THE EFFECT OF AGRICULTURAL PRODUCTS IMPORTATION ON THE GROWING ECONOMY OF NIGERIA
The study examined the effect of agricultural product importation, local economy. Secondary data from 1970 to 2016 were employed. Unit root, co-integration and Ordinary Least Square (OLS) assumption tests were checked. Least Square estimation model, Pearson Coefficient and Generalized Least Model (GLM) were employed. The results show that strong linear relationship (-0.466) exist between local agricultural product production and agricultural product importation, though in opposite direction. The results from GLM shows that quantities of agricultural product imported (-0.0324), sorghum production (0.967) and population growth (-0.779) are statistically significant but negatively influences local agricultural product production. Local price of agricultural product (0.471) on the other hand is positive and significantly influences local agricultural product production. There should be effective government policy to reduce agricultural product importation.
TABLE OF CONTENT
Table of content
CHAPTER ONE: INTRODUCTION 7
1.1 BACKGROUND. 7
1.2 STATEMENT OF THE PROBLEM 11
1.3 RESEARCH PURPOSE 12
1.4 OBJECTIVE OF THE STUDY 12
1.5 SIGNIFICANCE OF THE STUDY 12
1.6 STATEMENT OF HYPOTHESIS AND DECESION RULE 13
1.7 SCOPE OF THE STUDY 14
CHAPTER TWO: LITERATUE REVIEW 15
2.1 INTRODUCTION 15
2.2 THE CONCEPT OF AGRICULTURE 16
2.3 AGRICULTURE AND NIGERIA’S ECONOMY 18
2.4 AGRICULTURAL DEVELOPMENT IN NIGERIA 20
2.5 THEORETICAL AND CONCEPTUAL FRAME WORK 24
2.5.1. Import Substitution Industrialization 24
2.6 IMPORT LIBERALIZATION IN NIGERIA. 28
2.7 IMPORT ORIENTATION 30
2.8 IMPORT PENETRATION 31
2.9 LACK OF DEVELOPMENT 31
2.10 MARKETING PROBLEM 32
2.11 PROBLEMS AND CHALLENGES OF EXPANDING TRADE IN NIGERIA 32
2.11.1 Misplaced Priority: agriculture versus oil 32
2.11.2 Poorly Designed Liberal Trade Policies 33
2.12 LACK OF GOOD INFRASTRUCTURE 34
2.13 FREE TRADE AND ECONOMIC GROWTH 35
2.14 UNSTABLE PRICES 37
2.15 AGRICULTURAL LABOUR 37
2.16 FOOD IMPORTATION AND AGRICULTURAL DEVELOPMENT IN NIGERIA: 38
2.17 STORAGE AND PROCESSING 40
2.18 ROLES OF AGRIBUSINESS IN INTERNATIONAL TRADE 41
Figure 1. Conceptual framework 43
CHAPTER THREE: RESEARCH METHODOLOGY 44
3.1 INTRODUCTION 44
3.2 Study Area 44
3.3 Data Source 45
3.4 Econometric procedure 47
3.4.1 Pearson correlation coefficient 47
3.4.2. Generalized Linear Square Model (GLS) 47
3.5 Testing of Hypotheses 50
CHAPTER FOUR 53
DATA PRESENTATION, ANALYSIS AND INTERPRETATION 53
4.1. Unit root test 54
4.2. Co-integration test 55
4.3. Linear Relationship of key parameters 56
4.4. Test for OLS assumptions 58
4.5 DATA PRESENTATION 63
4.6 IMPLICATIONS FOR NIGERIA’S DEVELOPMENT 64
4.7 NIGERIA’S AGRICULTURAL SECTOR ANALYSIS 65
4.8 IMPLICATIONS FOR NIGERIA’S DEVELOPMENT 67
4.9 FINANCING AGRICULTURAL DEVELOPMENT IN NIGERIA: ISSUES AND CHALLENGES 68
CHAPTER FIVE 70
CONCLUSION AND RECOMMENDATIONS 70
5.1 CONCLUSION 71
5.2 RECOMMENDATIONS 72
The agricultural sector has a multiplier effect on any nation's socio-economic and industrial fabric because of its multifunctional nature. A strong and efficient agricultural sector would enable a country to feed its growing population, generate employment, earn foreign exchange and provide raw materials for industries. The agricultural sector has the potential to be the industrial and economic springboard from which a country’s development can take off, (Chude, 1989:28). 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, redistribution, poverty alleviation and socio-economic development. Agriculture was the key development that led to the rise of humancivilization, with the husbandry of domesticatedanimals and plants (i.e. crops) creating food surpluses that enabled the development of more densely populated and stratified societies. The study of agriculture is known as agricultural science.
Agriculture encompasses a wide variety of specialties and techniques, including ways to expand the lands suitable for plant rising, by digging water-channels and other forms of irrigation. Cultivation of crops on arable land and the pastoral herding of livestock on rangeland remain at the foundation of agriculture. In the past century there has been increasing concern to identify and quantify various forms of agriculture. In the developed world the range usually extends between sustainable agriculture (e.g. perm culture or organic agriculture) and intensive farming (e.g. industrial agriculture).
In Nigeria, during the early post-independence days (1960 – 1970) before the discovery of oil, agriculture served as the engine of growth of the overall Nigerian economy, (Chude, 1989:28). From the standpoint of occupational distribution and contribution to the GDP, agriculture was the leading sector. During this period Nigeria was the world’s second largest producer of cocoa, largest exporter of palm kernel and largest producer and exporter of palm oil. Nigeria was also a leading exporter of other major commodities such as cotton, groundnut, rubber and hides and skins, (Adeniyi, 1991:16). The agricultural sector contributed over 60 per cent of the GDP in the 1960s and despite the reliance of Nigeria peasant farmers on traditional tools and indigenous farming methods, these farmers produced 70 per cent of Nigeria's exports and 95 per cent of its food needs, (FAO, Summary of World Food and Agricultural Statistics 2003, Rome 2004:46-47).
The agricultural sector declined dramatically in the 1970s following the oil boom. While the oil sector has remained the dominant sector of the economy, agriculture has been neglected and relegated to the background, (Robert 2004:3). This is in sharp contrast to the situation in other oil producing countries where agricultural production generates significant revenue for their governments. For instance, Indonesia and Russia are leading oil exporting countries that produced 50 million metric tonnes of rice and 36 million metric tonnes of coarse grains respectively in 2001 (Robert 2004:6). The grains produced were sufficient to cater for the countries consumption and the surplus exported to generate additional income for their governments.
One of the major problems facing Nigeria’s agriculture is inconsistency in the government policies particularly in the areas of importation of agricultural produce and this has serious (negative) influence on local production and a spill over effect on rural farmer’s welfare that makes up the bulk of Nigeria agricultural producers. These inconsistencies over the years coupled with lack of political will to stabilize the agricultural sector of the economy have made the Nigerian agricultural production to experience low yield and reduction in local production to its lowest ebb. Hence, these posed negative effect on Nigerian farmer’s welfare (Onuk et al. 2010). One of the major disturbing phenomena in Nigeria today is the shortage of food grains with the attendant result of soaring prices and rising importation of these commodities. This shortage can be attributed to a number of factors among which are the increase in population which is not matched by the rate of growth in the food production and poor storage system (Akanni & Okeowo, 2011).
Conversely, Nigerian government responsibility is to provide an adequate and well stable food supply to meet the requirement of a growing population seems to be on the edge of being defeated. These have forced the nation to resort to importation as the only way to dissipate food shortage in the country. According to Alabi & Alabi (2009), agricultural sector was the then main stay of the Nigerian economy before and immediately after independent, until the oil boom of 1970s. In the period before 1970s, agriculture provides the needed food for the population and served as the major foreign exchange earner for the nation (International Institute of Tropical Agriculture, IITA, 2017). The significant of agricultural product production to modern society is first and foremost reflected in the importance of the crop in the diet of man and animals throughout the world (Onwueme & Sinha, 1991).
According to report released in fourth quarter of 2017 by the National Bureau of Statistics (NBS), Nigeria imported agricultural product from foreign countries that worth about N146.8billion annually (NBS, 2017). It is obvious that such policy on importation cannot bring permanent solution to food security rather it fuels inflation, discourages local production, created poverty among households. Therefore, Nigeria cannot continue to depend on importation to feed her growing population, thus, there is need to encourage local production by providing good market in terms of prices.
1.2 STATEMENT OF THE PROBLEM
The volatility of petroleum prices in the world market has led to the instability of the Nigerian economy. This is due to Nigeria’s over dependence on oil for its revenue. Consequently, the economy has remained a mono-product economy, weak and unable to effectively support the needed growth or development. The diversification of the economy has taken a centre stage in the present effort towards economic reforms in the country. The agricultural sector readily presents itself as that vital alternative in this regard.
Alabi and Alabi (2009) noted that during the period of oil boom of 70s and 80s, attention was shifted to petroleum sector and agricultural sector was totally neglected and huge sum of money from oil production sales was used for importation of some of agricultural products and food grains, agricultural product inclusive. This huge importation of grains rendered the locally produced agricultural product incapable of competing with foreign ones because production cost is usually high while modern technique in production is not available. As a result, there was a demand supply gap in agricultural product production in Nigeria, which still exists till date. In order to address the demand-supply gap, government has at various times come up with policies. However, these policies and programmes have not been consistent. In order to encourage local production and boost the morale of agricultural product farmers to continue production, there is need to examine those factors that discourage local production among which is differential in the pricing of imported and locally produced agricultural product.
1.3 RESEARCH PURPOSE
The aim of this study is to examine the effect of agricultural products importations on Nigeria economic growth, import/export surplus in Nigeria. It is also to determine how necessary the activity of importation of agricultural products, basically affects the economy in terms of growth, revenue generation and to also see the possible problems it is bound to encounter.
1.4 OBJECTIVE OF THE STUDY
The objectives of the study are as follows:
(1) Determines the effect of agricultural product importation on local agricultural product production in Nigeria.
(2) Examine the relationship between agricultural product importation, local prices and local agricultural product production.
1.5 SIGNIFICANCE OF THE STUDY
This study is important because in the recent time, Nigeria has witnessed unprecedented mass importation of agricultural product and other agricultural products into the country which can be produced locally at a lower cost. The relationship between agricultural product importation and local production needs to be examined for appropriate policy formulation on cereal crop import restriction in Nigeria particularly agricultural product importation. The study therefore will be of immense benefit to policy makers, government official in the Ministry of Agriculture, researchers and other stakeholders in the agricultural sector of the economy as it will give direction on how to enhance agricultural policy in Nigeria.
1.6 STATEMENT OF HYPOTHESIS AND DECESION RULE
Hypothesis testing is the building block of any scientific research. To this end we will test the following hypothesis in line with our stated objectives:
1. H0:Agric sector public expenditure and agricultural output do not have significant impacts on the economic development of Nigeria
H1: Agric sector public expenditure and agricultural output have significant impacts on the economic development of Nigeria
2. H0: Socio-economic factors (political instability and industrial production), natural factors (rain fall), and human factor (carbon emission) do not have significant impact on agriculture output in Nigeria.
H1: Socio-economic factors (political instability and industrial production), natural factors (rain fall), and human factor (carbon emission) have significant impact on agriculture output in Nigeria.
The above hypothesis will be tested at 0.05 level of significance. The null hypothesis will be rejected if the probability at which the t-value is significant is less than the chosen level of significance. Otherwise, the null hypothesis will be accepted.
1.7 SCOPE OF THE STUDY
The research covers the period from 1965-2016. However, greater emphasis will be laid from 1970 to 1983 this is because from records, most of the significant policies on agriculture were made during this period.
In the course of this study however, relevant literature on this subject will be referred to. This will include literature from 1984 till date..