AN ASSESSMENT OF THE DETERMINANTS OF AGRICULTURAL OUTPUT IN NIGERIA: 1981-2018.

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ABSTRACT.

This study assesses the determinants of agricultural output in Nigeria using annual data covering periods from 1981 to 2018. The variables employed were Agricultural Growth (AG), Agricultural Credit (AC), Government Expenditure on Agriculture (GEA) and Money Supply (MS) with Agricultural Growth (AG) as the dependent variable. The study employed the use of econometric analysis such as; Descriptive statistics, Unit root test (ADF), Granger causality test, Johansen co-integration test and Ordinary least square (OLS) regression. Specifically, this study was carried out to assess whether or not the selected variables have any impact on the level of agricultural output in Nigeria and to investigate the causal relationship between these variables and agricultural output. The study revealed that Agricultural Credit (AC) and Government Expenditure on Agriculture (GEA) both have negative effects on Agricultural output whereas Money Supply (MS) has a positive effect on Agricultural output spanning the period of 1981-2018. The study however recommended programs which will support the agricultural sector by providing the farmers with easy access to loans without the issues they face at the banks. The study also recommended the government making financial adjustments on the country’s annual budgets in such a way that more funds are allocated to the agricultural sector which can make it a priority.

 TABLE OF CONTENTS 
CONTENT PAGE
  TITLE PAGE   I
CERTIFICATION II
APPROVAL PAGE III
DEDICATION IV
AKNOWLEDGEMENT V
ABSTRACT VI
TABLE OF CONTENTS VII
LIST OF TABLES VIII
LIST OF FIGURES IX
LIST OF ACRONYMS X
   CHAPTER ONE: INTRODUCTION 

CHAPTER TWO: LITERATURE REVIEW AND CONCEPTUAL FRAMEWORK

  1. Introduction                                                                                                             9
    1. Conceptual Framework                                                                                         9
    2. Empirical Literature                                                                                              11
    3. Theoretical Framework                                                                                         16

CHAPTER THREE: METHODOLOGY

  1. Introduction                                                                                                            18
    1. Research Design                                                                                                     18
    2. Methods Of Data Collection                                                                                  18
    3. Methods Of Data Analysis                                                                                    19
    4. Model Specification                                                                                                21

CHAPTER FOUR: DATA ANALYSIS, RESULTS AND INTERPRETATION

  1. Introduction                                                                                                            23
    1. Descriptive Statistics                                                                                              23
    2. Unit Root Test (ADF)                                                                                            25
    3. Johansen Co-Integration Test                                                                               25
    4. OLS Regression                                                                                                      27
    5. Granger Causality Test                                                                                         28

CHAPTER FIVE: DISCUSSION OF RESULTS, CONCLUSION AND RECOMMENDATION

  1. Introduction                                                                                                           30
    1. Summary of Findings                                                                                           30
    2. Conclusion                                                                                                             31
    3. Recommendation                                                                                                  31

REFERENCE APPENDICES

LIST OF TABLES

TABLE 1:                  Descriptive Statistics

TABLE 2:                  Unit Root Test

TABLE 3:                  Johansen Co-integration test

TABLE 4:                  OLS regression

TABLE 5:                  Granger causality test

LIST OF FIGURES

FIGURE 2.1:                         Conceptual Framework

FIGURE 4.1:                         Trends of the Variables

LIST OF ACRONYMS

GDP                                       Gross Domestic Product

AG                                          Agricultural Growth

AC                                          Agricultural Credit

MS                                          Money Supply

GEA                                       Government Expenditure on Agriculture

OLS                                        Ordinary Least Square

SAP                                        Structural Adjustment Program

FDI                                         Foreign Direct Investment

CBN                                       Central Bank of Nigeria

ADF                                        Augmented Dickey-Fuller

CHAPTER ONE INTRODUCTION.

            BACKGROUND OF THE STUDY.

Agricultural output has been the backbone of the Nigerian economy long before the discovery and exploration of crude oil resulting in the country’s dependence on crude oil for the economy’s growth. Agriculture made provision of employment for about 30% of the population as at 2010 and approximately 70% of the population engages in agricultural production at a subsistence level.

Before the discovery of crude oil (the pre-colonial era), agriculture first served as the major source of livelihood and served up to 75% of the whole population. Agriculture however was mostly embarked on for sustenance and not for export. In the terms of trade however, it was only used for the trade by barter system. Overtime, the productivity began to increase significantly and soon enough was the country’s main source of revenue as it was used for exports before the advent of oil discovery in the early 1970s.

As of 1999, agriculture provided 41% of Nigeria’s total gross domestic product (GDP), this percentage exemplified a normal decrease of 24.7% from its input of 65.7 percent to the GDP in 1957. It was predicted that the decrease will continue due to the fact that as economic development occurs, the virtual size of the agricultural sector usually declines.

The agricultural sector is becoming more important to the cause of national development especially in developing countries such as Nigeria which has been acknowledged by all. Despite the years of neglect the sector has faced, it still remains one of the major contributions to Nigeria’s economic stability. It has also been acknowledged that without proper sustainable development of this sector, the levels of growth and development the country aims for will continue to be an illusion (Emeh, 2014).

The agricultural sector in Nigeria has faced a number of problems which ultimately hinders the growth rate of the sector. These problems range from the neglect by the government down to the little issues the farmers face when growing their crops or rearing their livestock. The major issue facing the agricultural sector in developing countries such as Nigeria is the issue of financing. Since the government focuses mainly on the oil sector of the country, the agricultural sector is not fed enough to flourish. This means that the government does not spend enough on the sector for maintenance. Also, the farmers face a challenge trying to secure loans for their farms. These are just some of the basic issues faced by the sector which can ultimately affect the output rates and overall growth of the sector.

Ultimately, government spending and access to loans by the sector can have a progressive effect on the development rate of agriculture in the country. However, if certain factors are not taken into consideration in addition to the financial contribution, there may be a negative effect on the agricultural growth. Some of these subordinate factors could however be enhanced in such a way that in addition to the financing of the sector, agriculture can flourish even more

and in some cases when the financing levels are low, the sector is able to make progress and produce altering results.

                          STATEMENT OF RESEARCH PROBLEMS.

Nigeria, based on the resources it has readily available, has every means of becoming a major factor in the world economy. The country is abundant in both Human capital and Natural resources and has incredible soil which can be used as an agricultural advantage.

Before the oil boom in the late 1960s, Nigeria mostly depended on agriculture as a source of foreign revenue but then quickly switched to oil and gas as a source of revenue generated. The influence of agriculture on the economic growth of Nigeria is very low paralleled to what it used to be in the past. The agriculture now retains the features of a peasant economy that produce on subsistent levels, which was prominent in the pre-independence period.

Despite the revenue gotten from exports, agriculture possesses a massive role in the expansion of the economy in the sense that it provides job opportunities, produces the raw materials used by industries for further processing, contributes to food security and reduces the level of poverty in the country.

However, agriculture does not just happen and grow successfully, in fact, there are a number of factors which influence the output or productivity of agriculture in Nigeria which is exactly what this paper talks about. It is aimed at looking at the major variables involved in determining the

level of agricultural growth in the country and in the type of relationship that exists between the chosen variables and the growth rate of agriculture.

The level of agricultural output currently has been calculated as not enough to feed the nation due to some factors in relation to the Malthusian theory of population which assumed that the world population grows at a geometrical rate and that food supply grows in an arithmetic progression. This implies that food supply grows at a slower frequency than the population.

The slow growth of agriculture depends on a number of factors such as government expenditure, climate change and agricultural loans.

This study aimed to look at some of these key factors and see how they affect agricultural output, what the relationship is and how they can be altered or worked on to increase agricultural productivity thus leading to an increase in the country’s GDP.

            RESEARCH QUESTIONS.

  1. What is the relationship between the selected independent variables and agricultural growth?
  2. What is the nature of the relationship between the variables and agricultural growth

            OBJECTIVES OF THE STUDY.

The extensive objective of the study was to assess the determinants of agricultural output in Nigeria. To attain the broad objective, the following detailed objectives were pursued;

  1. To assess the relationship between the selected variables and agricultural growth.
  2. To determine the nature of the relationship between the variables and agricultural growth.

            STATEMENT OF HYPOTHESIS.

The hypotheses that were tested in this paper are as follows:

H: The selected determinants have no significant relationship with agricultural growth in Nigeria.

H: The selected determinants have no causal relationship with agricultural growth in Nigeria.

            SIGNIFICANCE OF THE STUDY.

The impact of agricultural output in Nigeria and its economy cannot be stressed enough. Apart from providing employment for the citizens and an increase in exportable commodities, it is also embarked on a sustenance level, that is, on a small scale level for consumption.

Agriculture also shows its importance on a wider scale, that is, nationwide. Nigeria as an example depends on agriculture as a part of its national revenue and as a way to increase the country’s GDP.

In Nigeria’s agricultural history, the sector has always been considered inferior as the country depends solely on crude oil exportation. This has not only affected the GDP of the country in terms of export and low foreign exchange earnings, but it has also affected the country internally as we do not produce on such high scales to feed the nation. As the ban on rice was implemented, the agricultural sector began to look up as rice farmers as well as farmers of other crops began to produce on a commercial level and not just for sustenance. This has improved the agricultural sector in a way but it still faces some challenges which hinders its growth. These hindrances are nothing more than the determinants not fully given attention to which slow down the progress of the agricultural segment.

The issues of the agricultural sector can also be related to the Malthusian theory of population which states that population grows at a geometric level while food progresses at an arithmetic level. this further goes to say that a country might not achieve economic growth if there isn’t enough food supply to feed the entire population. Nigeria is currently facing this issue as we have a high population density which keeps multiplying in a geometric fashion and an agricultural sector that is not fully concentrated on which then grows in an arithmetic fashion. This affects the growth rate of the country severely.

The study was therefore aimed at examining the factors that determine agricultural growth in Nigeria and how these factors can be efficiently focused and worked on to increase agricultural

productivity to improve the country’s GDP. Knowing the major determinants of agricultural growth and how the variables affect the growth rate can drastically increase the economic growth rate of a country if properly enhanced and maintained.

The result of this study shall contribute significantly to the entire nation by suggesting ways to reduce the import rates of the country so as to boost the GDP and agricultural growth and also to get the government to focus on the selected determinants so as to eradicate the issue of hunger in Nigeria. The study also aims to contribute as material for academic references in the line of agricultural economics to be precise.

            SCOPE AND LIMITATION OF THE STUDY.

This work focuses on discussing the determinants of agricultural output in Nigeria and assessing the affiliation between these factors and the level of productivity in agriculture. For this study, time series data ranging from 1981 to 2018 was adopted. The time period chosen for this research was based on the availability of data for the research.

            ORGANIZATION OF THE RESEARCH.

This research was organized in five chapters each chapter containing a detailed explanation contributing to the main research.

Chapter 1 of this study focused on the introduction, statement of research problems, statement of hypothesis, research questions, significance of the study and the scope and limitations of the study.

Chapter 2 looked explicitly at the literature review and conceptual framework of the study. The theoretical framework shall also be looked at in this chapter.

Chapter 3 included the research design, methods of data collection, procedure for data analysis and the model specification.

Chapter 4 looked at the data analysis and results presentation, test of hypothesis and the discussion of findings.

The final chapter, chapter 5, consisted of the conclusion, recommendation and suggestion for further research. Finally, the references and appendices of the study round up the research.