers, better

tools, farm implements, tractors, irrigational facilities in the agricultural sector is

relatively low which lead to the expansion of the industrial sector.

Again it is known that the LDCs in general and Nigeria in particular mostly specialized in

the production of a few agricultural products for export.

Furthermore, agriculture creates employment opportunities in rural areas. As

agricultural productivity and farm income increase, non-farm rural employment expands

and diversifies.

Nigeria needs large amount of capital to finance the creation and expansion of

infrastructure and for the development of basic and heavy industries. In the stage of

development, capital can be provided to increase the marketable surplus from the rural

sector without reducing consumption.

Finally, an increase in rural income as a result of the agricultural surplus tends to

improve rural welfare. The rural people build better houses fitted with modern amenities

like electricity, furniture, radio farm, etc. They also receive direct satisfaction from

schools, health centres, irrigation, banking, transport, and communication facilities,

which forestall rural-urban migration.

4.0 Data Collection and Analysis

This research work used secondary data. Data were sourced from Central Bank of

Nigeria’s publications, journals, books and unpublished materials. The method of data

analysis is the ordinary least square (OLS) simple regression method. We made use of

econometric software (E-view)

Specification of the Model

Gross Domestic Product (GDP) is a function of agriculture.

where;

GDP = Gross Domestic Product

AGRQ = Agricultural output

e = Error term

, , and are the parameter estimates

a0 >0, a1 >0

4.1 Estimation and Results

We used linear specification of the model and discovered that the specification

explained the impact of the agricultural on gross domestic product in terms of goodness

of fit, precision of the estimates of the slope and tolerable level of collinearity.

The results of the regression are presented in econometric compact form as:
The standard error values and t-values of each parameter are shown in parentheses,

with the standard errors coming before the t-values.

The results of the regression show that there is a positive relationship between the

dependent variable (GDP) and the independent variables(AGRQ ). A unit change in

agricultural output will cause 5.6 percent in GDP. The estimated model shows F-ratio of

about 45.62 as compared with the F-table value of 3.55 with 5 percent level of

significance. This implies that agricultural production for the period of analysis have

significant influences on macroeconomic output level.

The explanatory power of the regression model with an adjusted R2 of 0.82 is

impressive. This indicates that 82 percent of GDP is explained by the agricultural sector.

The remaining 18 percent is explained by variables outside this model. From our results

the standard errors for each parameters are statistically significant .

5.0 Conclusion

On the whole, the agricultural sectors contribute significantly to Nigeria’s GDP. The

employment base of the Nigeria economy is largely dependent on this sector. However,

the agricultural sector contributes only 5.6 percent to the economy. This level of

disparity is due to the neglect of agriculture when oil was discovered in a commercial

quantity in the 1970s. It is well over due for the Nigerian economy to diversify. The

negative perception and orientation of the average Nigerian about agriculture should be

disabused so that this sector can contribute optimally to GDP.

6.0 Recommendation

In order to improve the agricultural sector in Nigeria, the following should be considered.

· Government should provide funds to acquire sophisticated farm tools.

· Special incentives such as tax holidays should be given to those who engage in

agricultural activities.

· The Export Promotion Council should create markets for the exportation of

agricultural outputs.

· Economic co-operation among regions and state should be encouraged. The

benefit of such cooperation is the ability to pool resources together in order to embark

on projects that are adjudged to be beyond individual’s states and regions. It also

allowed the cooperative states to reap the benefit of economies of scale thereby
improving the welfare of the people. The ultimate goal of the cooperating states should

be to achieve accelerated rate of economic development and industrialization.

· Extension programmes aimed at educating farmers and bringing to their

knowledge modern production techniques should be faithfully pursued by the

government.
References

Koutsayinnes: Theories of Econometrics

Rostow, W.W. (1960): The Stages of Economic Growth: A Non Communist Manifesto,

London: Cambridge University Press,.

Todaro, M. P. and Smith, S. C. (2003): Economic Development, Eight Edition,

Singapore: Pearson Education.

Tombofa, S. S. (2004): Development Economics. An Introduction, : Pearl

Publishers.

Ogunleye, A.G (2005): Introduction to Macroeconomics

Appendix

Table 1: GDP, Agricultural Output

Year GDP AGRQ

1985 253013.3 11720.80

1986 257784.4 8720.600

1987 255997.0 30360.60

1988 275409.6 31192.80

1989 295090.8 57971.20

1990 472648.7 109886.1

1991 328644.6 121535.4

1992 337288.5 205611.7

1993 342228.5 218770.1

1994 345228.5 206059.2

1995 352646.2 950661.4

1996 367218.1 1309543.0

1997 377830.8 1241663.0

1998 388468.1 751856.7

1999 393107.2 1188970.0

2000 412332.0 1945723.0

2001 431783.2 1867954.0

2002 451785.7 1744178.0

2003 495007.2 3087886.0

2004 527376.0 4602782.0

2005 562043.7 6372052.0

Source: CBN Statistical Bulletin, Vol. 16, 2005

 OSUN STATE UNIVERSITY
COLLEGE OF MANAGEMENT AND SOCIAL SCIENCES

DEPT: ECONOMICS BSc.

PAPER TITLE: AGRICULTURE AND ECONOMIC

DEVELOPMENT IN NIGERIA

COURSE TITLE: THEORIES OF GROWTH AND DEVELOPMENT

COURSE CODE: ECO 308

LECTURER IN

CHARGE: DR. A.O USMAN

GROUP A

NAMES OF MEMBER AND MATRIC NUMBERS

ADEGBENRO HAMMED BAF/07/0002

ADEWALE TAOHEED ECN/07/0010

BABATOLA OBALOLUWA ECN/07/0026

BAMGBALA TAIWO ECN/07/0027

ADEJUMO IDRIS BAF/07/0027

LAWAL TAOFEEK ECN/07/0044

ABIOLA OLUWAKAYODE ECN/07/0002