ABSTRACT

The research study evaluated National funding and investment in the agricultural sector of Nigeria (1970-2008). Information was gathered from secondary data and analyzed to evaluate fund allocations to Nigerian economic sectors and agriculture from 1970 to 2008, determine difference in budgetary allocations to Nigerian economic sectors and agriculture, examine the effect of National funding and investment in agriculture on agricultural production –GDP and different economic regimes (pre and post SAP) on agriculture GDP rates, identify the implementation constraints to National funding and investment in Nigerian agricultural sector. A simple random sampling was employed to select 2 states’ ADPs from each of the 6 geo-political zones that served as source of constraints analyzed in the study. Time series (secondary) data obtained from CBN and NBS publications were used for analysis. The data collected were analyzed using both descriptive and inferential statistics such as means, percentages, frequency distribution tables and OLS regression model. The major findings were that budget allocations and expenditure to and by the five economic sectors of agriculture, defence, education health, and general administration differed in various years. There were variations in the budget allocations to the economic sectors and an unsteady trend in the percentage allocation to agriculture which was 11.2% in 1970-1975 period, it declined to 7% in 1976- 1980, increased to 21.61%(1981-1985), declined to 18.52% in 1986 -1990, peaked 28 % in 2001-2005 and fell to 21.22% in 2006-2008.The study further revealed that the dynamic analysis of the impact of National funding and investment on agricultural GDP is acceptable. Out of the five variables, three (ADP services, fertilizer use, and amount of ACGSF) were positively and significantly correlated to the agriculture share of GDP, while two (irrigation cost and rural roads constructed) were found to have insignificant impact on agriculture share of the GDP. Result also showed that Nigeria economic regimes of SAP had a positive effect on agriculture GDP growth rates as its rate increased from 20.6 % in 1980 to 31.5% in 1990 .Subsequently, it appreciated to 35.8% and 42.1% in 2000 and 2009 respectively. Eleven constraints were identified as hindering

the implementation of National funding and investment in agriculture. Most critical constraints were financial, infrastructure, economic, technical, political, social-cultural and environmental in the 6 geo-political zones of Nigeria. The study therefore, recommended that budget allocations to agriculture should be increased to 30% target of NEPAD minimum by legislative act so that agricultural projects will be effectively implemented. Federal government should improve on human capital building on the ADP staff to increase their efficiency and agricultural output. The amount of loan granted by ACGSF to individual farmers should also be stepped-up to help create vibrant agricultural enterprises with employment opportunities to reduce the financial exclusion of the rural poor Nigerians which stunts agricultural growth and development. Federal government should also re-appraise fertilizer local production, local and state government ownership of irrigation projects policy to increase agricultural output by the public-private-partnership strategy. The study further recommends that rural feeder roads should be funded by the three tiers of government to increase rural roads density, access and evacuation of agricultural products which will reduce spoilages thereby increasing

agricultural                                      output                                        in                                          Nigeria.

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CHAPTER ONE

INTRODUCTION

1.1  Background of the Study

Agriculture played a pivotal role in the history of Nigeria’s economic development. Over the past several decades, agriculture has provided food, employment, foreign exchange and reduced poverty. It is the bedrock of Nigeria’s economy (FGN, 2004).Nigeria is endowed with a huge expanse of arable land, as well as a large, active population that can sustain a high productive agriculture. Nigeria has a great potential to become the food basket of the West African sub-region (FAO, 2003).

Improvement in agricultural sector is a major thrust for poverty reduction. It is expected that high growth rate in agriculture will push the growth of non-faractivities as well (Gemma, 2008). Several studies have examined the impact of public spending on agriculture and rural development and showed that public spending on agriculture and education could positively contribute to the improvement of the quality of life in rural areas which is in tandem with the United Nation’s Millennium Development Goal of eradication of extreme poverty and hunger (Rajkumar & Swaroop, 2002; ADB Key indicator, 2007; Eboh, 2009).

In Nigeria, the three tiers of government (federal, state and local) have overlapping but autonomous fiscal and policy jurisdictions for basic public services that directly impinge on the MDGs. In such federal setting, progress towards the MDGs will be hindered or accelerated depending on synergy and coordination of policies and service delivery across the public sectors. In particular, because Nigeria’s state and local governments are closest to the grass roots in terms of providing public services, their actions or inactions could impact greatly on MDG’s hence agriculture ( Eboh, 2008; Okogu and Osafo-Kwaako,2008; and 2009). Nigeria’s state and local governments have constitutionally been guaranteed autonomy for public spending, economic planning and sector policies (Eboh, 2009).

Oyebanji (2008) observed that most farm and agro-processing operations are carried out manually using simple hand tools. Small-holder farmers generally still do not have access to and lack knowledge about the use of improved technologies or crop,

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fish, animal or food processing. The use of rudimentary processing techniques lead to reduced national capacity for food security due to massive post-harvest losses and as well as revenue from value-addition opportunities (FAO, 2004) .

Many studies attempted to link government spending to agricultural growth and poverty reduction (Elias, 1985; Fan and Pardy, 1998; Fan, Hazell and Throat, 2000).The studies found that government spending contributed to agricultural production growth and poverty reduction. Central Bank of Nigeria(2006), Eboh, Amakom and Oduh, (2006) and Eboh, (2008), reported that between 1980 - 1998, Nigeria expenditure on agriculture rose from N528.65 ($9.45) to N44,130.24 ($20.16) billion, while agriculture percentage of GDP rose in percent from 12.80 to 19.79 in the period under review (CBN, 2006).

Economic growth refers to the increase in the value of goods and services produced by an economy. It is conventionally measured as the rate of increase in Gross Domestic Product (GDP). Finance and investment aid growth and development in an economy. There is a link between growth of output, investment and savings (Nnanna, Englama and Odoko, 2004). Levine and Renelt (1992) explained the empirical relationship between investment and economic growth; and concluded that the rate of physical investment to GDP was the most important of the factors. Arrows (1962) also pioneered a work that considered the impact of human capital on growth and concluded that variations in investment performance and growth rates across countries was accounted for either explicitly or implicitly by the variation in the accumulation of human capital.

Feldstein and Harroka (1980) explained that in the long term, gross national savings and domestic investment rates show a strong positive correlation. Iyoha (1998) established a positive relationship between investment and economic growth in Nigeria, using investment – income ratio as the explanatory variable. Using data for the 1970 – 1994 period, Iyoha found that a 10 percent rise in investment income ratio will trigger a 3 percent increase in short run and 26 percent in the long run in per capita gross national product (GNP) respectively. Iyoha (1998) concluded that per capita GNP is highly investment elastic in Nigeria and for government to achieve its desired objectives of high economic growth and rapid development; it must pursue policies that will increase both public and private investments in her economic sectors.

The Nigerian data on investment and economic growth was analyzed by Nnanna, Englama and Odoko (2004) using the correlation technique to establish relationship between investment and growth. The result showed a weak relationship between capital

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formation and economic growth. Indeed during the period 1981 – 1986, investment and economic growth moved in opposite directions with a negative co-efficient of 0.22 or 22 percent.

This was not unexpected given that investment declined in four out of the six years (1981 – 1986). Data for Structural Adjustment Programme (SAP) period of 1987

– 2001 indicated that the relationship between investment and economic growth was positive, with a correlation coefficient of 0.30 or 30 percent (Nnanna, Englama & Odoko, 2004). Obadan and Odusola (2001) using the granger causality test on Nigerian data, testing the causal relationship between savings and income growth, savings and investment and economic growth. This follows that investment would increase growth or Gross Domestic Product share of agriculture in the national economy. The findings are in accordance with, that of Iyoha (1998) on the same issue, therefore, giving credence to the importance of investment in the growth process.

However, Nigeria is no longer able to produce enough food for her needs. Despite advances in science and technology, Nigeria still finds it difficult to match supply with the ever increasing demand for food – a situation attributable mainly to uncontrolled population growth and inefficient utilization of productive resources. In an empirical study on the food problem in Nigeria, a challenge for the agricultural sector, Utomakili and Molue (1998) (using base year 1980 = 100); reported that the index of agricultural production in Nigeria declined from 34.2 to 17.2 percent between 1970 – 1975 as oil became increasingly important in the Nigerian economy.

Ample evidence on investment climate reveals that infrastructural weakness; institutional deficiencies and regulatory bottlenecks act as disincentive to private investments and businesses. Public spending aims at eliminating these deficiencies in order to promote investments, employment and economic growth (Eboh, 1999; Collier, 2006; Malik and Teal, 2006).

A review by Federal Office of Statistics (National Bureau of Statistics, 2000) of the national savings and investment rates from 1990-1999 showed that the investment/GDP ratio/rate in percentage declined from 6.33 in 1990 to 5.40 in 1999 (Table 1.1). This implied that investable fund in Nigeria is declining relatively and calls for efficient utilization of available investment fund especially in the agricultural sector of the Nigerian economy to increase productivity

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Table 1.1:               National Savings and Investment Rates, 1990 - 1999

Item

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

National