IMPACT OF AGRICULTURAL PRODUCTION ON GROSS FIXED CAPITAL FORMATION IN NIGERIA

Abstract

This paper provides an empirical approach to analyze the contributions of industry and agriculture exports and its impact on economic growth in developing countries. Historically, manufacturing has acted as an engine of economic growth. On the other hand, According to economists, agricultural sector offers two main functions: first, agriculture plays an important role as the most important source of resources for the development of industry and other non-agricultural sectors. Second, agriculture is substantial market for industrial products that helps modernize traditional production techniques by providing modern inputs, technology, and improve managerial skills. Also government final consumption and gross fixed capital formation have significant relation with economic growth

 

 

 

 

 

TABLE OF CONTENTS

Title page

Approval page

Dedication

Acknowledgement

Abstract

Table of contents

CHAPTER ONE: INTRODUCTION

1.1   Background of the study

1.2   Statement of problem

1.3   Objective of the study

1.4   Research questions

1.5   Hypothesis (if any)

1.6   Significance of the study

1.7   Scope of the study

1.8   Assumption of the study(if any)

1.9   Definition of terms

CHAPTER TWO: LITERATURE REVIEW

2.1   Conceptual review

2.2   Theoretical framework

2.3   Current Literature review

2.4   Summary of Literature review

CHAPTER THREE: RESEARCH METHODOLOGY

3.1    Design of the study

3.2    Area of the study

3.3    Population of the study

3.4    Sample size and sampling technique

3.5    Instrument for data collection

3.6    Validity of the  Instrument

3.7    Distribution and Retrieval of Instrument

3.8            Method of data analysis

CHAPTER FOUR: DATA PRESENTATION  AND ANALYSIS

4.1   Tabulation of Responses

4.2   Testing of hypothesis

4.3   Discussion of findings

CHAPTER FIVE: SUMMARY, CONCLUSION AND RECOMMENDATION

5.1   Summary of findings

5.2    Conclusion

5.3   Recommendation

References

Appendix

 

 

 

 

CHAPTER ONE

INTRODUCTION

• Background of the study

Since all countries have experienced population growth over time, stable GDP growth necessary to maintain the current standard of living has been the most important challenge for developing countries (Kundu, 2013). One way to achieve such growth is trade with foreign countries. History of trade between countries reaches to the past, when Adam Smith introduced the trade as an engine of economic growth (Kilavu and Topco 2012, Zahir Faridi 2012). Economic theory and empirical observations suggests that, expansion in exports would increase economic growth and lead to high growth in national income. In addition, these observations suggest that the contribution of exports to the growth in gross domestic product (GDP) has been significant. Description for this observation was submitted by several prominent economists in which the beneficial aspects of the export such as increased capacity utilization, economies of scale, incentives to improve technology, budget augmentation, a low probability in market failure, asymmetric information and efficient management against the pressures of international competition is emphasized (Shuai Shao and Yang, 2014, Kim and Gopinath, 2009). On the other hand, many developing countries are heavily dependent on Primary products as their main source of export revenues such as agricultural exports. (Mehara and Baghbanpour, 2015, Ma Fengand et al, 2014). In many developing countries, the agricultural sector plays a major role in the economy such as including food production, supply of raw materials for industries, environmental protection, development of the rural non-farm sector, maintenance of macroeconomic stability through stable food pricing and food security. Also Agriculture section play an important role in GDP growth and the main source of employment in these countries. (Ershad Ali, Talukder Dayal, 2010). However, despite the important role of agriculture in the economy, this sector in many developing countries has been neglected. Albeit use of agricultural exports in order to achieve economic growth is not sufficient and most economists suggest, exports of industrial goods to achieve sustainable economic growth. According to Fosu (1996), is that primary exports are usually raw and unprocessed while manufactured goods are more technologically intensive, and more likely to create positive spillovers. Moreover, the process of primary commodities production shorter than process of manufacturing goods production. Therefore, learning by doing, in the production of industrial commodities higher and export of such goods will leads economic growth. (Sheridan Brandon, 2014). Balassa (1985) asserts that, production of export goods made in sectors of the economy in which more efficient than other sectors. Therefore, expansion exports contribute to concentrate investment in this sector that lead to enhance productivity factors of production. (Ghazi and Al-Abdulrazag, 2015). In this paper we investigate the cause of the issue and ultimately, we will estimate contribution of industry and agriculture exports and its impact on economic growth for the developing countries by using panel data for developing countries over period of time, During the first decade after independence, Nigeria could considerably be described as an agricultural economy because agriculture served as the engine of growth to the overall economy (Ogen, 2003). From the standpoint of occupational distribution and contribution to the Gross Domestic Product, agriculture was the leading sector contributing about 70% of the Gross Domestic Product (GDP), employing about the same percentage of the working population, and accounting for about 90% of foreign earnings and Federal Government revenue. During this period, Nigeria was the world’s second largest producer of cocoa, largest exporter and producer of palm products. Nigeria was also a major exporter of leading commodities such as cotton, groundnut, rubber, hides and skins (Alkali, 1997). This situation began to change drastically with the discovery of oil. Between 1970 – 1974 agricultural exports as a percentage of total exports declined from about 43% to slightly over 7%. The major cause of this development was the oil price shocks of 1973 – 1974 which resulted in large receipts of foreign exchange earnings by Nigeria and the neglect of agriculture. From the mid-1970s to the mid1980s, the average annual growth rate of agricultural exports declined by 17 per cent. By 1996, agriculture accounted for only 2 per cent of exports. As agricultural exports shrank from the traditional 12-15 commodities of the 1960s, Nigeria became a net importer of basic food stuff she formerly exported (Bakare, 2011). In the early 1980s, it became apparent that the agricultural sector could no longer meet domestic food requirements, supply raw materials for industry and earn enough foreign exchange through exports, owing to various economic, social and other environmental problems. Food production has since become a major problem in Nigeria and huge foreign exchange earnings are being utilized in importing food. The food import bill rose from a mere 14,112.88 million annually during 1970-74 to N1, 964.8 million in 1991 (Talabi, 2004). Abolagba et al (2010) emphasize that Nigeria has lost its role as one of the world’s leading exporters of agricultural commodities. In addition, the country is currently suffering from a declining as well as fluctuating income from its heavy dependence on oil exports and with the present situation in the oil market, it has become necessary for the country to reconsider its agricultural export position. Olomola (2010) further stated in his study that increased agricultural production is necessary to tackle starvation and malnutrition, and that a rapid growth in agricultural productivity is a pre-condition for economic take off and sustained poverty reduction in Nigeria. In the same vein, this study attempts to find out if a significant long-run relationship exists between agricultural exports and economic growth in Nigeria and to access the long run impact of agricultural exports on growth performance in Nigeria.

• STATEMENT OF THE PROBLEM

Based on the experiences of advanced capitalist economics; It is believed that as a country develops, the share of traditional sectors (such as agricultural) in GDP and employment will decline due to the rapid growth in the modern sectors such as the service industry. This is the situation in Nigeria, but that could not be attributed to the structural transformation of the means and mode of production but to the near absolute neglect of the core real sectors by successive administration leading to the observed dominance of the oil and oil related sector. It is against this backdrop that the researcher intends to investigate the impact of agricultural production on gross fixed capital formation in Nigeria.

1.3 OBJECTIVE OF THE STUDY

The main objective of the study is to ascertain the impact of agricultural production on gross fixed capital formation in Nigeria, but to aid the successful completion of the study, the researcher intends to achieve the following specific objectives;

1. To ascertain the impact of agricultural production on the growth of Nigeria economy
2. To ascertain if there is any relationship between agricultural production and gross fix capital formation

• To examine the impact of agricultural production in curbing unemployment in Nigeria

1. To examine the role of government in increasing agricultural production in Nigeria.

1.4 RESEARCH HYPOTHESES 

To aid the successful completion of the study the following research hypotheses were formulated by the researcher;

H₀: agricultural production does not have any impact on Nigeria’s agricultural production

H₁: agricultural production does have impact on Nigeria’s agricultural production

H₀²: there is no relationship between agricultural production and gross fix capital formation

H₂: there is a significant relationship between agricultural production and gross fix capital formation

1.5 SIGNIFICANCE OF THE STUDY

It is believed that at the completion of the study, the findings will be of great importance to the federal and state ministry of agriculture as the study seek to explore, evaluate and examine the role of the agricultural sector in Nigeria’s gross fixed capital formation, the study will also be of great importance to the national economic planning committee, as the study seek to examine the impact of agricultural sector or production on the GDP and gross national product, as these will help in budget formation and implementation, the study will be useful to researchers who intends to embark on a study in a similar topic, as the study will serve as a reference point, finally the study will be useful to the students, teachers, lecturers, academia’s and the general public as the findings will add to the pool of existing literature

1.6 SCOPE AND LIMITATION OF THE STUDY

The scope of the study covers the impact of agricultural production on gross fixed capital formation in Nigeria, but in the cause of the study there were some factors which limited the scope of the study;

1. a) AVAILABILITY OF RESEARCH MATERIAL: The research material available to the researcher is insufficient, thereby limiting the study
2. b) TIME: The time frame allocated to the study does not enhance wider coverage as the researcher has to combine other academic activities and examinations with the study.
3. c) Organizational privacy: Limited Access to the selected auditing firm makes it difficult to get all the necessary and required information concerning the activities.

1.7 OPERATIONAL DEFINITION OF TERMS  

Agricultural production

Agricultural production data refers to vegetable and animal production that is made available for human consumption and animal feed.

Gross fix capital

Gross fixed capital formation (GFCF) is a macroeconomic concept used in official national accounts

Gross Domestic Product

Gross domestic product is a monetary measure of the market value of all final goods and services produced in a period of time

 

1.8 ORGANIZATION OF THE STUDY

This research work is organized in five chapters, for easy understanding, as follows

Chapter one is concern with the introduction, which consist of the (overview, of the study), historical background, statement of problem, objectives of the study, research hypotheses, significance of the study, scope and limitation of the study, definition of terms and historical background of the study. Chapter two highlights the theoretical framework on which the study is based, thus the review of related literature. Chapter three deals on the research design and methodology adopted in the study. Chapter four concentrate on the data collection and analysis and presentation of finding.  Chapter five gives summary, conclusion, and recommendations made of the study

 

 

 

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