ABSTRACT
The paper studies the impact of agricultural output on economic growth in Nigeria. Using an ARDL bounds test for cointegration, the study explore the short and long term effects of agricultural output on growth in Nigeria using annual time series over the period 1986 to 2015. In the short run, the result established that agricultural output is positively related to economic growth. The result also reveals that first and second lagged values of agricultural output have a significant impact on economic growth. The finding also provide strong positive and statistically significant evidence of a long run relationship between agricultural output and economic growth, as well as positive and statistically significance relationship between gross capital formation and economic growth. The result also indicated that labour force has a strong negative relationship with economic growth in the long run. This particular result suggests either one percent fall in labour force will increase economic growth or low productivity of agriculture is related to abundance of chief labour in the long run. The study concludes that agricultural output is important determinants of economic growth in Nigeria. These findings highlight the importance of improving agricultural sector and underscores the reasoning behind call for more support on agricultural sector to improve productivity and reduce food import dependence in Nigeria.
Keywords: Agricultural output, Economic growth, ARDL, Nigeria
CHAPTER ONE
INTRODUCTION
1.1 Background of study
The presumed contributions of agricultural sector to economic growth has been extensively discussed and debated among policy makers and scholars for a very long time. However, this old age argument in the academic literature that agriculture contributes to economic growth is attracting renewed interest particularly because in most developing economies, agricultural sector is not as vibrant as in developed countries. In an attempt to find out the lags behind agricultural contributions to economic growth in developing countries, numerous studies has been conducted. Findings from some of these empirical studies are still in support of the proposition that agricultural sector is crucial for achieving an equitable and inclusive growth looking at the sector`s contributions to the functioning of the economy as reflected by its share in total gross domestic product (GDP), its foreign exchange earnings, and its role in supplying saving and labour to other sectors of the economy (Gollin et al., 2002; Omorogiuwaet al., 2014; Yususf, 2014). This notwithstanding, there are some other studies that questioned the ability of agriculture to propel economic growth. Most of these studies have based their argument on strong evidence that suggests agricultural sector in some countries especially in Sub-Saharan African countries is still characterised with development strategies that are anti-agriculture development. They in particular held the view that lack of sustainable agricultural policy direction is responsible for very low agricultural productivity relative to the rest of the economy (Sakok and Gardner, 2007; Ehui and Tsigas, 2009; Diao et al., 2010).
The reported conflicting views on the role of agriculture suggest results from both side of the debates tend to reveal different conclusions. Although, studies have been conducted on the relationship between agriculture and economic growth in Nigeria (Iyoha and Oriakhi, 2002; Olajide et al. 2012; Odetola and Etumnu, 2013), as observed from the reviewed literature a general consensus is lacking because contradictory result is still being reported which explains the renewed and growing interest in disaggregating agricultural sector to look at the role of agricultural productivity on economic growth in the country. The goal of this study is therefore to investigate the impact of agricultural output on economic growth for Nigeria. By employing Autoregressive Distributed Lag (ARDL), this study will build upon existing empirical and theoretical literature, and contribute to growing research on the Nigerian economy. Nigerian is originally an agricultural dependent country but shifted to oil exports in the 1970s, and decades of slow economic growth as result of oil volatility necessitated the need to refocus on agriculture.
1.2 Statement of the Problem
The country Nigeria is bestowed with enormous resources for agricultural use and vast available land for crop cultivation and rearing of animals. The agricultural sector of Nigeria was well known for the exportation of agricultural products such as rubber, cocoa, groundnut, palm oil, hides and skin etc. The sector has a huge ability for economic growth and development of Nigeria. The difficulties that agricultural sector face led to decline in contribution of the sector to the Nigerian economy. This has made Nigerian government to be able to come up with many policy decisions and programs to improve agricultural production in Nigeria.
Upon that Nigeria has large expanse of rich soil, good number of citizens have issue with hunger and starvation due to relegation of agriculture to the background. Some existing industries are highly dependent on importation of required raw materials in their productive activities and good number of youths remain unemployed after graduation from schools (Noko, 2015). Nigeria was one of the leading countries in the exportation and production of some major agricultural products between 1940 and 1950. This has really change in recent times as the economic growth and development of Nigeria is mainly dependent on the revenue from oil exports. This over reliance on crude oil has affected the Nigeria market forces as well as its economic growth and development (Okoh, 2004). Moving into competitive market in western countries with our agricultural products other than crude only needs to be looked into to be able to attain a successful and sustainable economic growth and development in Nigeria (Bekun, 2015).
Harnessing Nigeria agricultural endowment wisely will help diversify the economy and reduce over reliance on the oil sector and an importation. Nigeria economy has been inconsistent due to unstable oil price and continues rise in the price of import goods. All these challenges have undesirable effect in Nigeria balance of payment, employment level and other sectors productivity as well as purchasing power of the people (Oyinbo, et. al. 2014).
1.3 Objectives of the Study
The broad objective of the study is to examine the impact of agricultural output on economic growth over the period 1986 to 2015. The specific objectives of the study are to:
i) investigate the relationship between agricultural output and economic growth in Nigeria?
ii) examine the short run impact of agricultural output on economic growth in Nigeria?
iii) examine the long run impact of agricultural output on economic growth in Nigeria?
1.4 Research Questions
This study intends to provide answers to the following research questions:
i) What is the relationship between agricultural output and economic growth in Nigeria?
ii) What is the short run impact of agricultural output on economic growth in Nigeria?
iii) What is the long run impact of agricultural output on economic growth in Nigeria?
1.5 Significance of the Study
The significance of this study depends on the fact that with improved economy Nigeria stands to gain in its effects toward development. This work attempts to answer the question: What is the relevance of agriculture in economic growth? The cause of agricultural backwardness and how the present state of our agricultural productivity will be improved.
This will form the basis upon which suggestions and contributions will be made as to how the full potentials of agriculture can be harnessed.
This work stands to benefit:
i. Nigeria as a whole: The research work intends to bring firth ways to increase agricultural output both for the purpose of consumption and exportation which ultimately will bring an increased favorable balance of payment (BOP) for the nation.
ii. This work will be advantageous to schools (staffs and students) and will help them understand the importance of farming no matter how small the scale of production may be.
1.6 Scope and Limitations
This research work focuses on the impact of agricultural output on the economic growth of Nigeria between the period of 1986 to 2015.
There are some factors or constraints which hinder my achieving the whole intension of this work, these constraints are; time factor, poor finance, environmental constraints like free movement to research outside the school premises etc.
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