INTRODUCTION
Resources of the entire world can be
developed to the fullest extent and can progress only by the efficient and
rational use of the natural resources. It is indeed no doubt that Nigeria is
blessed with abundant natural resources. And that’s where agriculture comes to
play because; it constitutes one of the most important sectors of the Nigerian economy.
This enormous resource base 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, and as well eradicates poverty in the economy.
The importance of
agriculture resources in bringing about economic growth and sustainable
development of a nation like Nigeria cannot be underestimated. Oji-Okoro (2011) in his opinion stated that 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; basically it
provides employment opportunities for the teeming population, eradicates
poverty and contributes to the growth of the economy. Olajide,
Akinlabi, and Tijani (2012)
opined that a strong and efficient agricultural sector would enable a country
to feed its growing population, generate employment, earn foreign exchange and
provide raw materials for industries. In the same view, Ahmed (2000) stated
that agriculture is the mainstay of many economies and it is fundamental to the
socio-economic development of a nation because it is a major element and factor
in national development.
In the
1960s, with a retrospective look into the agricultural sector and its
contributions to the development of the Nigerian economy, it reveals that
agriculture accounted for well over 80 percent of the export earnings and
employment; about 65 percent of the GDP (gross domestic product) and about 50
percent of the government revenue (FRN, 2000). However, over the years,
agriculture contribution to the Nigerian economic growth has declined.
Muhammad-Lawal and Atte
(2006) stated that the contribution of agriculture to the GDP was about 50% in
1970 and 34% in 2003. They further pointed out that in the present times,
agriculture no longer serves as the leading contributor to Nigeria’s gross
national product and leading foreign exchange earner due to phenomenal growth
in the petroleum sector of the economy. Despite the neglect of the agriculture
sector, agriculture is still the dominant economic activity in terms of
employment and linkages with the rest of the economy (Nigeria National Planning
Commission, 2004). Chigbu (2005) added that while
accounting for one-third of the GDP, agriculture remains the leading employment
sector of the vast majority of the Nigerian population as it employs two-third
of the labour force.
According
to Ukeje (2005), the principal constraint to the
growth of the agricultural sector is the fact that the structure and method of production
has remained the same since independence more than four decades ago. Despite
the reliance of Nigerian peasant farmers on traditional tools and indigenous
farming methods, these farmers produced 705 of Nigerian’s exports and 95% of
its food needs (Onunze, 2012). It is based on the above, that the study therefore intends
to examine the relationship between the agricultural exports and economic
growth in Nigeria.
During the period of
the oil boom in Nigeria which coincided with the civil war from 1967 to 1970,
there was an extensive exploration and exportation of petroleum products which
resulted in neglecting the agricultural sector in favour
of the high revenue gotten from oil. Ever since then, Nigeria has been
witnessing extreme poverty and insufficiency of basic food items.
In relation to the
growth of the economy, the contribution of the agriculture sector in terms of
exports to the Gross Domestic Product (GDP) in Nigeria have not been
encouraging, as evidence from CBN (2016) and NBS (2017) revealed that from the
1960s to the 1970s, the agricultural sector contribution to Nigeria’s GDP was
48 percent and it continues in 1980 to 20percent and 19 percent in 1985 which
was majorly as a result of oil glut of the 1980s (Ukeje,
2003). According to Onunze (2012), the agricultural
sector contributions and its exports now account for less than 5% of Nigeria’s
GDP. From the 1990s to 2000, the agricultural sector contribution to Nigeria’s
GDP was 2.95 percent and kept on rising from 3.88 percent in 2001 to 4.25
percent in 2002, and up to 7.40 percent in 2006 (CBN, 2015). As at 2007, the
agriculture contribution to the GDP declined slightly to 7.20 percent which
further declined to 6.30 percent in 2008, 5.90 percent in 2009; from 2010 to
2012, it declined to 4 percent and 2.61 percent in 2013 (CBN, 2016). In 2017,
the agricultural sector output stood at 4.23 percent from 3.06 percent in 2016
(NBS, 2017). With the above trend, it shows that agricultural exports have not
trickled down to the growth of the Nigerian economy. Thus, there have been a declining contribution of the agricultural
exports and its sector to economic growth in Nigeria.
The exportation of cocoa,
groundnut, rubber and palm products reduced drastically because of the huge
revenue gotten from oil production. The decline in agricultural production and
exportation was largely due to the rise of oil shipments.
However, the
dependence on oil is not only the cause of the under-development of the
Nigerian agricultural sector. Other causes include poor storage facilities
which have led to so much wastage and high cost of storage. This also hinders
the availability of source of perishable agricultural produce; poor and
unavailability of irrigation facilities for tackling weather conditions (i.e.
the dry seasons). Because of this, during dry season farmers stop farming
activities due to unavailability of water; inadequate financial assistance from
the government and cooperate bodies. Farmers do not get credit easily from
financial institutions, like commercial banks. And because of this, they find
it difficult to finance projects which are capital intensive; dependence on
imported foods has also contributed to disincentive investment in local
farming.
In the light of the
above, it is quite clear that the agricultural sector has really got a lot to
contribute to the economic growth of the country. Therefore, the study is hinged to examine the impact and relationship
between the agricultural exports and economic growth in Nigeria. As a
result, the following questions have been designed to
guide the study: What is the impact of agricultural exports on economic
growth in Nigeria? What is the long-run relationship between agricultural
exports and economic growth in Nigeria? Objectively, the study basically examines
the impact of agricultural exports on economic growth and the extent at which
the sector has contributed to Nigeria’s economic growth. Specifically, the
study intends to examine the impact of agricultural exports on economic growth
in Nigeria and to examine the long-run relationship between agricultural
exports and economic growth in Nigeria. Based on the research questions that
will be investigated, the research null hypotheses of the study include:
H0: agricultural
exports have no significant impact on economic growth in Nigeria.
H0: there
exists no significant relationship between agricultural exports and economic
growth in Nigeria.
In support of its
objectives, the study has its theoretical backing from the endogenous growth
model which associates growth to endogenous factors, other than external
forces. It represents a key component of the emerging development theory. The
endogenous growth theory provides a theoretical framework for analyzing
persistent Gross National Product (GNP) growth that is determined by the system
governing the production process rather than by forces outside that system (Adofu, Taiga, and Tijani, 2015).
According to Adofu et al (2015), the principal motivations of the endogenous growth
theory are to explain both growth rate differentials across countries and a
greater proportion of the growth observed.
The
endogenous growth theory seeks to explain the existence of increasing returns
to scale and the divergent long-term growth patterns among countries by
assuming that public and private investments in human capital generate external
economies and productivity improvements that offset the natural tendency for
diminishing returns. Thus, the endogenous growth theory can be expressed in a
simple Harrod-Domar growth model as:
[1] Y=AK
where
‘A’ represents any factor
that affects technology, and ‘K’ captures
both physical and human capital (Ojeka, Effiong, and Eko,
2016).
In this formula,
there are no diminishing returns to capital, so the possibility exists that
investments in physical and human capital can generate external economies and
productivity improvements that exceed private gains by an amount sufficient to
offset diminishing returns. And the net result is sustained long-term growth (Adofu et al.,
2015).
Empirically, Anyanwu,
Offor, Adesope, and Ibekwe (2013) examined the structure and growth of the GDP
over the 49 years of the nation’s existence, using multiple regression analysis
and discovered that agriculture was among the key significant determinant of
Nigeria’s GDP with clear dominance from 1960-1984. This dominance is attributed
to the fact that agricultural and macroeconomic policies of various governments
then were skewed towards massive crop production.
Ekpo and Umoh (2012) revealed that the contribution of agriculture
to GDP, which was 63 percent in 1960, declined to 34 percent in 1988, not
because the industrial sector increased its share but due to neglect of
agriculture sector.
Muhammad-Lawal and Atte (2006) adopted the
descriptive statistics and regression analysis to examine the growth of the
agricultural sector of the Nigerian economy. The study showed that the overall
agricultural production average growth rate was 5.4 percent and that GDP growth
rate, population growth rate, and the Consumer Price Index were the main
factors affecting domestic agricultural production.
Suleiman and Aminu (2010) conducted research on the contribution of
agriculture, petroleum and manufacturing sector of the Nigerian economy and
found out that agricultural sector is contributing higher than both petroleum
and manufacturing sectors. Their study reveals that agriculture is contributing
1.7978 units to GDP while petroleum is contributing 1.14 units to GDP, which is
less than the contribution of agriculture.
Oji-Okoro (2011) employed multiple regression analysis to
examine the contribution of agricultural sector on the Nigerian economic
development. They found that a positive relationship between Gross Domestic
Product (GDP) vis-a-vis
domestic saving, government expenditure on agriculture and foreign direct
investment between the period of 1986-2007. It was also revealed in the study
that 81% of the variation in GDP could be explained by Domestic Savings,
Government Expenditure and Foreign Direct Investment.
In addition, Lawal (2011) using time series data, attempted to verify
the amount of federal government expenditure on Agriculture in the thirty-year
period 1979 – 2007. 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.
Iganiga and Unemhilin (2011) studied the effect of federal government
agricultural expenditure and other determinants of agricultural output on the
value of agricultural output in Nigeria. In their study, they performed a
comprehensive analysis of data and estimated the Vector Error Correction model.
Their results showed that federal government capital expenditure was found to
be positively related to agricultural output.
Olajide, Akinlabi, and Tijani (2012)
analyzed the relationship between agricultural resources and economic growth in
Nigeria from 1970 to 2010. The Ordinary Least Square regression method was used
to analyze the data. The results revealed a positive cause and effect
relationship between Gross Domestic Product and agricultural output in Nigeria.
According to them, the agricultural sector is estimated to contribute 34.4%
variation in Gross Domestic Product.
Virtually all the
studies reviewed above revealed that the agricultural sector has a positive
impact on the economic growth of Nigeria. However, none of the reviewed studies
examined the impact of agricultural exports on the Nigerian economy. Ekpo and Umoh (2012) revealed
that the contribution of agriculture to GDP decreased from 1960 by 63% to 34%
in 1988. Anyanwu et
al (2013) revealed similar analysis in their study that the agricultural
sector had its dominance of contribution on economic growth from 1960-1984.
Iganiga and Unemhilin (2011) and Lawal (2011)
performed an analysis on the effect of federal government agricultural
expenditure and other determinants of agricultural output on the value of
agricultural output in Nigeria, disregarding the relationship and effects of
agricultural exports on economic growth (GDP).
Oji-Okoro (2011) and Olajide et al (2012) recorded a positive
relationship between agricultural sector and economic growth using multiple
regression analysis without capturing determinants like inflation rate and
exchange rate which will examine the effect of
institutional framework to check government commitment on the provision of
infrastructures that will attract investors in the agriculture sector, which
will in turn improve the agricultural sector in Nigeria.
Based on the gap in
the empirical literatures revealed above, this study therefore conducted its
analysis using multiple regression Technique-Ordinary Least Square (OLS) method
to determine the relationship between agricultural exports and economic growth
(GDP) in Nigeria, capturing inflation rate and exchange rate. And in other to
ensure that the regression is not spurious and to determine the existence of
long run relationship among the variables, the study was subjected to
stationary test using Augmented Dickey-Fuller test and Co-integration test
respectively.
MATERIALS
AND METHODS
This
work adapted the Ordinary Least Square (OLS) technique and the Augmented Dickey
Fuller (ADF) test method. The model incorporates agricultural exports,
inflation, exchange rate, and economic growth proxied
by Gross Domestic Product (GDP) growth which covers the period of 36 years (1981
to 2017). The incorporation of inflation and exchange rates examines the effect
of government policy framework to checkmate the commitment on the provision of
infrastructures that will attract investors in the agriculture sector, which in
turn will check the level of improvement of the overall agricultural sector.
Our
multiple regression is structured as in Equation [2];
[2] GDP = 
Where
GDP is Real Gross Domestic Product; AEXP is Agricultural exports (% of merchandise export); INF is Inflation Rate; and INT is Interest Rate.
Econometrically,
the model is specified in Equation [3];
[3] LogGDP = a0 + a1AEXP + a2INF + a3EXH
+ u
Where
a0, a1, a2,
and a3, are
coefficients; and u is the residual. The apriori expectation is thus: a1 > 0, while; a2, a3 < 0.
This
study utilizes the use of Ordinary Least Square (OLS) methodology in its
analysis. This was facilitated through the use of E-view Econometric software
version 7.0. And to ensure that the outcome of the regression is not spurious,
the data set was subjected to a stationary test using the Augmented Dickey
Fuller test. And to determine the existence of long run relationship among
the variables in the model, Co-integration test was conducted.
RESULT AND
DISCUSSION
Unit Root
Test Result
The Augmented Dickey-Fuller unit root test is
carried out on Appendix 2 to test for the existence of unit root in the time
series data. The Augmented Dickey-Fuller unit root test result on Appendix 2
indicates that at 5% critical level, the time series data for all the variables
except for agricultural export (AEXP) were non-stationary at levels. But at
first difference all the variables were stationary, indicating the presence of
unit root in all the time series data.
Co-Integration
Test Result
The Johansen test of Co-integration is
conducted on Appendix 3 to determine the existence of long run relationship
among the variables. The co-integration rank test on Appendix 3 shows that the trace test indicates 2 co-integrating
equations at the 5% level. However, the max-eigen value test indicates no co-integrating equation
at 5% level. On the basis of the trace
test statistics, the conclusion that there exists a long run relationship among
the variables is made.
Ordinary
Least Square (OLS) Result
The results of the multiple regression
analysis on Appendix 4 shows that at 5% critical level, agricultural export
(AEXP) had a positive and significant impact on economic growth in Nigeria. Its
coefficient value of 0.052610 states that a unit increase
in agricultural export, holding other variables constant increases GDP by 5 per
cent. With a probability value of 0 per cent which is significantly less than 5
per cent, the agricultural export was statistically significant.
The Inflation
variable (INF) had a positive impact on growth, which is against a priori
expectation, it was however not statistically significant. Its coefficient
value of 0.000964 can be interpreted thus, that a unit increase in inflation
rate holding other variables constant, economic growth increases by 0 per cent.
It had a probability value of 55 per cent, making its coefficient insignificant
at 5 per cent critical level.
Exchange rate (EXH)
for the period under review had a positive and significant impact on economic
growth. That a unit increase in exchange rate holding other
variables constant increases economic growth by 0 per cent. Its
probability value of 0.0000 was however found to be statistically significant
at 5 per cent level.
The overall goodness
of fit of the model as indicated by the R-Squared coefficient of determination
is 0.914677; it shows that about 91 per cent of the variation experienced in
GDP in Nigeria for the period being investigated may be explained by the
independent variables included in the model.
The
f-statistic which measures the joint statistical influence of the explanatory
variables in explaining the dependent variable is statistically significant at
5 per cent level. The probability value of the f-statistic (110.7744) which is
0.000000 is less than 5 per cent; this shows that the explanatory variables
have a significant impact on GDP.
The value of Durbin
Watson statistic for the model is 1.71421 (a Durbin Watson statistic ≥ 2
is significant). Approximating this value to 2, it indicates the absence of
serial autocorrelation in the model.
Hypotheses
Testing
As shown on Appendix 4, with a 5% critical
level, the agricultural export (AEXP) had a positive and significant impact on
economic growth in Nigeria. Its coefficient value of 0.052610 states that a unit increase in agricultural export, holding other
variables constant increases GDP by 5 per cent. With a probability value of 0
per cent which is significantly less than 5 per cent, the agricultural export
was statistically significant. This supports the alternative hypothesis thus;
H1:
there exists a relationship between agricultural exports and economic growth in
Nigeria.
CONCLUSION
AND RECOMMENDATIONS
The study concludes that agricultural export
had a positive and significant relationship on economic growth therefore,
provides evidence that agricultural sector contributes significantly to GDP
growth in Nigeria. Empirical findings show that at 5 per cent critical level
agricultural export increases economic growth by 5 per cent. The probability
value of the t-statistics for the coefficient of agricultural export was 0 per
cent which was highly statistically significant.
Therefore, based on the findings, the study
recommends the followings:
1.
Since agricultural exports have a positive
relationship with the growth of the Nigerian economy, the government should see
that a higher percentage of allocations are invested on agricultural sector so
that the economy will keep on growing in an increasing rate.
2.
Government through its agencies should seek
to maintain a stable and favourable exchange rate
since the variable has been found to possess a significant positive effect on
agricultural output.
3.
Government should provide funds to acquire
sophisticated farm tools and increase the country’s budgetary allocation to the
agricultural sector in a consistent manner because of its importance to the
national economy, hoping that with proper monitoring of fund, it would
contribute more significantly to the economy of the country. An effective
utilization of such funds is also advocated and all areas of wastage blocked.
4.
Government should initiate programmes and policies that will ensure adequate
partnerships between research institutions and higher institutions of learning
to breach the widening gap between theory and practice. This will assist in
effective implementation of new knowledge as well as expose the younger
generation on the lofty potentials in agricultural sector.
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