IMPACT OF TRADE LIBERALIZATION ON NIGERIA’S AGRICULTURAL OUTPUT

ABSTARCT

 

This thesis examines the impact of trade liberalization on Nigeria agricultural output from 1986 – 2009. The choice of this period is because it is within this period that Nigeria began the systematic process of deregulation of its economy and adopted more liberal trade and exchange rate regimes. Given the objectives of the study and it uniqueness ordinary least square (OLS) regression was found to be more appropriate. Justification for using OLS as method is because of it un-biased properties, efficiency and completeness. The study found that trade liberalization on an aggregate exact a significant positive impact on agricultural output in Nigeria. It impact on an average is about 14 percent in increase on agriculture output. In the disaggregated model the study found significant impact differences. For example, the positive effects of trade liberalization on agricultural sub-sector such as crop production, livestock and forestry are slightly significant., but the impact of trade liberalization on fish production output is highly significant. It exact about 28 percent on the output of fish production. We therefore concludethat trade liberalization has fairly significant positive impact on agricultural output in Nigeria. The study proffered the following recommendations. First, Making deliberate efforts by government to increase small scale enterprises in Nigeria. This is because most enterprises in Nigeria are likely to agro-allied that may require raw materials from agriculture and also increase in per-capita productivity of the people through improved technological innovation.

CHAPTER ONE

1.1     General Introduction

Agricultural sector was the main stay of the Nigeria economy before independence and immediately after it. The Evidence reveals that agriculture provided the needed food for the population as well as serving as major foreign exchange earnings for the country. It provides the means of livelihood for over 70 percent of the population, andmajor sources of raw-materials for the agro-allied industries (Alabiet al, 2004). The agricultural sector in periods immediately after independence (1965-1969) performed creditably, the roles highlighted above, to such an extent that the regional development witnessed during the period were linked directly to agricultural development (Olalokuet al 2010, Abolagba,2010).

Agricultural revolution is a fundamental pre-condition for economic development (Eicher and Witt, 1998, Oluwasanmi 1996, Jones and woolf, 1969). The proponent thus suggests that agricultural sector has the potential to be the industrial and economic springboard from which a country’s development can take off. Indeed, more often than not, agricultural activities are usually concentrated in the less-developed rural areas where there is a critical need for rural transformation, re-distribution, poverty alleviation and the socio-economic development (Steward, 2000).

The agricultural sector is strategically positioned to have a high multiplier effects on any nation’s quest for socio-economic and industrial development. The Nigerian economy, like that of Brazil during the first decade after independence, could reasonably be described as an agricultural economy because agriculture served as the engine of growth of the overall economy (Ogen, 2003 Imahe and Alabi 2005). Considering the occupational distribution and contribution to the GDP, agriculture was the leading sector. During this period, Nigeria was the world second largest producer of Cocoa, largest exporter of palm kernel and largest producer and exporter ofpalm oil. Nigeria was also a leading exporter of other major commodities such as cotton, groundnut, rubber, hides and skin (Alkali, 1997).

The agricultural sector contributed over 60% of the GDP in the 1960s and despites the reliance of Nigerian peasant farmers on traditional tools and indigenous farming methods, these farmers produced 70% of Nigerian exports and 95% of its food needs (Lawal, 1997). However, the agricultural sector suffered neglect during the hey-days of the oil boom in the 1970s. Ever since then, Nigeria has been witnessing extreme poverty and the insufficiency of basic food items. Historically the root of the crisis in the Nigerian economy lies in the neglect of agriculture and the increased dependency on a mono-cultural economy based on oil. The agricultural sector now accounts for less than 15% of Nigerian GDP (Mesike, 2007).

The dismal performance of the agricultural sector in terms of its contribution to Nigeria’s yearly total revenue in the last three decades prompted the government to initiate several agricultural schemes and programs to enhance agricultural productivity in Nigeria, which include the following: the River Basin Development Authorities, the National Accelerated Food Production Project, the Agricultural Development Project, Operation Feed the Nation, the Green Revolution, the National Directorate of Food, Roads and Rural Infrastructure, the Agricultural Credit Guarantee Scheme Fund, the National Special Programme for Food Security, Root and Tuber Expansion Project, and the National Fadama I and II program, and the Land Use Decree (1978), another program is National Rice Production.

According to Ukpong (1973), Ajibefun and Daramola (2003), Amaza (2000), Awotide (2004), Ogundele (2003), Okoruwa (2006), Okike (2000), Oredipe (1998), Rahji (2003), and Udoh (2000) the successes of all the various agricultural programs have been minimal, hence the country has not been able to achieve a sustained rate of growth in the agricultural sector. The world oil glut of the 1980s affected Nigeria revenue base adversely. The foreign exchange base was punctured, hence Nigeria government are unable to service its foreign financial obligation on schedule. In 1986, Nigeria domestic as well as international credit worthiness became questionable. This led to the introduction of Structural Adjustment Program (SAP) in July 1986. Generally, some of the policies of structural adjustment programs in Nigeria were market liberalization policies that were designed to give the free interplay of market forces a greater role in the economy.

The introduction of SAP has been described as the boldest step ever adopted by government to revamp the Nigeria economy. SAP also represents the concrete policy enacted by the government aimed at thoroughly moving the Nation towards a liberalized economy (Ahmed, 1987). Among the numerous policies, trade liberalization is one of the policies embraced by SAP. Economists in particular have debated the advantages and disadvantages of trade liberalization for centuries.

Classical economists such as David Ricardo (1886) and Adam Smith (1776) were strongly in favour of free trade, believing that it leads to the economic prosperity of civilization. This made the debate over trade liberalization the most important question in economics for many years to come. Modern economists who favour trade liberalization cited evidence that it creates jobs, fosters economic growth and improves the standard of living because of increased consumer choice in market place. (Taljaard, 2007, Das, 2002; Dollar, 1992; Goldar and Kumari, 2003)

The policy of trade liberalization was first observed and documented by an economist called Adam Smith (1776). He considered this policy to be the best for economic development. It is always safe to leave the economy to be propelled by and “invisible hands” i.e. the forces of competition motivated by individual self-interest. He builds his case for trade liberalization on the role which division of labour plays in economic progress. Expansion of international trade is an important method of widening the market and promoting the division of labour. He advocatedthat restriction on international trade limit the size of the market. Trade restriction diminish the scope for international specialization and there by lower domestic productivity. This view has severally been supported by other classists like David Ricardo (1886) and J.S Mill, who emphasized the role of “market mechanism” and competition” in functioning and growth of the economy. However liberalization of trade was proposed by the IMF as part of the Structural Adjustment Program (SAP) in order to help in adjusting increasing Balance Of Payments (BOP) deficit of the developing country.

Some scholars held different opinion on Trade Liberalization. Rugumamu (1999) argued that trade liberalization will cripple economic activities of Nigerian economy if the door of the fragile economies are open to tough competition in the International market. The under developed and unequal exchange school also argued that because of the skewed nature of the international system, free trade tends to promote the exploitation of poor nations and the development of the centre at the expense of the periphery, possible because of unequal exchange and economic dependence (Inang, 1998,Teweldemedhin M, 2010.) However, it is arguable that trade liberalization benefit accrue only to the rich and developed countries to the detriment of poor underdeveloped ones (Keller, 2004, Wang, 2007). This study therefore examines the impact of trade liberalization on Nigeria agricultural output

1.2 PROBLEM STATEMENT

Trade liberalization is proposed by the World Bank to correct the ongoing balance of payment deficit of the third world countries and as well promote trade. It was expected that a liberalized trade regime would stimulate agricultural output expansion and enhance a better performance of the economy. But the sector suffers severe problems due to persistent constraints inhibiting the performance of the sector such as poor growth in the sector, the productivity is low, un-competitiveness in the sector, inefficiency and the poverty situation deepens. The deepening economic problems precipitated the adoption of structural Adjustment program (SAP) July 1986, of which trade liberalization was a major element. It was expected that introduction of SAP will restore agricultural sector to it production efficiency but evidence have shown that the inability of the sector can be attributed to structural rigidities in the sector since inception of SAP.

According to static and dynamic traditional trade theory ( Ricardian, 1886, Adam Smith 1776), which argued that free trade promotes efficiency and the more countries embrace open trade, the higher the growth rate and their national income increases and promoters of free trade (2009) International policy network ,Atlas Economic Research Foundation, comprising over 76 civil society organization from 48 countries launched an open letter calling on all government to eliminate trade barriers they observed that protectionism creates poverty while free trade encourage growth but statistical and empirical evidence reveals that there is a constant fluctuation in the AGDP growth rate (Akanji 2002, Meyer 2000,IMF , World Bank 2004).

The revealing statistic and empirical evidence (see for example Oyejide 2001, Adubi 1999, okunmadewa 1999, Awotide 2004, and Okoruwa 2006 ) suggest that despite the demonstrated and the potential gain from free trade by classical, the Nigeria Agricultural term of trade with other countries have not been too favourable, the domestic supply is very poor, the balance of payment is negative, export performance is very poor and negatively affected the level of food production, employment opportunities for the growing population and the provision of raw material for industrial sector and general food insecurity in Nigeria economy (see Akinyosoye 2000 , Lawal 2000).

Also, given Nigeria’s openness and increased integration into the global economy, the Nigerian economy still presents a typical picture of a less developed country in spite of the adoption of the policy of trade liberalization (Okorie 1998, Odusola 2004 and Yusuf 2000).

However, given the condition of the economy since 1986, and the episodes of trade liberalization and agricultural sector in Nigeria it is not clear if

1. Progressively that trade liberalization has generated growth in agricultural sector.
2. What is the trend and pattern of agricultural sector in Nigeria?
3. What is the impact of trade liberalization on agricultural output in Nigeria

Against this background this study attempts to examine the impacts of trade liberalization on Nigeria agricultural Sector.

1.3 OBJECTIVE OF THE STUDY

The major objective of this study is to analyze the impact of trade liberalization on the Nigeria agricultural sector. The specific objectives are

1. To examine the trend and pattern of agricultural sector in Nigeria.
2. To examine the impact of trade liberalization on agricultural output in Nigeria.
3. To recommend policy options to the government base on the findings.

1.4 HYPOTHESIS

This research work will test the hypotheses that trade liberalization (i.e. openness of the economy) has no impact on agricultural output in Nigeria.

• Null hypothesis (H₀): b_i = 0 (Trade liberalization has no significant impact on the agricultural output in Nigeria)

1. Alternative hypothesis (H₁): b_i ≠ 0 (i.e. trade liberalization has significant impact on agricultural output in Nigeria).

1.5 JUSTIFICATION OF THE STUDY

It is obvious that agricultural sector is the back bone of every economy. The agricultural sector plays a vital role toward the development of the Nigerian economy since 70% of people depended heavily on agriculture for their food consumption, life sustenance and employment. (Alabiet al 2004). As a result of these, agricultural sector does not only make goods produce available to people but also facilitate or foster growth in other sectors of the economy. Despite these immense contributions of agriculture towards economic growth, the sector has not been given adequate attention. The Nigerian agricultural sector is on the verge of collapse that will result in so many implications and consequences; this has called for greater reposition of agricultural sector.

The focal point of this research work is to add value to the existing studies, the study provides empirical evidence on the impact of trade liberalization on the indicators of the key sectors of the economy with a particular interest on agriculture as well as the overall growth rate of the Nigeria economy. The result of this study would give the policy makers the insight and clear picture on how well the country has been in relation to globalization, determine the extent of further pursuit of trade liberalization and appropriately rework measures and policies to better make trade liberalization promote economic growth in Nigeria and to enhances of Nigeria gaining desired advantages of globalization. It will also help the government to see the effectiveness of trade liberalization policy on the economic growth of the nation over the years with respect to agricultural sector.

1.6 SCOPE AND THE LIMITATIONS OF THE STUDY

The sample of the study covers the period 1986-2009. This is because; it is within this period that Nigeria began the systematic process of deregulation of its economy and adopted more liberal trade and exchange rate regimes. The main limitation of the study was the difficulty in obtaining accurate data. The data used for the study are the publications of central bank of Nigeria (CBN) and which in most cases usually run conflict with data obtained from other source.

1.7 ORGANIZATION OF THE STUDY.

This study is organized in five chapters. Chapter one consist of the general introduction of the study. Chapter two contains related theories and literatures .Chapter three covers the research methodology which contains the model specifications. The focus of Chapter four is presentation and analysis of the results based on econometric techniques that were adopted in the study. The last Chapter contains the summary, conclusion and recommendations base on the findings.

 

₦5,000.00 – DOWNLOAD FULL PROJECT DOWNLOAD FULL PROJECT Added to cart

---

---

---

---

Related Project Topics :