AGRICULTURAL OUTPUT AND PER CAPITA INCOME IN NIGERIA 1980 to 2010
The study examines the impact of agricultural output on per capita income in Nigeria, Using data covering the period 1980 to 2010, econometric tools were brought to bear in estimating the purported relationships. Following previous methodology, per capita income was used to proxy economic growth in Nigeria. Based on the empirical analysis, the results show that agricultural output in itself does not stimulate per capita income in Nigeria. This is perhaps due to the weak productivity in the sector that has led to low yield output from small inefficient farms; agricultural exports have a significant positive impact on economic growth in Nigeria Again, while physical investment has a significant stimulating effect on agricultural output in Nigeria, human capital investment does not have a direct positive impact on economic growth in Nigeria.
The study recommends among others that the government should expedite means of increasing fund availability to farmers in the country. The various financing schemes/initiatives of successive Nigerian administrations designed to improve access to credit for the rural poor have been largely inefficient and ineffective. Also, investment in infrastructure should be boosted in the country.
TABLE OF CONTENT
CHAPTER ONE: INTRODUCTION
Background to Study
Statement of the Research Problem
Objective of the Study
Hypotheses of the Study
1.6 Significance of the Study
1.7 Scope of the Study
1.8 Limitation of the Study
CHAPTER TWO: LITERATURE REVIEW
2.1 Brief Overview of Agriculture and the
2.2 The Place of Agriculture in Sustainable
2.3 Agriculture and Capital Investments
2.4 Macro-Economic Trend
2.5 Importance of Agricultural Productivity
2.6 The Concept of Food Security
2.7 Conceptual Framework
2.8 Some Evidence In Nigeria and Around The World
CHAPTER THREE: METHODOLOGY
3.1 Theoretical Issues in the Model
3.2 Model Specification
3.3 Method of Analysis
3.4 Data and Data Sources
CHAPTER FOUR: EMPIRICAL ANALYSIS
4.2 Econometric Analysis
CHAPTER FIVE: SUMMARY OF FINGINGS, RECOMMENDATION AND CONCLUSION
5.1 Summary of Findings
5.2 Policy Recommendations
1.1 BACKGROUND OF THE STUDY
Per capita income is a measure of the amount of money that is being earned per person in a certain area. It can apply to the average per-person income for a city, region or country and is used as a means of evaluating the living conditions and quality of life in different areas. It is usually calculated for a given country by dividing the country's national income by its population.
The place of agricultural production in enhancing the well being of the people can not be over emphasized. This is true because, it is the only sector providing stable food for the timid population. The Nigerian agricultural sector has suffered from extreme low productivity, reflecting reliance on antiquated methods. Although overall agricultural production rose by 28% during the 1990s, per capita output rose by only 8.5% during the same decade. Agriculture has failed to keep pace with Nigeria's rapid population growth, so that the country, which once exported food, now relies on imports to sustain itself (The World Bank Group, 2011).
In Sub-Saharan Africa, Nigeria accounts for the largest population of about150 million people in 2006 national population census. It has a complex social and political history that has, for the most part, impacted adversely on the population and has worsened income distribution over time. The main constraint to the growth of the agricultural sector is the fact that the structure and method of production have remained the same since independence more than four decades ago (Ukeje, 2005) The United Nations Food and Agriculture Organization rates the productivity of Nigeria’s farmland as low to medium— but with medium to good productivity if properly managed (Nigerian National planning Commission, 2004). To be effective, and attain higher level of productivity and growth in the agricultural sector, that will inadvertently spur up the per capita income of the people, there is a need to identify the major factors determining agricultural production and income per capita of the people overtime.
1.2 STATEMENT OF THE RESEARCH PROBLEM
In the literature, it is an obvious fact that agriculture plays an important role in economic growth and development and poverty reduction. Agriculture contributes to economic growth in different ways such as provision of food and employment (Johnston & Mellor 1961; Ranis et al. 1990; Irz et al. 2001; Timmer 2002; World Bank 2008). Together with the trend of trade liberalization, agricultural export can bring important sources of income for countries, especially the developing ones. A large proportion of the poor are often agriculture-based, and agricultural growth can be a key to pro-poor growth and poverty alleviation (Andersen and Lorch 1995; UNDP 1997; Irz et al. 2001; World Bank 2008). The negative relationship between agricultural growth and poverty is evidence in many empirical studies like Rangarajan (1982), Coxhead and Warr (1991), Datt and Ravallion (1996), Thorbecke and Jung, (1996), and Irz et al (2001). However, agriculture is not always a panacea for poverty reduction. Agriculture is always associated with economic and natural risks. The poor farmers, especially in developing countries are most vulnerable to these risks. For example, a country which relies on agricultural export can be adversely affected by global economic shocks (Winters et al. 2004; Easterly and Kraay 2000). A sudden decrease in prices of agricultural outputs can quickly push the poor households who are in tradable agriculture into losses and poverty. Natural risks such as calamity and diseases can result in heavy loss for agricultural households. In addition, the industrial and service sectors tend to grow more quickly than the agricultural sector in the long run. The shrinking of agriculture relative to industry and service has been observed in both developed and developing countries. The non-farm employment and business have been proved to be an effective way to increase household income and reduce poverty (Lanjouw and Lanjouw,1995; Lanjouw, 1997; Van de Walle, 1994; Ruben and Van den Berg, 2001).
According to the Federal Republic of Nigeria (2000) on Obasanjo’s Economic Direction 1995-2003, the contribution of agriculture to the Nigerian economic growth is very low compared to what it used to be in the past. Nigerian agriculture to a large extent still possesses the characteristics of a peasant economy that was prominent in the pre-independence period (Adewumi and Omotesho, 2002). However, Lawal and Atte (2006), citing Jeter (2004), Chigbu (2005) and Nigerian National planning Commission (2004) assert that in spite of the presence of two major rivers, the Niger and the Benue, the agricultural sector is still predominantly rain fed and its productivity has seriously declined over the past two decades and as a result, rural poverty is rampant. The world bank data showed that more than 70% of Nigerians live below the poverty line (which is less than a dollar per day) meaning that there has been an astronomical growth in the levels of poverty of Nigerians, most of whom are engaged in agriculture from independence till date. Farming population comprises predominantly resource-poor peasants, cultivating an average of about two hectares of land usually on scattered holdings with low and declining productivity.
In view of the foregoing therefore, it seems obvious that there is no general consensus on the impact of agricultural output on per capita income as well as the growth of the economy at large. While some argued that agriculture is less productive than the non-agriculture sectors in terms of value creation. In other words, most countries that have larger non agriculture sector in relative terms are richer than those whose economies are dominated by agriculture. Others simply argued that growth in agriculture is a precondition for industrialization and that the spectacular industrial revolution would not have been possible without the agricultural revolution that preceded it (Nurkse, 1953 and Rostow, 1960).
Therefore, this study is an attempt to empirically examine the impact of agricultural productivity on the long-run per capita income in Nigeria, and to see if there is any agricultural led per capita income growth over time.
1.3 RESEARCH QUESTIONS
What is the impact of agricultural output on per capita income as a proxy for economic development in Nigeria?
Does agricultural exports have any effect on per capita income in Nigeria?
1.4 OBJECTIVE OF THE STUDY
The main objective of the study is to examine the relationship between agricultural production or output and per capita income as a proxy for economic development in Nigeria.
The specific objectives are:
I. to examine the impact of agricultural output on per capita income
II. to determine the effects of agricultural exports on per capita income in Nigeria.
HYPOTHESES OF THE STUDY
The following are the hypotheses of the study:
I. Agricultural output does not affect per capita income in Nigeria
II. Agricultural exports have no significant impact on per capita income in Nigeria.
SIGNIFICANCE OF STUDY
The study will be very relevant to the government and policy makers in Nigeria, as it will provide them useful information on agricultural output and per capita income in formulating appropriate policies and programmes on the agricultural sector of the economy that will in turn enhance income per capita of the people and the growth of the economy at large.
Secondly, the study will also be very useful to academia, researchers, students of agricultural sciences, finance, economics and all allied disciplines, as it will provide them strong data base to carry out further studies in the same area, if they so wish.
1.7 SCOPE OF STUDY
It is a Nigeria specific study, designed to cover a period of 30 years (1981 to 2010). Relevant data will be sourced from the Central Bank of Nigeria Statistical Bulletin and the Federal Office of Statistics.
LIMITATION OF THE STUDY
The accuracy and reliability of the source of data might affect the overall result of the study. However, effort will be made to reduce the error to the barest minimum and ensure that the results are accurate.
Secondly, the time frame for a study of this nature was not sufficient, as the researcher has to carry out the study simultaneously with normal academic work. This of course was a major limitation of the study.