GOVERNMENT EXPENDITURE ON AGRICULTURE AND AGRICULTURAL OUTPUT IN NIGERIA (A CASE STUDY OF FEDERAL MINISTRY OF AGRICULTURE, ADAMAWA STATE)

CHAPTER ONE

INTRODUCTION

BACKGROUND OF THE STUDY

The study of history of economic provides us with ample evidence that an agricultural revolution is a fundamental pre-condition for economic development. Agriculture is the cultivation of land, raising and rearing of animals for the purpose of production of food for man, feed for animals and raw materials for industries. It involves fishing, forestry, cropping, and livestock production, processing and marketing of these agricultural products. The agricultural sector has the capability to be the industrial and economic springboard from which a country’s development can take off. The Nigerian topography ranges from mangrove swampland along the coast to tropical rain forest and savannah to the north (NPC, 2009). Nigeria is naturally endowed with abundant resources and with these reserves of human and natural resources, it has the potential to build a prosperous economy and provide for the basic needs of the population. This enormous resource if well managed could support a vibrant agricultural sector capable of ensuring the supply of raw materials for the industrial sector as well as providing gainful employment for the teeming population. Before the discovery of oil in the country in the late 1950s and early 1970s, agriculture was the dominant sector of Nigeria economy. It consisted over 65% of the country’s Gross Domestic Product (GDP) and provided the bulk of the foreign exchange earnings through the export of cash crops. The sector is one of the most important sectors of Nigeria’s economy. It holds a lot of potentials for future economic development of the nation, having played dominant role in the remote past. With the emergence of oil as a major source of government revenue and foreign exchange earner the sector was neglected and hence led to the decline. In the last decade, its impact may not have been so prominent because of the dominating effect of the oil sector which annually contributed not less than 96% of the nation’s total export earnings (CBN, Annual Report and Statement of Accounts, various Issues). The population involved in farming is between 60 and 70% (Nwajiuba, 2012). The total federal expenditure that was allotted to agriculture during 1980 to 2011 was less than 4% (CBN, 2010; JFR, 2012). Public spending (e.g. Budget) is one of the most direct effective instruments used by governments to promote agricultural growth and poverty reduction. Public spending at the federal level and sub-national level follows a basic structure-recurrent spending and capital spending. This spending structure is characterized by different expenditure categories depending on the ministry, department or agency. The nature of support given to agriculture by various governments in the country varied over the years. Before independence, the assistance to the sector was generally aimed at developing the export crops required by the overseas industries. After independence when the national development plans were prepared, agricultural support took a much more formal form, and thus presented a more serious impression of what government intended doing for the sector. However what most of the efforts later turned out to be as can be inferred from the allocations made in the various national development plans and annual budgets, leave much to be desired. When compared to other sectors of the economy, agriculture virtually received the least annual allocations that are often inadequate to put the sector on sustainable grounds. This accounts to a large extent for the poor performance of many institutional reforms and strengthening which were over the years undertaken in the sector. There have been a number of valuable studies on the relationship between agriculture and economic growth. Agriculture resource has been an important sector in the Nigerian economy in the past decades, and is still a major sector despite the oil boom. Ogen (2007) believes that the agricultural sector has a multiplier effect on any nation’s socio-economic and industrial fabric because of the multifunctional nature of agriculture. Ogwuma (2010), studied on public expenditure in agricultural sector using econometric analysis. Based on his report, agricultural financing in Nigeria shows positive relationship between interest rate and funds loan on the level of agricultural output. Using time series data, Lawal (2011) attempted to verify the amount of federal government expenditure on agriculture in the thirty-year period 2007 to 2014. Significant statistical evidence obtained from the analysis showed that government spending does not follow a regular pattern and that the contribution of the agricultural sector to the GDP is in direct relationship with government funding to the sector. Adofu et al. (2012) in their work; effects of government budgetary allocation to agricultural output in Nigeria (2009-2015) show that the percentage, degree or amount of budgetary allocation to agricultural sector has a positive relationship with the total agricultural production in the country. This implies that the more the public spending on agricultural sector, the more the improvements in the performance of the agricultural sector. Also, a large degree of change in agricultural output is accounted for by change in budgetary allocation to agricultural sector. Thus, budgetary allocation to agriculture has a large impact on agricultural output. However, none of these studies employed Granger Causality to analyze the relationship between government expenditure and agric output that is if government expenditure granger causes agric output or agric output granger cause government expenditure. This study is an improvement on other studies on the relationship between government expenditure on agriculture and agricultural output in Nigeria.

STATEMENT OF THE PROBLEM

Inadequate funding of the agricultural sector has been mentioned by several experts as an obstacle to increased agricultural output (CBN, 2007). However, from a nominal point of view, it is evident that in  Nigeria, government spending on agriculture has continued to increase over the years while empirical evidence have revealed that the performance of the agricultural sector in Nigeria has  been  inadequate. The Nigerian agricultural sector which was the main stay of the economy is no longer performing the lead role it was known for. By mid 1970’s Nigeria’s agriculture started to experience problems, agricultural exports began to decline and food shortages started emerging. From 1975, there was increased revenue from petroleum, government assumed heavier responsibilities for agricultural production, input supply and marketing; in addition to adopting credit control and other policies allocated in favor of agriculture. Agricultural production stagnated at less than 1% annual growth rate between 1970 and 1982. There was a decline in export crop production, while food production increased only marginally.  Thus, domestic food supply had to be augmented with large imports. Food import bill rose from a mere N113.88 million annually in 1970-1974 to N1964 million in 1991. Since 1999 and until recently, Nigeria has been spending an average of 60 million USD on the importation of rice annually (Alkali, 2015).  Indeed in 2015, the agricultural sector performed below the projected 7.2% of budgetary output. Theoretically, input-output theory in economics posits that input determines output. More so, Keynes postulated that increased government spending boosts economic growth. In the case of Nigeria, there has been a conflicting view about spending on agriculture.  Therefore there is need to examine the extent to which government expenditure as an input has affected agricultural production as an output. It is in the light of this that this research was carried out to study government expenditure on agriculture and agricultural output in Nigeria.

AIMS AND OBJECTIVES OF THE STUDY

The major aim of the study is to examine government expenditure on agriculture and agricultural output in Nigeria.  Other specific objectives of the study include;

1. To examine the amount of money spend on agricultural sector by government in Nigeria.
2. To assess the level of agricultural output in Nigeria.
3. To examine the impact of Public expenditure on agriculture and agricultural output
4. To examine the ways government policies on agriculture will enhance private and public participants in the sector.
5. To examine the relationship between Public expenditure on agriculture and agricultural output.
6. To highlight alternative procedures that can be taken to impure methods of enhancing agricultural output effectively.

RESEARCH QUESTIONS

1. How is the spending on agricultural sector by government in Nigeria?
2. What is the level of agricultural output in Nigeria?
3. What are the impacts of Public expenditure on agriculture and agricultural output?
4. In what ways will government policies on agriculture enhance private and public participants in the sector?
5. What is the relationship between Public expenditure on agriculture and agricultural output?
6. What are the alternative procedures that can be taken to impure methods of enhancing agricultural output effectively?

RESEARCH HYPOTHESES

Hypothesis 1

1. : Public expenditure on agriculture has no significant impact on agricultural output.
2. : Public expenditure on agriculture has a significant impact on agricultural output.

Hypothesis 2

1. : There is no significant relationship between public expenditure on agriculture and agricultural output in Nigeria.
2. : There is a significant relationship between public expenditure on agriculture and agricultural output in Nigeria.

SIGNIFICANCE OF THE STUDY

The study would be of immense benefit towards the development of agriculture in Nigeria by properly assessing the importance of agriculture to the country at large. The study would also be of immense benefit to students, researchers and scholars who are interested in developing further studies on the subject matter.

SCOPE AND LIMITATION OF THE STUDY

The study is restricted to government expenditure on agriculture and agricultural output in Nigeria, a case study of federal ministry of agriculture, Adamawa state.

LIMITATION OF THE STUDY

Financial constraint: Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview)

Time constraint: The researcher will simultaneously engage in this study with other academic work. This consequently will cut down on the time devoted for the research work.

1. DEFINITION OF TERMS

Government Expenditure: It refers to the purchase of goods and services, which include public consumption and public investment, and transfer payments consisting of income transfers (pensions, social benefits) and capital transfer

Agriculture: The science, art, or practice of cultivating the soil, producing crops, and raising livestock and in varying degrees the preparation and marketing of the resulting products.

Agricultural output: is the main measure of individual crop and livestock output. It comprises: (a) Crop enterprise output, which is the total value of crops produced by the farm (other than losses in the field and in store).