CHAPTER ONE

INTRODUCTION

1.1        Background Information

Agricultural expenditure policies in Nigeria have undergone many changes since independence in 1960. These changes were mainly a reflection of changes in government philosophy to agricultural development, while the philosophical changes were in themselves, often brought by changes in government.

Between 1960 and 1998, the country witnessed six military regimes and three civilian eras (spanning 29 and 10 years, respectively), which implemented varied policy measures in line with the priority of the government. A review of the Federal Government agricultural expenditures by the type of government showed that the average real annual agricultural expenditure on total expenditure was higher under the civilian regimes, averaging about 3.82% compared to the 2.94% under the military regimes. The annual average real civilian government agricultural expenditure was also about 1.5 times that of the military, while the percentage of agriculture’s contribution to GDP average about 47.10% under the civilian regime compared to 38.90% under the military. The total Federal Government agricultural expenditure figure, which reached peak of N2,473 million in 1980, fell to N286.0 million in 1984, after the military came to power.

In a broad sense, however, Federal Government expenditure policy on agricultural development had undergone three major phases, the first, which was the period of decentralized approach to agricultural development, was from 1960 to about 1969. The second from 1970 to 1985, witnessed increased Federal Government participation, while the third, which is still unfolding, from 1986 to the present time is the era of economic reforms (Olayemi and Dittoh, 1995).

A comparison of real Federal Government (FGN) expenditures on agriculture by philosophical orientation revealed that the average real Federal Government expenditure on agriculture of N867.06m recorded during the 1970 - 85 era was higher than the N398.0m and N37.3m obtained under the reform and decentralized era respectively. Also, the annual growth of real government expenditure on agriculture was higher (50%) under the era of increased Federal participation compared to the 16.67% observed for the 1960 – 1969 period and the 11.43% recorded during the 1986 – 1998. Ironically however, the percentage contribution of agriculture to GDP was higher during the decentralized era, averaging about 57.67% compared to 36.25% and 34.04% recorded in the last two periods.

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In spite of all these efforts and huge budgetary allocations, the overall agricultural situation deteriorated creating a wide gap between the supply and demand for food. Revenue from agricultural export dwindled (See Appendix 1) and government was faced with mounting food import bills. At the same time, industries increasingly resorted to imports of agricultural raw materials, thus putting lot of stress on foreign exchange. Ojo and Akanji (1996) also noted that the results were inadequate, not only in relation to the committed financial resources, but also with regard to the nation’s minimum needs of agricultural products. Thus, raising questions as to the level, structure, determinants and effectiveness of government expenditure policy on agriculture.

1.2        Problem Statement

The ultimate objective of any public policy on agriculture is to increase total production and enhance agricultural growth. Specifically, both the agricultural credit policy and government direct spending are generally geared towards making farmers more productive and efficient through the provision of the appropriate facilities.

An analysis of the real public sector spending for agricultural development indicates that substantial increases have been recorded. From N373.0 m during the 1960-69 fiscal periods, real Federal Government expenditures (recurrent and capital) rose by about 26 folds N9,672.0m between 1980 and 1989, thus reflecting the broad pattern of Federal Government intervention in agricultural development.

In spite of the increased resource flow to the sector, however, total agricultural production stagnated and eventually declined in the pre-SAP era, while moderate growth was witnessed in the wake of the SAP induced reforms (Ukpong, 1993). Vincent (1981) also affirmed that in spite of the increased flow of funds to the agricultural sector, supplies of agricultural production for consumption, the manufacturing industry and exports also declined with adverse effects on the country’s inflow and outflow of foreign exchange. Also, the results in the market place and on the tables of consumers have been worrisome. Food prices have been rising persistently over the years with the average price of garri, a major staple food, rising to about N63.3/kg in December, 2007, compared to N5.80/kg in August, 1992 (APMEU, 1993; NFRA, 2008). The World Bank (1996) also argued that even though social and economic indicators had been improving somewhat, it remained far below acceptable levels and below levels that should have been expected on the basis of previous high expenditures. It, however, noted that key programmes related to poverty reduction,

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health care, education, transport and agriculture received lower funding than administration and security.

Inspite of the FGN’s investment in the agricultural sector over the years, Czech Conroy Natural Resources Institute (2003) noted that the sector had been dominated by poor, smallholder, peasant farmers and had performed below expectations. According to AfDB (2006), the sector employed about 70 percent of the estimated 140 million people, 80 per cent of the rural population and contributed about 32 per cent of GDP. AfDB (2006) further revealed that Nigeria ranked 125th in the 2005 Human Development Index, with basic indicators that placed the country among the 26 poorest countries in the world. The Bank further affirmed that two out of every three Nigerians (66 percent) lived in extreme poverty as measured by the International Standard of one dollar a day as of 2004. Poverty in Nigeria was also observed to be concentrated in rural areas, where about 64 per cent lived below the poverty line compared to 35 per cent in the urban areas.

Against this backdrop, this research raised pertinent questions such as:

•       What had been Nigeria’s history of government expenditure on agriculture?

•       What type of government or philosophical orientation affected the share of annual budgets allocated to agriculture?

•       What factors had determined the amount of government expenditures on Nigeria’s agricultural sector over the study period?

•       What were the effects of government expenditure on Nigeria’s agricultural output?

1.3        Objectives of study

The broad objective of this study was to assess the trend, structure, composition, determinants and effectiveness of Federal Government expenditure policies and the implications of these policies to agriculture from 1960 – 1998.

In line with the above broad objective, the study specifically:

i.                   examined the trend, structure and composition of Federal Government expenditure on agriculture in Nigeria;

ii.                 compared agricultural expenditures during civilian and military regimes and along philosophical era;

iii.               compared Federal Government expenditure on agriculture with those of selected sectors of the economy;

iv.                 determined the causes of public agricultural spending in Nigeria;

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v.                 assessed the effectiveness of Federal Government expenditure policy on Agriculture in Nigeria; and

vi.               drew policy recommendations based on research findings.

1.4        Research Hypotheses

The null hypotheses tested were:

i.                   growth rates of real public federal expenditure on agriculture under military regimes and civilian administrations were not different;

ii.                 federal government expenditure on selected sectors of the economy had no relationship with government agricultural expenditure;

iii.               determinants of agricultural expenditures had no relationship and effect on agricultural spending; and

iv.               agricultural expenditure policies relating to Federal Government direct spending had not been effective in achieving increased agricultural productivity.