Government Expenditure and Agricultural Production in Nigeria (1970 – 2010)
Chapter One
OBJECTIVE OF THE STUDY
The broad objective of this study is to analyze the relationship between government expenditure and agricultural production in Nigeria, the specific:
To identify the problem of agricultural financing in Nigeria.
Proffer policy recommendations on how to improve the agricultural sector in Nigeria.
To determine the effectiveness of government expenditure on agricultural production in the Nigerian economy.
CHAPTER TWO
LITERATURE REVIEW
DEFINITION OFTERMS
Government Agricultural Expenditure: This is taken to be Federal Government Capital Expenditure into agriculture from annual budgetary allocation. It is the expenditure on crop development, seed production and distribution, fertilizer procurement, agricultural mechanization, extension services, control of pests and diseases, soil conservation, irrigation, research etc Agricultural Output: In this study agricultural output is taken to mean the value of agricultural GDP of the four sub-sectors (crops, fisheries, forestry, and livestock) of the economy.
Rainfall: This is the average rainfall in each year
Price of Agricultural Output: This is expressed as the all item component of the consumer price index.
GENERAL INTRODUCTION
In recent years, there has been renewed interest about the size of government expenditure in agriculture. Such interest was centered on the implication of the expansion of government public expenditure for economic activity. Such expansion, it is argued, would increase aggregate demand and would increase the ability of market forces to function in the allocation of resources (Lerme, 1984; Abizadeh and Basilevsky, 1990).
Public expenditure refers to the expenses, which the government incurs for its own maintenance and for the society, by expanding state activities. It is becoming increasingly difficult to classify the portion of public expenditure that includes the maintenance of government and those that go into benefiting the other sectors of the economy. Although, public expenditure is found to be continually increasing over time in almost all countries and with unprecedented growing importance in National economy especially in developed countries (Steven et al, 1994).
Some government expenditure are in return for goods and services that account as part of recurrent output while some represent sacrifice for future benefit. From here the different types of expenditure will have to be identified, and they are subdivided into two;
- Recurrent expenditure and,
- Capital expenditure
Recurrent Expenditure: are spending on running costs or for day-to-day running of government affairs such as payment of workers’ salaries/ remunerations, spending necessary to maintain existing levels of government services.
Capital Expenditure: on the other hand, are those that are capital stock augmenting that is, spending on the construction of feeder roads, irrigation, pipe borne water, etc .They represent project and sacrifices for future benefit.
Government Agricultural Expenditure is part of public expenditure. Various attempts have been made, to provide theoretical explanation of public expenditure. Some of these theoretical attempts have been provided below.
CHAPTER THREE
RESEARCH METHODOLOGY
METHODOLOGY
This research work attempted to provide insights into the effect of government expenditure on Nigerian agricultural sector. The government spending behavior to the sector is essential for its growth hence; the study adopted a multivariate regression model. This handled the relationship between the agricultural GDP, government expenditure on agriculture, price of agricultural output and rainfall. Equally important is a stability test, which was carried out in order to investigate the performance of the agricultural output within the pre-SAP and the with-SAP periods. This is particularly necessary in order to determine the level of government contribution to agriculture
SOURCES OF DATA
The research relied heavily on secondary data published by the Central Bank of Nigeria such as Statistical Bulleting and Annual Report and Statement of Account, Annual Abstract of Statistics of the Federal Office of Statistics, Financial and Economic review and journals.
ESTIMATION TECHNIQUE
The ordinary least square technique of estimation was used to estimate the coefficients. While a test of the hypothesis was conducted by the use of a t- test. The choice of technique was based on an a priori expectation, guided by economic theory.
MODEL SPECIFICATION
In order to estimate the level of contribution of government expenditure on agricultural output growth, the data were analyzed by the use of a Cobb- Douglas production function. Which employed the logarithmic function; they are called so because they are linear in logarithmic transformation, and are also referred to as log-linear regression model.
CHAPTER FOUR
PRESENTATION, ANALYSIS AND DISCUSSION OFRESULTS
EFFECT OF GOVERNMENT AGRICULTURAL EXPENDITURE ON AGRICULTURAL SECTOR OUTPUT
The effect of government agricultural expenditure on agricultural output is examined from the results of the estimated equations using the OLS technique. However, the general model is disaggregated into pre-SAP and with-SAP periods. This is done so as to examine the effect of SAP, and how it has affected the government agricultural expenditure on agricultural output. Also presented below alongside the estimated equations are: the student t- statistics presented in parenthesis, R-square (R2), Adjusted R-square( □R2), and the F- statistics.
CHAPTER FIVE
CONCLUSION ANDRECOMMENDATION
CONCLUSION
The size of the government expenditure to agriculture is dependent on, among other things, the existence of an agricultural policy frame work which indicates its priorities within the agricultural sector, availability of funds and the sectoral priorities within the general economic policy frame work. There is no doubt that in Nigeria, government has always emphasized the importance of agriculture in the development policy. However, there have been indications that this overall position of the government was not supported in practical way by financial allocations for the development of the sector, for instance, total capital allocation to agricultural sectors was only 4.9 percent of its aggregate capital allocations to all sectors during the first plan period (1962-68). This must be considered low, given that agricultural production accounted for between 50-65 percent of the GDP during the period. Although, total allocation to the agricultural sector increased more rapidly within this period but the proportionate share of total agricultural sector allocations were on the decline. Therefore low capital expenditure on agriculture by the federal government was particularly unsatisfactory and this is not a surprise since its interest was in agricultural research as specified in the Nigerian constitution. Thought, that attitude of in-difference was short sighted and detrimental to food and agricultural production. Since it was obvious that agriculture was basically under develop and it needed just the minimum test to show its weakness. An example is the issue of the decline in rainfall in most part of Nigeria which ranged between 15-60 percent this led to the re-appearance of the drought of 1982-1983 which came with even greater severity than before. This drought was attributed to several features, the most important being metrological changes, poor land use and inadequate water control schemes. Also there was the recent incidence of bird flu in some part of the world, Nigeria inclusive, and it ravaged most of the poultry farm. This incidence discouraged most small- scale farmers in Nigeria from investing in poultry farming again, thereby causing a huge scarcity and also an increased in price of the few available poultry farm.
With regard to the research results, the amount of government expenditure to agriculture during the period under consideration had no effect on the agricultural output. Although, government made emphasis on the importance of agriculture in its development policy; however, agricultural policies, programmes were formulated by different regimes with the idea of stimulating and inducing a better agricultural production. Therefore it can be stated that the poor performance of the agricultural sector reflects largely not only on the expenditure allocation pattern but also as a result of defects in their conceptualization and in efficient implementation of some policies and programs.
RECOMMENDATION
It has been noted that while agricultural credit was increasing and multiplicity of government finance and other programmes observed since the 1970s, aggregate agricultural production tended to stagnate. Apart from finance, several factors such as credit supply to farmers by lending banks:
improper monitoring of agricultural projects by the lending institutions have also contributed to the non-commensurate response of aggregate agricultural production to the various policy measures.
Some programmes have been ineffective in contributing to the growth of the agricultural sector as result of defects in their conceptualization and inefficient implementation. For example, programmes such as Operation Feed the Nation, National Acceleration Food Production Programme, River Basin Development Authorities, etc. were rather all embracing and too large in scope as to be efficiently implemented. A better approach is for project to be modest, sector- specific and for pilot programmes to be undertaken before replications if benefits are found out weigh costs.
Other areas that require considerable attention in view of their potential contribution to agricultural growth are input procurement/distribution and application of suitable technology. Adoption of modern farming/husbandry practices, such as the supply of improved seeds/seedlings, agricultural chemicals for pest and disease control and fertilizers to enhance yield/output. Yet the procurement and distribution of fertilizer have been characterized by bottlenecks resulting in inadequate quantities of the product-reaching farmers at more than twice the subsidized rates. It is suggested that fertilizer procurement and distribution be privatized and a better mechanism for providing fertilizer subsidy be evolved-preferably through ADPs or farmers associations. With the exception of the ADPs, it is difficult for any observer to believe that the food policy measures adopted for implementation were preceded by thorough planning in the sense of a desire to follow a particular pattern of structural change in the food economy. A systematic planning of the food economy would have begun with on identification of appropriate instruments and policy measures for the attainment of stated objectives. There would also be on effective monitoring and evaluation system for ensuring that objectives were being achieved. Above all, in such an environment, government would clearly determine the extent of its intervention so as to produce the optimum results.
Similarly, research institutes should ensure that improved and high- yielding seeds and simple technologies capable of increasing output are made available to farmers at reasonable costs. For agricultural research to have development as its focus, a people centered approach is needed. This strategy should have a long-term perspective in terms of the factors that influence both the demand for and supply of food items. The strategy should also create a path through which shorter-term government priorities could dovetail into the long- term perspective. It should also identify the immediate and long-term skills required by the universities and research institutes to meet up with the public and private sectors.
Basically, the small-scale farmers are the major producers of food and fiber in Nigeria. Hence, research focus on how to improve their levels of efficiency should be the main priority for food security to be achieved.
Research in crops, mainly cowpea, maize, tubers and vegetables needs to focus on post-harvest preservation and storage to minimize, if not eliminate, the current high losses variously put between 20 and 35 percent.
Similarly, in the areas of animal production, emphasis needs to be put on poultry; cattle and piggery given their high demand elasticity and required supplies. Measures to improved breed of livestock and fisheries, improvement in the processing and storage of the agricultural enterprises are essential research areas, which should be a pedestal for achieving national and household food security.
It should be emphasized that agricultural development cannot take place without a vibrant rural development programme. Hence, research needs to be focused on rural-electrification, feeder roads, storage facilities, rural health programmes and credit institutions. These are some of the areas that can complement the efforts towards the attainment of food security within a short space of time.
Additional focus is necessary in the area of environmentally related measures designed to stimulate agricultural growth. Past efforts were largely concentrated on the provision of irrigational facilities, such as dams in drought- prone section of the country and on tree planting to slow down desert encroachment. A shift should be made to the less expensive but effective fadama-type irrigational facilities relaying on hand pumps and with the capacity for greater territorial coverage than dams. For the south, programmes would have to be developed to minimize damage to topsoil and resultant poor crop yield caused by erosion, floods and landslides.
Finally, more weight would have to be attached to data gathering, coordination and reconciliation to enhance planning and facilitate decision- making. Ultimately, a viable national agricultural data bank, capable of meeting the needs of relevant users, would have to be established and founded. Information sharing and utilization should attract stipulated and agreed user feeing in other to make such system self-sustaining in the long run.
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