CHAPTER ONE

1.1          BACKGROUND OF THE STUDY                                                                                                By the time Nigeria became politically independent in October 1960, agriculture was the dominant sector of the economy, contributing about 70% of the Gross Domestic Product (G.D.P), employing about the same percentage of the working population and accounting for about 90% of foreign exchange earnings and the federal government revenue (C.B.N 2005).The early period of post independence up until the mid 1970’s saw a rapid growth of industrial capacity and output as the contribution of the manufacturing sector to G.D.P rose from 4.8% to 8.2%. This pattern changed when oil suddenly became of strategic importance to the world economy through its supply price nexus.

 Crude oil was first discovered in commercial quantity in Nigeria in 1956, while actual production started in 1958. It became the dominant resources in the mid 1970s.The massive increase in oil revenue as an aftermath of the Middle East war of 1973 created unprecedented, unexpected and unplanned wealth for Nigeria. Notwithstanding the enviable position of the oil sector in the Nigerian economy over the past three decades, the agricultural sector has remained the largest and arguably the most important sector of the economy. Agricultures contribution to the Gross Domestic Product (G.D.P) has remained stable at between 30 and 42 percent, and employs 65 percent of the labour force in Nigeria (Aigbokhan, 2001). It is estimated to be the largest contributor to non-oil foreign exchange earnings. This means agriculture holds abundant potentials for enhancing and sustaining the country’s foreign exchange.

A strong agricultural sector, as it is recognized is essential to economic development both in its own right and to stimulate and support the growth of industries. Economic growth has gone hand in hand with agricultural progress. Stagflation in agriculture is the principal explanation for poor economic performance, while rising agricultural productivity has been the most concomitant of successful industrialization (Ukeje 1999). The labour intense character of the sector reduces its contribution to the G.D.P. Nevertheless agricultural exports are a major earner of foreign exchange in Nigeria.

 Like in most developing countries agriculture remains the backbone of the Nigerian economy. Typically it is the largest sources of employment often two third or more of the population is dependent on this livelihood on farming. It is a well known fact that Nigeria comparative advantages in the production of certain foods and other agricultural commodities that can earn foreign exchange for imports of other foods.

It has long been recognized that sustained agricultural development requires striking an appropriate balance between investments that are directly productive in agriculture and investment in infrastructures. Poor infrastructural services in developing countries lead to low productivity. Much of the high productivity of agriculture in the developed countries is as a result of massive form of investments’ over many years in physical and institutional infrastructure.

Conversely, the low productivity of agriculture in many developing countries reflects among other things, limited investment in rural roads and electricity. This stems from the concentration of public investments in urban areas where the unit cost of providing services is typically less and logistic problems fewer.

1.2          STATEMENT OF THE PROBLEM

One of the constraints of the growth in Nigeria has been the slow development of the agricultural sector. The performance of the sector was undermined by disincentives created by the macroeconomic environment.

The economic stabilization Act enacted in 1982 affected expenditures on agriculture and restricted imports of the agricultural products and inputs. A major problem confronting the agricultural sector however is in its inability to contribute to foreign exchange earnings as well as its price and income elasticity of demand. It would be extremely difficult to attain long run sustainable growth, If not impossible without addressing the problem of the agricultural sector. This raises the questions of what need to be done to develop the Nigeria agricultural sector in order to realize the potentials of the sector. This calls for new thoughts and limitations.

1.3                OBJECTIVES OF THE STUDY

·        To investigate the major causes of low productivity in agriculture in Nigeria.

·        To find out if the various policies and programs used are effective or not.

·        To identify and analyze the constraints facing the agricultural sector as an accelerator for economic growth.

·        To examine the prospect of agricultural sector in Nigeria.

·        To find out the ways to improve the competitiveness of agriculture in Nigeria and alleviate their supply-side constraint.

1.4                STATEMENT OF HYPOTESIS

HO:    That Nigeria’s agricultural sector has not contributed significantly to the economic growth at the country.

1.5                SIGINIFICANCE OF THE STUDY

The fundamental importance of this study is to examine the relationship or correlation that exists between economic and agricultural growth in Nigeria. So far, little has been done to determine the impact of agricultural sector on economic growth in Nigeria, but a number of studies have been carried out on cross country analysis of less  developed countries. This approach assumes that the impact of foreign inflow is constant across countries that are the same in all less developed countries (L.D.C’s). Most studies in this area consider only a small number of variables trying to establish agricultural growth.

The basic significance of this study is that it employs econometric models with strong theoretical under pinning that relate agriculture and economic growth in Nigeria and that growing concern of the agricultural sector. It would be useful to explore this come up with result that would help in the policy building of the Nigerian economy.

1.6                 SCOPE AND LIMITATION OF THE STUDY

The study will explore the possible ways through which the agricultural sector affects growth and inspects the direction and examine the transmission channel of the relationship between growth and agricultural index to be used for the study.

To achieve this objective, the period range from 1960-2008 data will be used. This period is chosen because published data for the variable included in the model are available. The result of this study could be limited by the quality of the data series available. This limitation arises from the problem of inconsistency of data as reported by different institutions.

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