This study looked into the impact of government agricultural expenditure on economic growth in Nigeria. Time series data were gathered from secondary sources on real GDP, government agricultural expenditure, agricultural output and agricultural credit from the CBN statistical bulletin covering the period between 1981 and 2019. Econometric methods such as Augmented Dickey-Fuller unit root test, Johansen Co-integration test, Ordinary Least Squares method and Granger Causality tests were used for data analysis. The study revealed that the overall model was statistically significant at 5% level of significance. Agricultural output and agricultural credit have a positive effect on economic growth whereas government agricultural expenditure has a negative effect on economic growth. Therefore, the study recommends that budget allocations to the agricultural sector should be closely monitored and ensured that they are channeled into the right targets. The government should also put forth policies that will promote good lending environment for agricultural related investments. Financial institutions should be made more available in rural areas where most farmers reside.
TABLE OF CONTENTS
CHAPTER ONE: INTRODUCTION
- Researchquestion – – – – – – – – 11
- Objectives ofthe study – – – – – – – 11
- Statementof hypothesis – – – – – – – 11
- Significance ofthe study – – – – – – – 12
CHAPTER TWO: LITERATURE REVIEW
CHAPTER FOUR: DATA PRESENTATION, ANALYSIS AND INTERPRETATION
CHAPTER FIVE: SUMMARY, CONCLUSION AND RECOMMENDATIONS
|5.1 Introduction – – – – – – – – –||40|
|5.2 Summary – – – – – – – – –||40|
|5.3 Conclusion – – – – – – – – –||41|
|5.4 Recommendation – – – – – – – –||41|
|REFERENCES – – – – – – – – –||43|
|APPENDIX – – – – – – – – – –||44|
|LIST OF FIGURES Figure 2.1: Conceptual framework – – – – – – –||14|
|Figure 2.2: Trend in government expenditure on agriculture in Nigeria – –||21|
|Figure 4.1: Trends on the variables – – – – – – –||34|
|LIST OF TABLES Table 2.1: Share of agriculture on the GDP – – – – – –||19|
|Table 4.1: Descriptive statistics – – – – – – –||33|
|Table 4.2: Unit root test results – – – – – – –||35|
|Table 4.3: Co-integration test results – – – – – – –||36|
|Table 4.4: OLS regression results – – – – – – –||37|
|Table 4.5: Causality test results – – – – – – –||38|
Nigeria is endowed with abundant natural resources ranging from solid minerals to arable land with varieties of agricultural produce such as palm oil, cocoa, groundnut, beans, melon, corns, and rice, among others. The hub of Nigeria economy before the advent of oil in commercial quantity was agriculture, but with the emergence of oil, there were focus shift from being agricultural dependent country to crude oil dependent nation. Since the era of oil boom in the 1970’s, Nigeria has been a victim of monolithic economy and since then have been enjoying crude crash without adequately evolving a sound policy that will put the nation’s economy on a firm foundation for steady growth. Today, oil revenue accounts for about 90% of the nation’s gross export revenue. From the 1970 oil boom era in the country, to date, heavy reliance was on oil revenue and with the fluctuation of oil prices and a subsequent sharp decline in the world oil price in the recent periods, it is obvious that over dependence on oil as major source of revenue could fail the country as it can’t finance the budget as usual (Ikpor, 2016)
Ewubare and Eyitope (2015) stated that the growth and development of any economy, to a large extent depends on the development of its agricultural sector. In Lewis’s model of economic development with unlimited supply of labor, he discussed five roles of agriculture in the development process – product contribution, factor contribution, source of employment, foreign exchange contribution and means of technological advancement (Ayesha, n.d).
Ayunku and Etale’s study (2015) identifies the agricultural sector in Nigeria as the segment that is most critical to the achievement of the elusive goal of a diversified economy. Recent researches on the reasons for development and underdevelopment haven distinguished
agricultural transformation as key to economic liberation of worsening countries. The growth and development for most nations arise from the functions of agriculture and basically from its relationships with other sectors of the economy (Oluwatoyese, Applanaidu & Abdul Razak, 2015).
Petroleum production and export play a dominant role in Nigeria’s economy and account for about 90% of her gross earnings. This dominant role has pushed agriculture, the traditional mainstay of the economy from the early fifties and sixties, to the background.
Nigeria entered recession in 2016 as a result of lower prices and production, exacerbated by militant attacks on oil and gas infrastructure in the Niger-Delta, coupled with detrimental economic policies, including foreign exchange restrictions. GDP growth turned positive in 2017 as oil prices recovered and output stabilized. With oil price volatility, the economy becomes highly vulnerable to unpredictable external shocks. This brings about the need to shift the focus from oil to the agricultural sector. This study is an improvement on other studies on the relationship between government expenditure on agriculture and economic growth in Nigeria.
Statement of the Problem
The agricultural sector used to be the primary foreign exchange earner of Nigeria. Before the Nigerian civil war, Nigeria was self-sustaining in food production. However, agriculture has now failed to keep up with Nigeria’s fast growing population, and Nigeria now depends on food imports to sustain itself. Between 2010 and 2018, Nigeria has imported agricultural products worth a total of US$231,550,000 (Central Bank of Nigeria Statistical Bulletin, 2018).
Regardless of the involvement of Nigeria in international trade, hunger, malnutrition, mass poverty and income among individuals, groups of businessmen and politicians, unemployment
and lack of executive capacity, overdependence on petroleum and import goods and services continues to take a turn for the worse thereby delaying the economic growth in Nigeria (Ijirshar, 2015).
I.3 Research Questions
At the end of this study, the researcher provided answers to the following questions:
- What is the impact of government agricultural expenditure on economic growth in Nigeria?
- What is the nature of the relationship between government agricultural expenditure and economic growth?
1.4 Objective of the Study
The broad objective of this study is to examine the impact of government agricultural expenditure on economic growth. Other specific objectives are:
- To ascertain the impact of government agricultural expenditure on economic growth in Nigeria.
- To examine the causal relationship between government agricultural expenditure and economic growth.
I.5 Hypothesis of the Study
H0 = Government agricultural expenditure has no impact on economic growth in Nigeria.
H0 = There is no causal relationship between agricultural expenditure and economic growth in Nigeria.
Significance of the Research
The significance of this research originates from the role of agriculture in the economy. Since a greater part of the population is employed in farming, the economic development is practically difficult to accomplish without building up this sector. Research on this issue is, therefore, essential to help policy decisions with regard to allocation of public expenditure. This research will also provide information to future researchers on matters concerning the relationship between government agricultural expenditure and economic growth.
The study will assist in disclosing the factors hindering the effective implementation of government policies and programmes on agriculture and will make practical suggestions towards ensuring the achievement of goals of such agricultural policies and programmes. This is important because it is only through feasible agricultural policies that the government can restore the agricultural sector and ensure its target goals and objectives in national development.