IMPACT OF AGRICULTURAL EXPORTS ON ECONOMIC GROWTH IN NIGERIA

IMPACT OF AGRICULTURAL EXPORTS ON ECONOMIC GROWTH IN NIGERIA

BACKGROUND TO THE STUDY

 Prior to the discovery of petroleum and its commercial mining in Nigeria, Nigeria was essentially an agricultural society. Agriculture dominated not only government revenue and export earnings, but was also the major employer if labour. Its contribution to the gross domestic product (GDP) in 1970 stood at 78% while over 60% of the total workforce was actively engaged in the sector. Given that agriculture was the major component of Nigeria’s total exports within this period, it was a major foreign exchange earner as well as a significant proportion of government revenue. These highlight the dominant role of agriculture in the pre-oil-boom era of 1972-73 in Nigeria.  

The oil boom era recorded a declining composition of agriculture in the aggregate GDP as it stood at 20.6% and 23.3% in 1980 and 2005 respectively. Agricultural exports are negligible and represents about 0.2% of total exports. Nevertheless, agriculture remains the largest employer of labour engaging an estimated 60% of Nigerians which also ensures availability of inputs for agricultural-based industries.

As the oil sector gains dominance due to massive exploration and exportation of the product, the agricultural sector becomes increasingly insignificant as a component of total exports from Nigeria to other countries. Presently, the oil sector is the principal source of government revenue accounting for 76% of foreign exchange in 2004 and 90% in 2010(World Bank report, 2011).

The dominance of the oil sector also has some undesirable effects. First, the high level of dependence on the sector exposes the country to vagaries in the world market and as such increases her vulnerability to external shocks. This was evident in the global economic downturn of 2007 which led to a drastic drop in the price per barrel of crude oil from about $100 in 2008 to $50 in 2010/1011 thereby putting enormous strains on the nation’s revenue and foreign exchange. Secondly, the oil sector operates like an enclave economy. In other words, apart from serving as a foreign exchange earner, its impact on the rest of the economy in terms of labour employment is disproportionately less than the value of its economic activities, hence, the imperative for developing the non-oil sector whose main component is agriculture which still accounts for about 60% of labour employment.

Consequently, policies, programs and institutions have been initiated and established in Nigeria not just to promote non-oil exports but also to meet the insistent demands for a high standards of living as well as fast-track a sustainable economic growth for Nigeria. As a result, the Nigerian export promotion council (NEPC), the Nigerian agricultural corporative and rural development bank (NACRDB), among other institutions and policies, have been established to achieve this macroeconomic objective. These stem from the recognition that, given labour availability, a tremendous increase in production and exportation of agricultural products can enable Nigeria achieve a sustainable and high economic growth rate and consequently solidify the nation’s developmental process.         

​​​​​​​STATEMENT OF PROBLEM

 In terms of employment, agriculture is by far the most important sector in Nigeria engaging about 60% of the total workforce. Agricultural holdings are generally small and scattered. Farming is often of the subsistence variety characterized by simple tools and shifting cultivation. However, this sector produces about 80% of the total food consumed in Nigeria thereby emphasizing its imperative in the sustainability of the Nigerian economy.

The tremendous increase in foreign exchange earnings and government revenue which occurred in the early 1970’s- popularly called oil boom- saw a sudden displacement of agriculture as the main stay of the Nigerian economy. The subsequent neglect of the sector as well as the non-oil sector in general resulted in the relegation of agriculture to the background, as a source of either foreign exchange or government revenue even though it retained its dominance in terms of employment. Oil became the life wire of the Nigerian economy.

But as explained earlier, the heavy dependence on the oil sector is harmful to the economy. Oil earnings depend on the world oil price as oil exports are subject to a quota. Thus the Nigerian economy is exposed to the vagaries of the world oil market which in turn, is subject to the vicissititudes of the economies of western countries which are the main consumers.

As way of reducing the vulnerability of the economy to external shocks occasioned by wild swings in oil prices, the Nigerian government institituted and executed a number of policies aimed at stimulating the non-oil sector. Given its strategic importance as the engine of growth of the economy, and its previous position as the country’s major foreign exchange earner, agriculture was given a prime position in these policies. But how far agriculture has responded to these measures in not very clear. It is against this background that this study seeks to assess the contribution of agricultural exports to the growth of the Nigerian economy over the review period.

​​​​​​​RESEARCH QUESTIONS

    This research work is designed to address the following questions:

1. What programmes have been instituted by the government to promote the exportation of agricultural commodities?

2. What is the relationship between agricultural exports and economic growth in Nigeria?

3. What are the factors militating against a substantial improvement in the exportation of agricultural products?

4. How can agricultural exports be increased?

OBJECTIVES OF THE STUDY

 The major objective of this study is to examine the contribution of agricultural exports to gross domestic product (GDP) in Nigeria, specifically the study will:

1. Examine specific policies and programmes initiated by the government to promote the exportation of agricultural crops or commodities.

2. Ascertain the functional relationship between agricultural exports and economic growth in Nigeria.

3. Examine factors inhibiting a substantial improvement in the exportation of agricultural commodities.

4. Suggest and recommend measures that would enhance and promote the exportation of agricultural commodities for a high and sustainable GDP.

HYPOTHESIS OF THE STUDY

  Given the objectives of the study as outlined above, the research work sets     out to test the following hypothesis:

H0: Agricultural exports have made no significant contribution to the growth of the Nigerian economy.

H1: Agricultural exports have contributed significantly to the growth of the Nigerian economy.

​​​​​​​SIGNIFICANCE OF THE STUDY

 This research work will evaluate and review the significance of agricultural exports on the overall economic growth of Nigeria.

 It will provide a roadmap for the much needed diversification of the Nigerian economy and consequently expose the dangers of over relying on the oil sector.

 The study will provide useful information to the government and other stakeholders for planning and policy formulation.

In addition, this research work will contribute to existing stock of literatures as a reference point and a basis for further research.

​​​​​​​SCOPE OF THE STUDY

The focus of this research is on agricultural exports and gross domestic product (GDP). However, other explanatory variables such as exchange rate and government expenditure on agriculture have been included in the model due to their economic imperatives in determining agricultural exports and economic growth.

  The geographical area covered in the study is Nigeria. The study examines the behavior of agricultural exports on economic growth over a 41-year period from 1970 to 2010.

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