IMPACT OF AGRICULTURE ON UNEMPLOYMENT IN NIGERIA (1981-2014)

IMPACT OF AGRICULTURE ON UNEMPLOYMENT IN NIGERIA (1981-2014)

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ABSTRACT

Agriculture was known to be one of the major contributors to national development, but due to negligence towards the sector has led the country to heart aching unemployment. Unemployment which has become an economic burden on a society necessitates this study. The main objective is to examine the impact of agriculture on unemployment in Nigeria between the period 1981-2014. The specific objectives were to investigate the impact of agriculture on unemployment in Nigeria and to evaluate the existence of any significant long run equilibrium relationship between agriculture and unemployment in Nigeria. The methodology used for this study is econometric techniques of ordinary least square (OLS) by regressing the dependent variable UNEM against the independent variables, ACGS and ASO. Vector Auto-Regressive Mechanism (VAR) was used. VAR result reveals that Agricultural Credit Guarantee Scheme Fund (ACGS) does have significant impact on unemployment in Nigeria. The result reveals a negative relationship between agricultural output (ASO) and unemployment (UNEM).The computed coefficient of multiple determination (0.825925) depicts that 82% of the total variations in the dependent variable (UNEM) is influenced by the variations in the explanatory variables. The regression plane of the model indicated that the joint influence of the explanatory variables was statistically significant as shown by the F-statistics (45.86508). Toda-Yamamoto approach was used. The result showed that there is no causal relationship between Unemployment and Agricultural output as their p-values were greater than 0.05 levels of significance. There is no autocorrelation among the variables since the p-value for the f-statistics were greater than the null hypothesis as seen in the Breusch-Godfrey Serial Correlation LM Test. Consequently, recommending that agriculture in Nigeria should be given a top priority and that government should encourage farmers by absorbing excess inventory of modernized agriculture and agricultural output so as to increase agricultural production for employment creation, foreign exchange and export promotion.

CHAPTER ONE

INTRODUCTION

1.1       Background to the Study

Agriculture remains the mainstay of Nigerian economy, the main source of food for the population, providing means of livelihood for over 70% of population and a major source of raw material for the agro­­­‑allied industries (Okumadewa, 1997; World Bank, 1998).Agriculture was, until the discovery of oil in the 70s the highest foreign exchange earner, though oil led to the increase in petroleum export at that period. This emphasizes its preeminence in the Nigerian economy. Agriculture helps to bring a change in the overall development of a nation. The agricultural sector is necessary for economic development, the provision of raw materials and for industrialization.

The agricultural sector is salient for ensuring enough food supply and its security, income and employment generation. It should be noted that around the world, about two-thirds of all employees work in the agricultural sector (World Bank, 2009). Nigeria, though depend largely on oil industry for its budgetary revenue as she runs a monoculture economy, is still predominantly an agrarian society. In the periods immediately after independence, the agricultural sector performs outstanding role to the extent that the regional development, witnessed during that period was attributed directly to the sector.

             Agricultural productivity is a crucial single factor influencing the standard of living of both rural and urban areas (Yusuf, 2002). Agricultural production in Nigeria is mainly characterized by small scale farmers scattered over wide expanse of land area, with small holdings ranging from 0.05-3.0 hectares, poor access to modern input and credit, poor infrastructure, land and environmental degradation, inadequate research and extension service, poor response to technology, adoption of strategies with poor return on investment. (Olayemi, 1994; Manyong et al, 2005).

             Oil boom led to the rapid decline in the agricultural sector. Nigeria became a major importer of agricultural products as against its major position as a major exporter of agricultural product. As a result of this, there was a decline in the economy in terms of active population in agriculture in Nigeria, leading to an increase in the level of unemployment. Some programs which aimed at revitalizing agricultural sector such as Green Revolution which was launched in 1980, centering its objective at self-reliance in food and diversification of Nigeria’s source of foreign exchange. But its achievement like livestock production, forestry and fishery short-lived and the program failed due to shortage of funds, mismanagement, poor and thorough research and extension services, problems of land, inadequate data, inadequate executive capacity and lack of infrastructural facilities. (Anyanwu, 1986).

            It is said that agricultural contribution to gross domestic product fell to 14.63% in 1983 as against 61.50% in 1963/64 because agriculture was left for white-collar jobs. Due to the multifunctional nature of agricultural sector, it has a multiplier effect on any nation’s socio-economic and industrial fabric. Also, it is crucial to the industrial and economic spring board from which the country’s development can take off. Development economics have in fact attributed the present economic situation in the country to the poor performance of agricultural sector. The knowledge of agricultural production landscape (Okuneye, 1995), has shown that the small scale farmers that dominated the production landscape produces about 85% of total production.

            Though, agricultural sector has increasingly shrunk in its contribution to the gross domestic product of many nations, it still provides the chunks of the domestic product of many nations, especially the developing ones. Much later thinking moved agriculture to the forefront of developing process, the hopes for technical change in agriculture and “green revolution” suggested that agriculture could be the dynamo for growth, (Wilber and Jameson, 1992). The industrial revolution of the nineteenth century which catapulted the agrarian economies of the most countries of Europe got the impetus in agriculture (Ojenagbo, 2011). All these brought tremendous employment opportunities. The salient nature of agricultural sector in Nigeria and as well in developing nations cannot be undermined especially in generating employment and stimulating the overall economic development.

In spite of this, there has been a persistent increase in unemployment rate all over the world, particularly in the Sub-Saharan Africa. Unemployment is a situation where a portion of the country’s workforce who are actively searching for job, could not find work. It is a state of being economically inactive. In this 21st century, unemployment is one of the developmental problems facing any developing economy. Unemployment consequences is directed mainly on youths - 80% of Nigerian youths are without jobs with 6.9 in the fourth quarter of 2014. Following April 2014 statistical “rebasing” exercise, Nigeria emerged as Africa’s largest economy with 2013 gross domestic product estimated as US $502 billion. Nigeria with the populace of about 173.6 million in 2013 as agriculture contributes about 45% of gross domestic product, oil export contributes about 15% of the gross domestic product and gainfully employed to 90% of the rural populace.

Nigeria generates about 4.5 million new entrants in labor market annually-made up of out of school system (1 million), primary school leavers not preceding to secondary school (2.2 million) and secondary school leavers not preceding to tertiary level (1 million), tertiary graduates (300,000). Mostly, labor market absorbs about 10% of the new entrants, thereby leaving about (4 million) people who are either openly unemployed or underemployed. The Nigerian youth employment action plan (NIYEAP), 2009-2011 depicts that the time frame of NIYEAP, the number of youths requiring productive employment would be about (13 million). This number is alarming when compared to the current rate of unemployment and underemployment among youths. These results to growing conflicts, youth restiveness and militancy (Niger Delta Youths, movement for actualization of sovereign state of Biafra, Oduduwa people’s congress, Boko Haram etc.). Others include armed robbery, political thuggery, abduction, drug abuse, vandalization of oil pipelines and national power holding installation to mention but a few (NBS, 2005). The international labor organization depicts that 40% of jobless people worldwide were young. Though, government was insensitive to the plight of youths, who spend their youthful age and vigor going in search of non-existed jobs (ILO, 2012). Unemployment rate is high at about 41.6% for youths between 15-25 years while unemployed youths consist about 17% of males and 23.3% of females. In comparism to other African countries, unemployment rate in Kenya is about 40% in December 2011, Ghana has an unemployment rate of 11% in 2012, South Africa increase to 25.20% in 2013 as against 24.90% in 2012 (NBS, 2013). Nigeria economics statistics showed that the unemployment rate (% of labor force) in Nigeria is 21.1 and 23.9 in 2010 and 2011 respectively. As Nigerian agricultural sheet of Nigeria Bureau of Statistics showed that the total employment in agriculture is 44.6%. Graduates of tertiary institutions – 20%, often remaining unemployed for upward of five years after graduation (NISER, 2013). Agricultural sector if given the needed support and regulatory framework could be major player in the combat against unemployment in Nigeria and in other developing countries as it contributes about 90% of job opportunities in many developing nations.

            Structural Adjustment Programs in 1986 was to reduce unemployment but failed amongst other programs. This has left the state and individuals worse off. Agricultural sector employed about 65 million persons and contributed 41% to the country’s gross domestic product (NBS, 2006). Agricultural sector comprising crop production, livestock, forestry and fishing, grew in nominal terms by 9.19% (year-on-year) in Q3 of 2014, up by 2.72% points from the previous quarter of 2014. Intra-sector performance showed that fishing activities grew the fastest by 18.76%, followed by livestock at 12.36% with crop production and livestock growing the fastest by 52.83% and 5.05% respectively. Agricultural sector contribution to nominal gross domestic product, stood at 23.77% in Q3 of 2014, with real agricultural GDP growing in Q3 of 2014 at 4.47% (year-on-year), up by 1.03% products from the corresponding period of 2013 and higher by 0.79% points from the rate Q2 of 2014. The report identified crop production as the main driver of growth in Q3 of 2014 by 4.34% while the sector grew by 38.53% (quarter-on-quarter basis) in Q3 of 2014, with crop production emerging as the main driver of growth by 43.50%. The contribution of agriculture to GDP in real time, was 26.63% in Q3 of 2014 compared to 27.08% in Q3 of 2013 and 20.89% in Q2 of 2014. (NBS, 2014).As the total allocation to the agricultural sector in the proposed 2014 budget declined by 20.06% to ₦66.64 billion in 2014 compared with ₦83.37 billion in 2013.This shows that the neglect towards agricultural sector is much as its allocation continues to decline.

            Dr. Okonjo Iweala quoting figures from the Nigerian Bureau of Statistics in Abuja said that no fewer than 5.3 million youths are jobless in the country while 1.8 million graduates enter labor market every year. Agricultural sector gained employment and satisfactory livelihood to over 90% of the country’s population (NDHS, 2008). Nigeria at this period depended entirely on agriculture for food and agro-industrial raw material for foreign exchange earnings through commodity. Even as Nigeria has more natural endowment than most of her neighboring countries, unemployment problem is still a major problem facing the nation as unemployment rate continues to accumulate over the years (Olatunji, 2002) which has led to tremendous increase in criminal activities and other social vices. Although, agricultural growth is supported to be a part of solution to unemployment but appears not to be so. This was as a result of oil boom in the early 1970’s which brought about neglect in agricultural sector. Government also help in making agricultural work unattractive and enhance the lure of the cities for workers because government pay farmers low prices over the years on the food for domestic market in order to satisfy urban demands cheap basic food products. Low productivity continued as the population exceeds food produced, among others like trade restrictions, poor transportation, environmental degradation, inadequate technology and infrastructure, poor storage system and irrigation. This made Nigeria to lose its status as exporter of cash crops like oil palm (from the east), cocoa (from the west), cotton and groundnut (from the north) and began to import food. This poses as a problem and a great challenge to Nigeria. Nigeria Bureau of Statistics now estimates Nigeria’s Gross Domestic Product at 80.22 trillion naira in 2013 compared to 42.4 trillion naira prior to the rebasing. These revised figures, made Nigeria the world’s 26th largest economy up from the 33rd position prior to the rebasing as its nominal GDP stood at 509.9billion dollars last year compared to South Africa’s statistics reading 323billion rand for the South African economy during the same period. Agricultural sector contributed 35% to GDP prior to rebasing but is now only estimated to account for 22% of Gross Domestic Product.

However, government has made much efforts to revive agricultural sector as this will reduce unemployment and increase export but have only yielded modest results because of corruption, embezzlement of fund, poor planning and implementation etc. Nigerian government and policy makers are increasingly finding it difficult to deal successfully with the problem of unemployment especially that of youth. The high level of unemployment can be said to be lack of adequate provision for job creation in the development plans, the ever expanding educational growth and the desperate desire on the part of youths to acquire University education irrespective of course and course contents. As a result, greater number of skills acquired from the University appear dysfunctional and irrelevant (Okafor, 2011). The minister of youth development, Bolaji Abdullahi in 2011, reported that 42.2% of Nigeria’s youth population is out of job. Depo Oyedokun, the chairman of the house committee on youth and social development revealed that, of the over 40 million unemployed youths in the country, 23 million are unemployable and therefore susceptible to crime, hence the need to articulate what to be done to salvage the situation should be done (Emeh, Nwanguma, and Abaroh, 2012). This is to say that Nigeria’s unemployment level poses greater threat to the nation’s development, security and peaceful co-existence and should be tackled severely.

1.2       Statement of the Problem

The failure of agricultural output to reduce unemployment in Nigeria as a result of poor agricultural technology and service delivery has been a serious problem in the country over the years. Also, continuous absence of basic agricultural infrastructure, industrial and social services has led to a huge disincentive in reducing agribusiness processes and set backs against the development of agriculture over this period. Rural-Urban migration mostly seen in our youths as they go into the city in search of white collar jobs. Lack of agricultural long term loans that leads to long run disequilibrium relationship between agricultural products and unemployment in Nigeria. The accessibility of small farmers towards the process to finance sources has been so difficult in terms of time, amount, availability and lack of security for more formal credit. Since small farmers are unable to provide enough collateral as their farms and other assets which they possess could not be enough to guarantee them loans from private/banks. There is weak, undeveloped and atomistic agricultural input and output in the market. The access towards foreign markets is been affected by price competitiveness and product productivity.

 The Nigerian government has introduced a lot of policy measures to control unemployment (which is the major problem facing individuals and the nation at large). This include: Operation Feed the Nation, Green Revolution, Land Use Decree etc. Though, without much positive result, rather it seems to be escalating as the application of this programs and policies could not effectively solve the problem because it is based on the economic, social and political effects of unemployment. The pertinent question often asked is: why is Nigeria still suffering from mass unemployment especially its youth, despite her wide expanse of land, which can contribute to the growth and development of the country and as well yield more revenue to the government and help to reduce unemployment? This research work aims at addressing the factors responsible for why measures, programs, policies used by government have not been effective in solving the problem of unemployment in Nigeria but depicts neglect of the agricultural sector.

1.3     Research Questions

1.      Does agriculture have a significant impact on unemployment in Nigeria?

2.      Is there any long run equilibrium relationship between agricultural productivity and unemployment?

1.4       Objectives of the study

The main objective of this study is to assess the impact of agricultural productivity on unemployment in Nigeria. The following specific objectives are:

1.      to investigate the impact of agriculture on unemployment in Nigeria.                                    

2.      to evaluate the existence of any significant long run equilibrium relationship between agriculture and unemployment in Nigeria.

1.5       Research Hypotheses

The hypotheses to be tested in the course of this research work include;

1.      H0: Agriculture has no significant impact on unemployment in Nigeria.

2.     





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