The Role of Agriculture in the Nigerian Economy Essay

CHAPTER TWO LITERATURE REVIEW In this chapter of the research work, the review of related literature is presented under the following heading: ? Role of Agriculture in an Economy ? Importance of Agriculture ? Analysis of Selected Indicators of Agricultural Growth ? Agricultural Constraints ? Institutional Reforms ? Major agricultural policies in Nigeria from 1960-2005 ? Macro-economic variables affecting economic growth ? Government expenditure ? Investment ? Foreign investment The new Nigerian Agricultural Policy 2. 0The role of agriculture in an economy It is important to first define the term-Agriculture before talking about the role of agriculture in the economy. Oxford (2000) defines agriculture as the science or practise of farming. Anyanwu (1997) noted that agriculture “involves the cultivation of land, raising and rearing of animals for the purpose of production of food for man, feed for animals and raw materials for industries. It involves cropping, live–stock, orestry, and fishing, processing and marketing of these agricultural products”. Abayomi (1997), like many other economists opined that “in most developing countries, agriculture is both the main traditional pursuit and the key to sustained growth of the modern economy. She noted that economic growth has gone hand in hand with agricultural progress; stagnation in agriculture is the principal explanation for poor economic performance, while rising agricultural productivity has been the most important concomitant of successful industrialization.

Among the roles conventionally ascribed to the agricultural sector in a growing economy are those of: providing adequate food for an increasing population; supplying raw materials to a growing industrial sector; constituting the major source of employment; earning foreign exchange through commodity exports, and providing market for the products of the industrial sector”. Myrdal (1986) notes that, “it is in the agricultural sector that the battle for long term economic development will be won or lost”.

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This assertion has been supported by both historical and contemporary development experience. Reynolds (1975) stated that agricultural development can promote economic development of the underdeveloped countries in four distinct ways:- i) By increasing the supply of food available for domestic consumption and releasing the labour needed for industrial employment; ii) By enlarging the size of the domestic market for the manufacturing sector; iii) By increasing the supply of domestic savings; s v) By providing the foreign exchange earned by agricultural exports Riemenschneider (2003) stated that at the most basic level, agriculture’s essential role is to provide adequate output to assure global food security. Without adequate food, people cannot work and earn, they cannot learn, and they are more susceptible to disease. Overall, their economic prospects are dim. Following these criteria, Anyanwu et al (1997), noted that Nigerian agriculture has in recent years not been able to meet the food needs of the country.

Rather, food production per capita has been declining. To complement the low domestically produced food supply; there has been a substantial rise in food imports. These have taken substantial portions of the much needed foreign exchange for importing capital for development purposes. Available data revealed that average food imports have accounted for about 9. 15% of total imports over the period between 1960 and 1993. Nigerian’s quick turn from a low food importing to a high food importing country with food bill accounting for 14. 71% of 1991’s total import bill compared with 6. 7 percent in 1970 was a sign of collapse of the agricultural sector. Anyanwu et al noted that this situation does not augur well for the Nigerian economy especially when we realized that there are available resources that can be exploited to increase the local production of food stuffs. With respect to employment, they noted that more than 80% of the rural population of Nigeria is engaged in one type of agricultural activity or the other. This roughly indicates the extent to which the agricultural sector absorbs the labour force in the country.

However, World Bank Report (1970) puts it that the agricultural sector employed 71% of the total labour force in Nigeria in 1960 and by 1977; this had dropped to 56%. It rose to 68% in 1980, fell to 55% in 1985 and further fell to 53% in 1986 and 57% annually from 1989 to 1992. They however argued that the fall in the proportion of labour force engaged in agriculture is due to the structural changes in the economy where other sectors are assuming different dimensions and engaging more labour than they previously did.

It is necessary to point out that given the importance of labour in agriculture of most African nations including Nigeria, and the poor labour absorptive capacity of their industrial sector, rapid outflow of labour from the agricultural sector has generated not only social but economic problems as well. A partial consequence of a high labour out flow from agriculture has been a decline of agricultural production in Nigeria in recent years. In his analysis, Ihimodu (1993) stated that “agriculture had often been described as the mainstay of the Nigerian economy, especially so before the oil boom of the 1970s”.

Consequently, many roles were expected to be played by the sector in the process of development of the economy. He maintains that these roles are typical of the contribution normally made by the agricultural sector to the economics of developing countries. The agricultural policy for Nigeria, (Federal Ministry of Agriculture, 1987) outlined the traditional contribution expected of Nigerian agriculture. They include the provision of adequate food, a source of employment, foreign exchange, raw materials for domestic industries and the provision of a market for the product of the industrial sector. The contribution of griculture to food supply could be measured indirectly via the volume as well as the value of food imports (Ihimodu, 1993). He also noted that a direct measure of food production is difficult because of lack of adequate statistical data. It has always been claimed that the agricultural sector supplied most of the food needs of the economy especially before and during the 1950s and 1960s. In recent times however, there has been some concern that there exists a widening gap between domestic food supply and total food requirements. Some studies have shown that while the demand for food has been growing at about 3. % per annum, food production has been growing only at about 2. 5% per annum (Agricultural Policy for Nigeria, 1987: 12). This has led to a significant increase in food imports both in absolute terms as well as in relative to the total import bill. To a large extent, the absolute value of import had risen overtime, as had the proportion of food in the total import bill. Generally, before 1974 the food bill constituted less than 10% of total import. However, after 1974 food import increased above 10% of import rising to about 18% on the average between 1984 and 1985.

In 1984 specifically, food import constituted 21% of total import bill. There appeared to be some decline in the share from about 1986. It is thus, obvious that the agricultural sector has successfully played its role of food supplier in the economy until the 1970s when food import became intensified. On the other hand, the raw material contribution by the agricultural sector appeared to be the least satisfactory. This situation may have been caused partly as a result of historical development, as well as the technologies adopted in the industrial sector of the economy.

The colonial pattern of development regarded the Nigerian economy basically as a source of raw materials for the British industries and therefore, all efforts were geared towards satisfying that requirement. This pattern, no doubt must have accounted for the initial slow pace of industrialization in Nigeria. Moreover, the industries that were established depended mainly on imported inputs. One of the consequences of the dismal performance of the agricultural sector in this regard is the retardation of industrialization in the country.

It should be clear, though, that the pattern of development, the orientation, adverse agricultural pricing policies, and bias of industrialization, rather than the capability of the agricultural sector were responsible for this poor performance of the sector. The potential of the agricultural sector to make a substantial market contribution depends on two major considerations. One is the purchasing power of the agricultural sector which depends on the rate of modernization of both the economy and agriculture in particular.

A high rate of agricultural modernization implies a fast rate of substitution of modern inputs such as tractors, improved seeds, fertilizer etc. for traditional implements like hoes, cutlasses and traditional seeds. On this count, the Nigerian agricultural sector has not performed satisfactorily. There are two major sources of factor contribution of the agricultural sector. These are capital and labour transfers from agriculture to the other sectors of the economy. Capital transfer is one of the major roles played by the agricultural sector in the Nigerian economy.

An objective on which the government was always silent; namely, mobilization of revenue for government or transfer of capital from the agricultural sector to other sectors engaged the attention of most of the marketing boards from the inception until they were abolished in 1986. Most of the accumulated profits of the marketing boards were converted by state governments to grants and loans. The Nigerian agricultural sector was virtually the sole earner of the country’s foreign exchange before the oil boom, while only a very small proportion of the earnings were contributed by the other sectors especially mining.

Agricultural products accounted for an over whelming proportion of the total export earnings in the 1950s and early 1970s, before the oil boom. In the second half of the 1950s agricultural export accounted for 86% of the total export earnings. By the first half of the 1970s, the proportion fell drastically to 26% between 1970 and 1974 and to an insignificant 3% in the last half of the 1980s. It is obvious that the sector did play a very dominant role in mobilizing foreign exchange resources required for the development of the economy up to the early 1970s; when Nigeria hit the jackpot, so to say, in petroleum oil.

As in the case of the role played in capital formation most of the foreign exchange receipts from the agricultural sector was expended in the non – agricultural sector. 2. 1 The importance of Agriculture i. ) The first contribution of agricultural sector is to provide sufficient food for the workers in the industrial sector. Inadequacy of food supply usually leads to high food prices and low savings, which have adverse effect on levels of investment and rate of economic growth. Correspondingly, inadequacy leads to high import bill with its attendant negative impact on the country’s foreign exchange reserves. i. ) It also has a contribution on increasing the supply of food and new material to other sectors, tax revenue to the government to provide” invest able surplus” to other expending sectors and to provide foreign exchange. iii. ) Linkages of the Agricultural sector include the manufacture of tyres and footwear from rubber, textiles from cotton, and beverages, cakes from cocoa. It makes the establishment of agro-allied industries feasible. iv. ) In line with employment, the sector employs about 70 per cent of Nigeria’s labour force. v. ) Contribution to the Gross Domestic Product (GDP). i) The supply of foreign exchange. It is clear that increase export of primary products is the first stage of the LDCs. As the productivity of agric sector increase, excess products will be exported to earn more foreign exchange. Since in the first stage, the output of industrial sector is small and the quality is not good due to lack of new tech. and equipment. Therefore, the nation has to rely solely on exporting agric. sector. The earning of foreign exchange can provide the government fund to invest and purchase new equipment for modern sector. 2. Analysis of selected indicators of agricultural growth Under this heading, trends in input utilization, capital requirements, and the production gap are used as parameters to weigh the growth of agriculture in Nigeria. 2. 2. 1 Trends in input utilization Three approaches are adopted to achieve self -sufficiency in food production. Firstly, the intensive use of improved inputs such as fertilizers, seeds, and agrochemicals to control pests, diseases and weed. In Nigeria and elsewhere, improved farm cultural practices have been adopted in the past to complement the use of such improved inputs.

Secondly is the expansion of total land area under cultivation and lastly is the combination of the two. The expansion of land under cultivation involves enhancing the productive capacity of marginal lands through the use of irrigation facilities and deforestation. However, this method is expensive. Consequently, the intensification of inputs is normally preferable as a means for boosting agricultural output. In Nigeria, massive resources have been channelled into the procurement and distribution of farm inputs.

Following a report by Federal Ministry of Agriculture and Natural Resources, fertilizer consumption increased in the early 1980’s into the 1990’s and peaked in 1993, with a total consumption reaching 1,590 thousand metric tones. But declined in 1994 to the lowest level of 357. 8 thousand tonnes in 2001. (Ibid, 1997) 2. 2. 2Trend in agricultural financing There is general agreement that Nigerian agriculture is grossly under-funded. Worse still, patterns of agricultural sector spending hardly represent the best and most effective use of public resources.

Agricultural sector funding comes from the federal government, state governments, organized private sector, informal sector and international development partners including bilateral and multilateral agencies. Perhaps, because the society sees agriculture as a small-farmer activity, less than 1% of Nigeria’s annual GDP is ploughed back into agriculture as productive investment. In 2003, agriculture share of the budget was mere %. In 1990 the public sector contributed 24. 0 per cent of the total credit while the private sector accounted for the balance of 76. per cent. This trend continued until 1993 where the public sector accounted for about 28 per cent of the total credit. Thereafter, the composition of total credit was reversed, with the share of the public sector falling to 18. 0, 14. 0 and 3. 0 per cent in 1994, 1996, 1999 and 2000 respectively. The diminishing trend was due to non-mobilization of savings by the specialized credit institution, coupled with the reduction in government grants. Likewise, capital budgetary allocations to the sector, which stood at 11. per cent of total capital expenditure in 1989, had declined to 6. 7 per cent by 1990. The downward trend continued to 2001. (Federal Ministry of Agriculture and Natural Resources) 2. 3Agricultural output In the 1990’s, policy measures were initiated and strategies designed to propel agricultural development, targeting year 2000 and beyond. A discussion of the output targets set and a detailed analysis of the level of achievement so far is emphasized below. 2. 3. 1Crop output gap Food crops constitute the largest component of the crops sub-sector of Nigeria’s agricultural sector.

They are broadly categorized into cereals, pulses, roots, tubers, and plantain, oil seeds and nuts, vegetables and fruits, sugar and beverages. Over the years, in Nigeria, there have been occasional food supply shortfalls And high food prices in all or some parts of the country. This was often due to seasonal and cyclical food supply fluctuations, drought and /or poor rainfall in parts of the country. Market imperfections also creates local food supply shortfalls in some parts of the country while there are surpluses in some other parts (NAEE, 2008).

However, the current food crisis seems to be different as it cuts across many developing countries. The price of nearly every agricultural commodity increased sharply between 2007 and 2008. Food prices rose 55 percent from June 2007 to February 2008. Corn prices began their rise in the third quarter of 2006 and soared by some 70 percent within two years wheat and soybean prices also skyrocketed during this time. The cooking oils (mainly form soybean and palm oil)- an essential foodstuff in many poor countries rocketed up as well.

Rice prices also more than doubled in the years 2007. (TWN, 2009). The price of nearly every agricultural commodity increased sharply by 55 percent between 2007 and 2008. (UNDP, 2008). World prices of wheat and maize were three times higher than at the beginning of 2003, while rice was five times higher (ITRD, 2009). African continent with a population of 900 million people now has 315 million living in less than 81 a day (UNDP, 2008). This rapid and simultaneous rise in World prices of all basis food crops is having a devastating effect on poor people all over the world.

Almost everybody’s standard of living has been reduced; the middle class are spending more on food purchases, the near poor drop into poverty and the poor suffer even more (TWN, 2009). Explanations for these crises in food ranges from global warming through to international trade policies, the emergence of bio-fuels, increasing urbanization and population growth. Also included are poor post-harvest supply management in many developing countries, sharp increase in World-wide demand for food to feed refuges and other displaced people in crisis-ridden countries and drought or poor rainfall in some countries.

For example in Nigeria, food production was said to have declined by about 25 percent in 2007 due to drought in the Northern part of the country. (NAEC; Economic & Policy Series, 2008). The level of dependence of a country for a particular food item is a measure of the vitality of the food system and the vulnerability of the people to changes in production of the exporting countries and other external factors such world prices. The current food crisis in Nigeria cannot be completely isolated from the trend in supply in the country.

The gap between supply and demand for a particular food item is a measure of the level of food in security with respect to such commodities. One major factor accounting for food insecurity is the variability in food production from year to year which often affects mainly the physical availability of food. In attempt to stem the gap between food supply and demand in Nigeria, the Federal Government designed and implemented a plethora of reform initiatives. The responsiveness of farmers to these economic incentives/policies determines agriculture’s contribution to the economy.

Analysis of Nigeria’s food crops production shows that of the seven food crops for which comparative data are available, only four exceeded the specific targets, while three recorded variance between actual and projected output during the period 1990 and 2001. Obviously, the target for self-reliance was largely unaccomplished. (Ibid, 1997). 2. 3. 2Fisheries output gap In the mid 1960s, estimates indicated that Nigerian fisheries brought in 120,000 tons of fish per year and imported 180,000 tons, mostly air-dried fish. Domestic production through the 1970s ranged from 600,000 to 700,000 tons annually.

Fisheries output ranged from 600,000 to 700,000 tons annually in the 1970s. Estimates indicate that the output had fallen to 120,000 tons of fish per year by 1990. This was partly due to environmental degradation and water pollution in Ogoniland and the Delta region in general by the oil companies In the 1990s, the target set for fish supply from domestic sources was 958,397 tonnes, with growth rate of 7. 05 per cent annually. The demand and supply for fishery resources for 1990 to 2001 exhibited extensive negative gaps between projected demand and supply.

Though the supply of fish has been on the increase between 1990 and 2000, it has consistently been more lower than the demand for fish, hence the deficit recorded over the years. The deficit, which stood at 848. 16 thousand tonnes in 1990, fluctuated upwards and peaked at 1,191. 4 tonnes in 1995 before declining to 403. 0 thousand tonnes in 2000. Nevertheless, this growth rate, which stands at 2. 0 per cent per annum, is too low to compensate for the substantial negative variance between actual and projected outputs thereby negating the objective of self-sufficiency in fish production.

The speculated growth rate of this sector has not been achieved, suggesting that the current production practices may not be capable of achieving the desired production targets. (CBN Report) 2. 3. 4Livestock output gap A significant portion of the agricultural sector in Nigeria involves cattle herding, fishing, poultry, and lumbering, which contributed more than 2 percent to the GDP in the 1980s. According to the UN Food and Agriculture Organization 1987 estimate, there were 12. 2 million cattle, 13. 2 million sheep, 26. 0 million goats, 1. million pigs, 700,000 donkeys, 250,000 horses, and 18,000 camels, mostly in northern Nigeria, and owned mostly by rural dwellers rather than by commercial companies. For the purpose of planning for self-sufficiency in livestock production, output in the sector was categorized into short term and long term. Livestock, whose sufficiency level could be conveniently attained within five years, were classified as short term while those that would require at least 15 years were categorized as long term. Thus, the target years for the two classes of livestock products were set at 1992 and 2002 respectively.

The demand and supply projections for the livestock sub-sector in policy document were limited to five livestock products, namely; beef, poultry products, goat meat, mutton and pork. The agricultural production index shows that livestock output recorded a growth rate of 2. 2 per cent between 1990 and 2001, a much lower figure than the expected growth rate of 19. 05 per cent stipulated in the policy document for the various livestock species. At the current level of production, the protein intake of Nigerians will continue to remain much below the stipulated minimum requirement. Federal Ministry of Agriculture, Livestock Division). 2. 4Agricultural constraints The major setback of the sector is funding then other factors follow. Below are some constraints to the development of the sector in Nigeria. I. Inherent problems in agriculture CBN (1981) stated that these problems include among others, natural hazards, like unfavourable climate – winds, which are unpredictable and some of which have no immediate solution and thus increased the risks of agricultural ventures.

They agreed that the inelastic nature of land, relative scarcity and mobility of farm labour also contribute to the risky nature of agricultural project. More so, they identified the high rate of perish ability of agricultural products, poor and inadequate infrastructural and storage facilities in rural areas where farming is mainly carried out as factors which further scare away the would be labour from the farming communities and this has brought about the erroneous belief that farming is a traditional rather than a form of business.

Furthermore, to explain that the highly vulnerable nature of food stuff to fluctuations in prices often deter prospective creditors from extending credit to farmers because of the high risk involved. a. ) Government policies: The success of agricultural loan scheme hangs greatly on government policy and implementation. Ahmed (1990) argued that in Nigeria, government policies are inconsistent, often self-contradictory and hardly allowed to mature.

For instance, while the importation of wheat, maize, rice etc was banned by Babangidas’ administration in the country, sugar, wheat, fish, fish product, salt, etc, importation are generously encouraged despite abundant resources to produce them here in the country. The CBN summarizes the problems caused by the government to include, the inadequate provision and untimely release of funds in the national budget, lack of adequate pre – project studies, problems of infrastructure and marketing, the inability to solve the problem of land tenure – despite the promulgation of the land use act in 1978.

Ahmed decried the poor co – ordination of public policies and among public agencies, the Pharisee approach to foreign exchange conservation. B. ) Farmer associated problems: Nto and CBN identified problems encountered here to include, the deliberate misconstruction of the objectives of government credit initiated programmes. Most farmers according to them regard agricultural loans as a national cake which is to be shared by all. The issue of loan diversification by farmers and the problems of high level of illiteracy among farmers were also identified.

So also are management problems leading to inefficient application of funds which is due in part, to wrong selection of enterprises. Exaggerated assessment of the farmers’ credit needs and their reluctance to accept time assessment also poses a problem. C. ) Financial institutions problems: The CBN summarizes obstacles associated with credit policy and credit delivery to include; the general inefficiency of the present mode of credit delivery.

Specifically, the problems among others are delays in processing application for loans forms, granting of inadequate loan, inadequacy of relevant skilled staff, drawing up amortization schedule, unjustifiable insistence on particular type of collateral, inability of existing financial institutions to reach the small farmers, inadequate interest shown towards agricultural lending, the question of interest rate chargeable on agricultural loans and the mutual distrust between the bankers and the borrowers. . 5. Infrastructural Problem This consists of poor and inadequate road network between the rural areas where agricultural production mainly takes place and the urban areas where there is available market for the commodities. Smith et al (1994) identified this as a problem militating against increased productivity in the agricultural sector as the availability of these infrastructural facilities is crucial to increasing productivity in the sector.

With research findings indicating the availability of good road networks and transportation having a positive effect on boosting agricultural productivity in the country (ibid), tackling this problem is a critical tool towards increasing food security in the country. There is also lack of storage facilities for storage of farm produce with a high volume of annual loss of agricultural produce attributed to inadequate storage facilities.

Many of the rural areas also lack electricity needed for processing and storage of perishable agricultural produces as well as other needs of the farmers. Provision of social amenities in the rural area such as health facilities, pipe borne water, schools and relaxation/sport centres is grossly inadequate which is responsible for the high incidence of migration especially the youths to the urban area (Fadayomi, 1988). A lot of man-days and hours are also lost to ill health resulting in low labour productivity of the farmers (Smith et al, 1994).

Series of steps have been taken by different government administration in Nigeria to address these problems some of which include construction of silos in specific locations in the rural areas, construction of feeder roads into the rural areas and building of health care centres (Okoli, 2004). However, due to poor maintenance culture in the country, many of the facilities in the rural areas are not maintained to ensure their sustainability while many of the road networks constructed are not motor able due to destruction by erosion and low quality of job done during their construction.

In places where electricity has been provided, insecurity in the country had made the electricity poles and equipments venerable to vandalisation by hoodlums coupled with incessant supply of electricity. 2. 5. 1 Socio-cultural and land tenure problems This relates to the problem of land tenure system in Nigeria in relation to socio-cultural factors especially in the southern region of the country where the system of land tenure limits the availability of land to the would-be farmers.

In the northern part of the country, land belongs to the state which is supervised by the emirs and chiefs for allocation to users while it is owned by individuals in the eastern part with a similar case in western region too (Akande, 2006). The cultural system and beliefs also limit the role of women to few activities in some cultural settings while religion also plays a major role in defining the roles played by women and other potential source of labour for agricultural purposes (Okike et al, 2001).

The government has taken steps to address the problem of land tenure system in the country with the promulgation of the Land Act of 1978 which reversed the ownership of all land in the country to the federal government. However, the Act is only a statement on paper as it has not been implemented in the country while the implementation may also be practically and technically impossible due to cultural reason associated to land ownership structure in the country.

While Akande (2006) opined that the land degree had an impact the land ownership structure in the East and Western region of the country with the state having control of land, available records still shows that a vast majority of the land in these regions are still controlled by the communities, individuals and family households (Okolo, 2004; Onokerhoraye, 1995) Nevertheless, different government administration has taken steps to provide land to would-be farmers through the demarcation of specific area of land in the different region of the country as agricultural lands with programs such as the farm settlement scheme (Akande, 2006).

While some of the would-be farmers do benefit at the start of such programmes, many of the land areas are eventually taken over by the political leaders and influential government officials and converted for personal use (ibid). 2. 5. 2 Economic factors The economic situation in the country and inconsistent policies has led to increasing prices of farm inputs such as fertilizers, herbicides, pesticides while some of the inputs are also not readily available in the input market.

This limits the adoption of these inputs which does have a great impact on yield and production levels (Okike, et al. 2001). While some policies such as the SAP program has encouraged the local production of inputs in the country (Akande, 2006), others like the austerity measures has had a negative effect on input supply in the country (Mustapha, 1999). The unavailability of major inputs at the time required also generates a demand pull situation for higher prices of the input materials.

Inadequate credit facilities to farmers also limit farm size in commensurate to what they can afford and where credit is available, the commercial sources always come with high interest rate while many of the government source are not easily accessible to the farmers. Government administrations in the country both at the federal and state level have taken steps to address these problems some of which include construction of fertiliser blending plants, setting up of agricultural input procurement boards among others (Akande, 2006).

However, due to corrupt practices of government officials and political leaders in the country, many of these projects are only used to siphon fund into private accounts and the plants packing up after a few years of operation (Okolo, 2004). Many of the credit facilities provided by government are also associated with bureaucratic bottlenecks in accessing while the few lucky farmers that are able to access the loans do not make any attempt to repay them back, seeing such as their own share of the ? national cake` (ibid).

However, the ACGSF scheme has achieved immense success in providing cheap credit to farmers except that the amount provided are low compared to the actual credit requirement for the farmers. 2. 5. 3 Environmental problems A major problem confronting the agricultural crop production sector in Nigeria is the high incidence of pests and disease. This problem was identified to be responsible for loss of high amount of revenue to farmers due to pest and disease attack on the field and during storage (Akoroda et al, 2004; Okike et al, 2001).

The problem of pollution of freshwater resources through industrial activities by manufacturing and oil exploration companies is also posing a great challenge to the livelihood security of many rural people who are dependent on the use of these resources for their sustainability. Drought incidence, desert encroachment, soil erosion and degradation are other environmental limitations to agricultural development in Nigeria (Oluwasemire et al, 2002). The Nigerian government did not have any environmental protection agency until 1999 when the new civilian administration was sworn-in.

However, with the new environmental protection agency in the county saddled with the responsibility of policy formulation for environmental protection and implementation of such policies and environmental laws, new initiatives has been taken to address the different environmental problems in the country with environmental issues becoming very significant in public debates and issues of interest. However, a possible limitation presently is that the research organisations in the country lack adequate fund in conducting research to find solutions to the environmental problems facing the agricultural sector in the country. . 5. 4 Extension, manpower and skill development problems The extension service delivery system in Nigeria has suffered many set back from inefficiency and inadequate numbers of extension personnel. While experience had indicated the advances in the agriculture of developed countries was sustained by technological innovations and practices, the role of extension in agricultural development in the country through the provision of linkages to the farmers with research institution for the delivery of research findings and information of new techniques of agricultural production has been lacking (Akande, 2006).

Available records has indicated the failure of the extension strategies adopted under the various agricultural programs in the country except the ADP which has immense success records with the uses of different extension methods and approaches (Akande, 2006; Oladele et al, 2004). With extension creating access for the farmers to procure production inputs which are ordinarily difficult to procure and training on the use of the inputs and new innovations, achieving any successful record in increasing volume of production and meeting food security is intrinsically tied to good extension system being put in place in the country.

The shortage of experienced professionals and technical manpower for tractorisation and mechanization is another limitation while there is a mass drift of able-body men and women from the rural areas to the urban areas thus having a negative impact on labour availability for agricultural production in those areas.

While the government is making steps to address these problems through different programmes such as the National Fadama program currently going on in the country, many of which are been sponsored by international agencies such as the World bank, IFAD, CGIAR, IITA among others and significant amount of progress being achieved, there is still a long way to go in addressing all these problems in the country. 2. 6Institutional reforms a)Establishment of universities of agriculture

The Federal government in order to build capacity to boost agricultural growth established three Universities of agriculture namely: University of Agriculture Abeokuta (UNAAB), Michael Okpara University of Agriculture Umuahia and Nnamdi Azikiwe University of Agriculture Umudike, so as to offer degree programmes in all disciplines of agriculture and address the perennial problem of inadequate human resources at all levels of the agricultural sector. b. Establishment of the Nigeria export-import bank and the Nigerian export promotion council (NEPC) The Nigerian Government established the Nigerian Export Promotion Council (NEPC) in 1986 and the Nigerian Export-Import Bank (NEXIM) in 1991. The Bank’s main functions are to provide export financing, export risk mitigating facilities and export advice to companies and it is seen as the instrument of policy to expand and stimulate exports focusing on non-oil products. c. ) Research institutes

The Federal government in order to improve the funding of Nigerian Agricultural Research Institutes obtained a World Bank loan for specified research activities involving agricultural research institutes in the world (The World Bank, 1989). However, the level of funding of research in the institutes and the universities of agriculture could not be sustained, largely on account of their ever increasing number and personnel. Besides duplicating their functions, the institutes have continued to be dependent on the subventions from the Federal Government for virtually all their operations. 2. Major agricultural policies in Nigeria from 1960 – 2005 | |Year of Introduction |Objectives | |Agricultural Policy | | | |National Accelerated Food production | |*to increase local production of food | |Program |1973 | | | | 1976 |*to mobilise the nation towards self reliance and | |Operation feed the Nation | |sufficiency in food production | | | |*encourage general pride in agriculture as a viable | | | |and profitable industry | | | |*to increase local production of food towards national| |Green Revolution |1980 |food security | | | |*increase agro-allied industry operations in the | | |country | |Abolition of import duties on | |*to provide easy access to cheaper | |fishing vessels, agricultural |N/A |agricultural production inputs | |machinery and equipments | | | |Establishment of the | N/A |*to provide credit and loan facilities for | |Nigerian agricultural and | |agricultural development | |cooperative bank | |*provision of low interest rate loans to farmers | |The agricultural credit | 1977 |*provision of loans to farmers through banks | |guarantee scheme | |*provision of guarantee for loans provided by | | | |commercial and merchant banks to the agricultural | | | |sector. | | |*to increase level of bank credit to the agricultural| | | |sector | |Increasing Agricultural | | | |Loans in the banking sector |1980 |*to increase commercial and merchant bank | |from 60 percent to 80 percent | |participation in the agricultural sector | |Back to Land Programme | 1984 |*to increase local food production in the country | | | |*to encourage participation of the younger labour | | | |force in agricultural production activities | |First & Second National fadama | 1999 & 2004 |*to sustain ably increase the income of fadama users | |development | | | |programme | | | Source: Aigbokhan, 2001; CBN, 2005; Nwaobi, 1990 Table 2. 7 contains some of the major policies that were introduced in the country after Independence, from 1960 to 2005.

While all the policies have good objectives with the potential of solving the problems in the agricultural sector, many of the policies were not implemented while the few ones being implemented were only aborted at a period when the policies were about bearing positive results (Aigbokhan, 2001). The problem of corruption has also being a great disadvantage in the positive implementation of these policies with majority of the programmes started as a means to siphoned government funds into private accounts (ICPC, 2007). The first and second national fadama development program introduced in 1999 and 2004 respectively is a program being financed by the World Bank in partnership with the Federal, state and local governments in the country.

While this program is not so much different from the earlier programs and policies, it was designed specially to adopt a new strategy of empowering the beneficiaries through direct participation in the program. This involves allowing the beneficiaries to voice their problems and opinions and proffering solutions to their problems in their own way as well as channelling funds and other financial assistance directly to the beneficiaries in executing their projects (CBN, 2005). This strategy was to overcome the traditional problem of government bureaucracy in program execution and corrupt practices of government officials through diversion of program funds into private pockets.

While massive success was recorded during the first phase of the program (CBN, 2005), the program is now in the second phase and there are plans to go into the third phase after the successful completion of the second phase. 2. 8Macro – economic variables affecting economic growth 2. 8. 1 Government Expenditure Government expenditure is examined based on the ninth Nigerian Economic summit, 2002 report. The Federal Government will be committed to a prudent and transparent macroeconomic strategy that supports poverty reduction in achieving economic growth and price stability and assuring national unity, democracy, good governance and security. The study considers some macro-economic variables as they affect economic growth and issues arising as far as they are concerned. Key Macroeconomic Targets for 2003 to 2007 Inflation to average around 10%, by year-end 2003 and drop well under 10% by 2007. -Real GDP growth to approach 7% by 2007. -Exchange rate management that assures a stable currency and seeks to eliminate significant parallel market activity. -Foreign exchange daily sales to be market responsive and largely in line with export receipts. -International reserve levels that assure at least 6 months of imports. -Money supply growth that is non-inflationary. -Interest rates to be market responsive, with attempts to direct low interest funds to the real sector. -Deficit financing not to involve inflationary borrowing from the central bank. Reference crude oil price for budgetary purposes to be $20 a barrel, underpinning a fiscal rule that stabilizes government revenues and expenditures. -Expected crude oil production base of about 2 million barrels a day. -Encouragement to be provided to state and local governments that show outstanding fiscal responsibility. -A stabilization fund from crude oil sales above the budgeted price to be maintained for fiscal stabilization among all 3 tiers of government. -Government will propose that at least 1 % of the federation account revenue be added to the stabilization fund. -Fiscal and monetary policies to be complimentary. -Federal government deficit per year of not more than 2. 0% of real GDP. In the effort to operate an efficient and compassionate economy, government ill do the following: – Streamline federal government land tenure systems for housing -Provide infrastructure to facilitate and encourage private developers and mortgage finance institutions, so that every Nigerian who has a job can own a home. – Government will act as a buyer of last resort when unforeseen market conditions lead to an oversupply of homes, Growth of new dwellings will be targeted at no less than 3% a year. a. Agriculture and Agro-business The main policy objectives for the agricultural sector, over the outlook horizon include food sufficiency, increased raw material production for the agro-allied industries and enhanced value added in agricultural exports.

The strategy to be adopted is the provision of an enabling environment that will support private sector initiatives in the production of staples such as rice, maize, cassava, as well as export crops. Government will also set up mechanisms for ensuring the following: -Stabilization of output and prices. -Risk analysis and management -Agricultural extension services. -Access to credit facilities at affordable interest rates -Access to improved seedlings. -Priority activities in agriculture and agro-business will include cassava – production, rice farming, and cotton production for textiles. – Agricultural output growth is targeted to reach at least 8% by 2007. 2. 8. 2Investment The investment climate in Nigeria today is one of the most favourable in the developing countries.

As part of the effort to ensure an advantageous climate for foreign investor, government has designed and implemented appropriate fiscal monetary policies. The country, with her population of over 140 million people (2006 estimate) constitutes a fertile ground for the growth of profitable businesses. There is, in the country, adequate skilled manpower and unskilled labour to support investment project management. The cost of labour is cheap. Land is easily available on application to the Land Allocation Committee in the Office of the Administrator of each State in Nigeria or privately through purchase or lease from individual land owners. The numerous investment opportunities in the country are predicated on her abundant natural and human resources.

The abundant natural and human resources in the country include: human resources in the form of well educated administrators, managers and professionals in almost all works of life as well as unskilled manpower; food crops such as rice, maize, sorghum, millet, cow pea, cassava, yam, potato, fruits and vegetables such as leave vegetables, tomatoes, onion, okro, pepper, carrots, citrus, pineapple, banana, mango, papaw, etc; cash/industrial crops such as groundnut cotton, Soya-bean, wheat, beniseed, shea-nut, ginger, sunflower, sugarcane, cocoa, rubber, oil palm, coffee, tea, cashew, coconut, gum arabic, etc; livestock such as sheep, goats, poultry, pigs, rabbits, cattle, camels and other sources of meat; fish inclusive of prawns, tuna and tuna-like fishes, crabs, oysters, periwinkles, shark, etc; forest products such as fuel wood, veneer and plywood, various trees and plants, wildlife species such as guinea fowls, crocodiles and snails, watersheds and minerals such as coal of which known reserve is 650 million tones; columbite of which known reserve is 32,098 tones; iron ore of which known reserve is 258. 70 million tones, kaynite of which known reserve is 0. 5 million tones, lignite of which known reserve is 71,120000 tones, tin ore of which known reserve is 10,546 tones, clays (kaoline) who 1996 production figure was 97,661 metric tones, limestone of which 1996 production figure was 2,032,494 metric tones was, marble of which 1986 production figure was 14,932 million metric tones in the country.

Agricultural plantation, ranching, food processing, forestry development and fishing are also favored in the administration of government incentives; therefore agriculture is an area of lucrative business for both local and foreign investments. Agricultural land development is facilitated by the National Agricultural Land Development Authority (NALDA). There are investment management support services provided by the Industrial Development Centres (IDC’s) to small-scale industrialists and by the Agricultural Development Programs (ADP’s) to farmers. Nigerian government accepts the private sector as the engine of growth and the creator of wealth, while the government’s major responsibility is to provide the enabling environment for the private investors to operate.

In this regard, laws which had hitherto hindered private sector investments have been either amended or repealed and a national council on privatisation has been established to oversee orderly divestment to private operators in vital areas of the economy such as mining, transportation, electricity, telecommunications, petroleum and gas. Nigerian government’s policy of economic deregulation and liberalization has opened up new windows of opportunity to all investors wishing to invest in the country’s economy. In this connection, an interest rate regime. Supportive of the real sector of the economy as well as an exchange rate that is market determined are the object of government policy. The security of life and property of the citizens are being vigorously pursued with the reorganization and strengthening of the Nigerian police force.

In addition, the Nigerian Investment Promotion Council (NIPC) has been strengthened to enable it serve as a one-stop office for clearing all the requirements for investment in the country. The tariff structure is being reformed with a view to boosting local production. Government has introduced a new visa policy to enable genuine foreign investors to procure entry visa to Nigeria within 48 hours of submission of required documentation. Existing “expatriate quota” requirement for foreign nationals working in Nigeria is in the process of being replaced with “work permit” which will be administered by the Nigerian investment promotion council (NIPC).

Within the past few years following the end of military dictatorship in Nigeria, government has progressively introduced a number of incentives designed to promote investments, but the focus of the study is agriculture. Without prejudice to government’s deregulation of the financial sector, banks have been enjoined to recognise the differences in the gestation periods within each category of agricultural loans ranging from 6 months to 10 years, for crops, livestock, fisheries, forestry and wild life. In addition, the following incentives are also available; • Companies in the agro-allied business do not have their capital allowance restricted to 60% but graduated in full – 100%; • Agro-allied plant and equipment enjoy enhanced capital allowances of up to 50%. 2. 8. 3Foreign Investment

The government has open-door policy on ownership of enterprises in Nigeria whereby foreigners can own as much as hundred percent (100%) shares in industrial enterprises in Nigeria. Companies and firms intending to operate in Nigeria are required to register with the Nigerian Investment Promotion Commission after incorporation under the Companies and Allied Mattes Decree 1990. Foreign companies and firms as well as Nigerian companies operating in Nigeria are required to pay tax on profit earned in Nigeria at the rate of 30% of the corporate profit. However, loses are allowed to be carried forward against future profit for period of four (4) years.

At the moment, the whole gamut of investment promotion is now open to participation by private entrepreneurs and investors, both local and foreign investors. The private sector is expected to exploit to the fullest the resources, human and material (in the forms of manpower, agricultural produce and mineral available locally in Nigeria as well as the assistance and industrial investment incentives being provided by the Nigerian Government. The primary role of the private sector will be in exploiting and transforming these resources into goods and services required for the well-being of the Nigerian populace as well as for export trade for purposes of foreign exchange earnings.

The private sector is also expected to partake actively, through judicious placement of investment, in the privatization of public sector project and collaborate with the Government in improving the long term growth and development prospects of the country. 2. 9The new Nigerian agricultural policy The previous agricultural policy document was finalized in 1988 and was supposed to remain operative until the year 2000. Hence, in year 2001, a new policy document was launched. The new policy document bears most of the features of the old one, but with more focused direction and better articulation. 2. 9. 1 Objectives of New Agricultural Policy In a broad sense, the objectives of the new agricultural policy (as stated in the document) are very similar to those of the old one. They include: i) The achievement of self-sufficiency in basic food supply and the attainment of food security; (ii) Increased production of agricultural raw materials for industries; (iii) Increased production and processing of export crops, using improved production and processing technologies; (iv) Generating gainful employment; (v) Rational utilization of agricultural resources, improved protection of agricultural land resources from drought, desert encroachment, soil erosion and flood, and the general preservation of the environment for the sustainability of agricultural production; (vi) Promotion of the increased application of modern technology to agricultural production; and, vii) Improvement in the quality of life of rural dwellers. 2. 9. 2 Key Features of the New Policy The key features of the new policy are as follows: • Evolution of strategies that will ensure self-sufficiency and improvement in the level of technical and economic efficiency in food production. This is to be achieved through (i) the introduction and adoption of improved seeds and seed stock, (ii) adoption of improved husbandry and appropriate machinery and equipment, (iii) efficient utilization of resources, (iv) encouragement of ecological specialization, and (v) recognition of the roles and potentials of small -scale farmers as the major producers of food in the country. Reduction of risks and uncertainties in agriculture, to be achieved through the introduction of a more comprehensive agricultural insurance scheme to reduce the natural hazard factor militating against agricultural production and security of investment. • A nationwide, unified and all-inclusive extension delivery system under the Agricultural Development Programs (ADPs). • Active promotion of agro-allied industry to strengthen the linkage effect of agriculture on the economy. • Provision of such facilities and incentives as rural infrastructure, rural banking, primary health care, cottage industries etc, to encourage agricultural and rural development and attract youths (including school leavers) to go back to the land. 2. 9. 3 Major Content of the Policy Framework The policies cover issues on i) agricultural resources (land, labour, capital, seeds, fertilizer, etc) whose supply and prices affect the profitability of agricultural business, (ii) crops, livestock, fisheries and agro-forestry production, (iii) pest control, (iv) mechanization, (v) water resources and irrigation, (vi) rural infrastructure, ( (vii) agricultural extension and technology transfer, (viii) research and development (R&D), (ix) agricultural commodity storage, processing and marketing, (x) credit supply, (xi) insurance, (xii) agricultural cooperatives, (xiii) training and manpower development, and (xiv) agricultural statistics and information management. The successful implementation of the agricultural policy is, however, contingent upon the existence of appropriate macroeconomic policies that provide the enabling environment for agriculture to grow in equilibrium with other sectors.

They affect profitability of agricultural enterprises and the welfare of farmers through their effects on the flow of credit and investment funds, taxes, tariffs, subsidies, budgetary allocation, etc. 2. 94 The New Policy Direction According to the document, the new agricultural policy will herald in a new policy direction via new policy strategies that will lay the foundation for sustained improvement in agricultural productivity and output. The new strategies involve: (i) Creating a more conducive macro-environment to stimulate greater private sector investment in agriculture; (ii) Rationalizing the roles of the tiers of government and the private sector in their promotional and supportive efforts to stimulate agricultural growth; iii) Reorganizing the institutional framework for government intervention in the agricultural sector to facilitate the smooth and integrated development of the sector; (iv) Articulating and implementing integrated rural development programs to raise the quality of life of the rural people; (v) Increasing budgetary allocation and other fiscal incentives to agriculture and promoting the necessary developmental, supportive and service-oriented activities to enhance agricultural productivity, production and market opportunities; and (vi). Rectifying import tariff anomalies in respect of agricultural products and promoting the increased use of agricultural machinery and inputs through favourable tariff policy.


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