Government expenditure and agricultural production in Nigeria (1970 – 2010)

Complete Chapter One


This research work critically focused on the roles of government expenditure in the agricultural production in Nigeria for the period 1970 to 2010. Data on relevant variables were collected from the statistics Bulletin of the Central Bank of Nigeria. A functional relationship between Agricultural output and other explanatory variables, of which government expenditure is one, was specified and estimated using the OLS method and multiple regression analysis. It was found that adjusted R2 for the relationship was 85% and also that government expenditure has played a positive role in the development of the agricultural sector. Other major findings made were that the rate of inflation was very low throughout the period and did not cause much impact with regards to low productivity. The amount of rainfall during the period was very low and does not have any significant effect on agricultural output. Another observation was that the rising prices of agricultural products brought about increase in the performance of the sector, as more people were attracted to it. Again, low interest rate was an encouragement for investors to invest more on agricultural product.

Title page i
Certification ii
Dedication iii
Acknowledgement iv
Abstract vi
Table of Contents viii
1.0 Introduction 1
Background of the Study 1
Objectives of the Study 5
Statement of the study 6
Significance of the Study 8
Scope of Study 8
Statement of Hypotheses 9
Limitation of Study 9
Definition of terms 9
2.0 Literature Review 13
2.1 Conceptual Issues 13
Determinants of Public Expenditure 19
Government Expenditure and Agricultural
Development in Nigeria 22
Government Agricultural Policies and
Programme in Nigeria 30
Theoretical Literature 42
2.2.1 The Theory of Production 42
The Classical Economists view of the theory
of production 45
2.2.3 The view of Neo-Classical Economists 46
2.2.4 The Monetarist Theory 48
2.2.5 Peacok and Wise man Theory of Expenditure 50
2.2.6 Welfare theory of Pigon and Daltion 53
Wagner’s Hypothesis: The Law of increasing
State Activities (1835 – 1917). 54
Methodological Issues 55
Empirical Literature 58
3.1 Research Methodology and Data Sources 68
3.2 Research Design 68
Source of Data and Limitations 69
Data Analysis Technique 69
Model Formation and Specification 70
4.0 Data Presentation, analysis and Interpretation 78
4.1 Analysis of Results 78
4.2 Economics Test 79
4.3 Statistical Test 82
4.4 The F-Test 82
4.5 The Econometric Test 83
4.6 Policy Implications of Result 83
5.1 Findings 88
5.2 Recommendations 90
5.3 Conclusion 92
Area for Further Research 93

Bibliography 96



The socio-economic development of any nation is usually dependent on many factors, which combine to ensure the successful attainment of set development goals. One of such factors is agriculture. Its discovery dates back to 800 BC period regarded as the new Stone Age, when man began to till soil and grow crops using crude implements made out of stone (Anderson, 1995). According to Maslow, 1954, food is one of the physiological needs of man, which must be satisfied before other needs could be attained. Supporting Maslow’s assertion, Morgan and Henson (1085) argue that agriculture will remain an indispensable factor until the end of human existence.
The importance of agriculture in the socio-economic development of every nation has made many countries of the world (i.e. developed and developing) to place more emphasis on its development. This is evident in the number of programmes that have been introduced by both international agencies and individual countries to ensure improvement in agricultural activities. In Nigeria for instance, successive governments have introduced and implemented programmes in this regard. Such programmes include Operation Feed the Nation (O.F.N.), Agricultural Research Policy, Agricultural Development Project, Agricultural Credit Government Scheme, The Green Revolution, River Basin Development Authorities (RBDA), National Agriculture Land Development, Nigeria Agricultural and Co-operative Bank (NACB), The Structural Adjustment Programme (SAP), Directorate of Food, Roads and rural Infrastructure (DFRRI), (Anyanwu, 1960-1997). It is however, disheartening that despite the laudable nature of these programmes and the huge financial resource expended on them, their impact on the economy remains as infinitesimal.
However, the problem, which the Nigeria agricultural sector suffers till date, could be traced to the discovery of crude oil. The discovery of crude oil deposit in various parts of the country in commercial quantities in mid 1960’s coupled with the oil boom of 1974 as a result of the America, affected adversely the agricultural sector. The economy therefore, became heavily dependent on oil. For instance, oil sector provides 20% of GDP, 95% of foreign exchange earnings, about 85% of total export and 65% of budgetary revenue (Anyanwu, 1997).
Agricultural contributions to the economy were instrumental in sustaining economic growth and stability, stable growth in agricultural exports was the backbone of favourable balance of trade. Primary processing of raw materials from the agricultural sector hence helped in the sectors through the imposition of taxes and accumulation of marketing surpluses, which were used to finance many development project.
Agricultural sector notwithstanding is more else degenerating to a type of peasant agriculture, which is caught in vicious cycle of poverty where destination caused by low income, and disguised employment lends to poor saving and little investment in technology. This therefore, calls for the attention of the government for the development of the sector. The development of agricultural sector is one of the crucial requirement for moving the economy forward. This study therefore, tends to investigate government expenditure on agricultural production in Nigeria and how to increase its productivity and role in the economy.
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 agricultural sector in Nigeria.
To determine the effectiveness of government expenditure on agricultural production in the Nigeria economy.
In recent years, especially since the inception of the present democratic government in Nigeria, the agricultural sector of the economy has continued to perform below expectation despite the huge sums of money being allocated to the sector in each year’s budget. In 2002, about N9.874 billion was mapped out for the sector. In the same 2002, over 72 million dollars donated by Food Agricultural Organization (FAO) was distributed to the 36 states of the federation in addition to that year’s allocation. According to Iheagu (2002) the money cannot be said to have a justifiable use. Rather, what one sees is the prevalent “Lack Luster” attitude of government to the total execution of the programme. He said that every thing is one side with increasing number of jobless youths roaming about. He also pointed out that across the state of the federation, warning signals are booming on the possibility of a butcher National Food Security programme, which may result in a situation similar to what are being continued on daily basis by price of food item in the market and the crude system of farming being practiced in the country. The situation raises questions as to the effectiveness of the various agricultural programmes in the country, thereby making it necessary and imperative to examine the effectiveness of government expenditure on agricultural production in the Nigeria economy.

The study is significant because it will help resolve the issue of the need for the federal government to finance and boast the sector and provide agencies for monitoring and maintenance of policies periodically for significant growth and development of the economy. Also, it will help resolve the serious attention as well as raw materials for infant industries in the country.
This study is designed to assess the impact of government expenditure on agricultural development in Nigeria (1970 – 2010). This study will also examine the performance made by agriculture to the development of the economy over the years as stipulated above.

Ho: Government expenditure in agricultural sector will not lead to agricultural development in Nigeria.
Hi: Government expenditure in agricultural sector will lead to agricultural development in Nigeria.
This work did not go all that economy, the problem of the allocation of time between the research study and other academic work was a serious limitation because the two activities went on simultaneously. Another major limitation was the one due to financial constraints to fund all the aspects of the work.
Some of the terms that will be used due to their involvement are as follows:
AGRICULTURE: This is used in this study, as the cultivation of land resources, raising and rearing of animals for the purpose of food, feed and raw materials production for man, animal and industrial use respectively.
FARMER: This literally serves as a collective designation given to those who found themselves in the agricultural field either as cultivation or harvesters.
INDUSTRY: This as used refers to the various institutions engaged in the production of either secondary or final goods for economic purpose, using agricultural output.
BOOM: This simply means sudden increase in trade activities especially when money is being made quickly.
PRODUCTION: This is the act of making goods and services available to the public.


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