THE EMPIRICAL INVESTIGATION OF THE RELATIONSHIP BETWEEN THE AGRICULTURAL SECTOR AND THE INDUSTRIAL SECTOR AS A STRATEGY FOR ECONOMIC GROWTH AND DEVELOPMENT IN NIGERIAN


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THE EMPIRICAL INVESTIGATION OF THE RELATIONSHIP BETWEEN THE AGRICULTURAL SECTOR AND THE INDUSTRIAL SECTOR AS A STRATEGY FOR ECONOMIC GROWTH AND DEVELOPMENT IN NIGERIAN. (A CASE STUDY OF NIGERIA ECONOMY)  

ABSTRACT

This project study the empirical investigation of the relationship between the Agricultural sector and the industrial sector as a strategy for economic Growth and development in Nigeria.

The major objective and aims of this project work is to look at the effect of agricultural sector and the industrial sector in Nigeria. The data used in this project are mainly from primary survey data (by the use of questionnaire), personal interview with the respondents and secondary survey data.

The finding shows, contribution of agricultural sector in Nigerian economy of the Gross Domestic product (GDP) from 1947-1958 (before independence) and from 1964-1992 (after independence) in 1960 ad how industrial sector adds to the demand for goods by the agricultural sector and this may increase productivity in agriculture. Higher agricultural product will provide capital and market for new industries while industries will absorb the surplus labour; there are recommendation for producer, suppliers, consumers and the government on how to improve the tools, implement, pesticides.

TABLE OF CONTENTS

Title page

Certification

Dedication

Acknowledgement

Abstract

Table of contents

CHAPTER ONE

1.1 Introduction

1.2 Industrial and agricultural growth

1.3 Statement of the problem

1.4 Objective of the study

1.5 Rationale of the study

1.6 Hypothesis

1.7 Methodology of research and sources

1.8 Scope of the study

1.9 Organization of workCHAPTER TWO

2.1 Literature Review

2.2 Theoretical Framework

2.3 Agricultural Sector

2.3.1 Agricultural Exports

2.3.2 Domestic Demand for and consumption of major Agricultural products

2.4 Industrial Sectors

2.4.1 Manufacturing industry

2.4.2 Performance of selected federal government core industrial projects (CIPS)

CHAPTER THREE

3.0 An overview of the agricultural role, policies in industrial development in Nigeria

3.1 Introduction

3.2 Synthesis of agriculture outlook from the ’80s

3.3 Some specific policies to boost the agricultural outlook

3.3.1 The national Accelerated food production programme

3.3.2 Operation feed the Nation (OFN)

3.3.3 The Green revolution

3.3.4 Macroeconomic policies

3.3.5 Sector-specific policies

3.3.6 Farm settlement

3.3.7 Land use degrees

3.3.8 Directorate of food, roads and rural infrastructure (DFRRI)

3.4 Interdependence among the different sectors of an economy

3.5 Need for a structural balance economy

CHAPTER FOUR

4.1 Economic analysis of agricultural and industrial relations in Nigeria

4.2 The analysis of the regression of the relationship between agricultural and industry

4.2.1 Model specification

4.2.2 Model interpretation

4.2.3 Re-statement of the hypothesis

4.2.4 Standard error test

4.2.5 T-test

4.2.6 F-test

CHAPTER FIVE

5.0 Summary, Conclusion and Recommendations

5.1 Summary

5.2 Conclusion

5.3 Recommendation

References

CHAPTER ONE

1.1 INTRODUCTION

Changes in the relative importance of agriculture and industry have been recognized as the core of the process of growth. Hence agricultural process is a prerequisite for industrial development which metamorphosed to economic growth and development. In industry it is the role of manufacturing sector that appears to be the strategic factors in modern economic growth. One of the issues confronting many developing countries is sectorial balance, determining which area of development most to the economy as a whole.

Except for few countries, the discernible patterns are overwhelmingly agricultural and industrial interdependence. 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 forestry fishing, processing and marketing of those agricultural products. The role of agriculture in transforming both the social and economic work of an economy cannot be put off with wave of hand.

On the other hand, an industry refers to a number of rims producing broadly similar commodities. Thus, industrialization is the process of building up a nation’s capacity to convert raw materials and other inputs to finished goods and to manufactured goods for other production or for final consumption. Agriculture provided the needed surplus for industrialization processes in most developed countries and lately in south Asian and Latin American countries. The industrial sectors adds to the demand for goods produced by the agricultural sectors and this may increase productivity in agriculture. Higher agricultural product will provide capital and market for new industries, while industries will absorb the surplus labour, which agriculture must release in its process of improvement.

Before and immediately after interdependence in 1960, agriculture was the mainstay of the Nigerian economy accounting for more than one-half of the Gross Domestics Product (GDP) and more than three-quarter of exports earnings. The contributions of agriculture to GDP moved from 50 percent in 1970 to 38.8 percent in 1991 and by 1995 this has declined further to only 32 percents. In fact, by mid 1980’s Nigeria has moved from a position of self-sufficing in basic foodstuffs to one of heavy dependence on inputs, as mush emphasis was shifted to the petroleum sector. Thus, the observed drop of relative share of agriculture in aggregate output reflects the period of windfall from petroleum income when farm production was depressed by the massive urban boom and movement of rural workforce to cities.

On the other hand, emphasis on industrialization as a means of diversifying production patterns and import-substitution and semi-processing of cash crops for export and later on the establishment of light intermediate and heavy industrial complexes in the 70s and 80s. consequently, the manufacturing sub-sector accounted for about 4 percent of an annual average of less than 10 percent between 1983 and 1995.

Struthers (1990) described this simultaneous decline in the agriculture and industry as ‘Dutch Disease’ which could be attributed to poor linkage between the sectors, despite the huge earnings from the petroleum sectors. Moreover when the two sectors wait for each other to perform the thrust and feedback expected of them, the pace of economic growth tends to slow down or stagnate.

Economic historians have shown that all economically advanced countries today were once predominantly agricultural at their early stages of development. They repeatedly emphasized that an expanding agricultural sectors forms the basis for industrial expansion and development by raising the level of real income in the agricultural sector thereby extending the potential market for manufacturing goods, opening a new source of capital for the establishment of industry and making possible the purchase of foreign tools and equipment necessary for industrialization.

1.2 INDUSTRIAL AND AGRICULTURAL GROWTH

 On attaining independence in 1960, the agricultural sector maintained its dominant position as the major foreign exchange earner. The sector accounted for more than half of the GDP and provided enough food for the teeming population. Traditional small holder farmers who use simple techniques of production and the bush-fallow system of cultivation, account for about two-thirds of Nigeria’s total agricultural production. Before 1939, there was virtually no manufacturing industry in Nigeria. Cotton was partially processed and cigarettes were manufactured at Ibadan, but there was very little else. In recent years however, and particularly since 1948, there has been a rapid and important growth of factory industry. A major objective of the country’s economic policy is to promote the growth of industry, both to increase the wealth of the country and also to provide new sources of employment.

The highest industrial growth was achieved during the period of 1966-70 when the sector recorded an average growth rate of 25.9 percent, compared with 12.4 and 13.4 percent achieved in the preceding periods of 1971/75 when the country was just recovering from the devastating effect of civil war Nigeria’s economics history can be said to have been pre-determined by the industrial expansion of Europe at that time. For instance, crop such as palm kernels and groundnut provided and invaluable source of raw materials for appropriates industries of Europe he said “it takes more than industry to industrialize” this the more developed these industries were the more the raw materials were required and the more country like Nigerian will produce.

In 1960 about 80 percent of the country used to regard agriculture as their principle occupation, although a large percentage of them might have produced for mere subsistence. The country is endowed with a good climate and plenty of fertile land and this has made it possible to produce a wider range of agricultural resources, which are being used as raw of self-sufficiency in food production. Sugar refining, textiles, breweries, rubber, fertilizer, footwear, paper, cigarette and general food processing industries have continue to record reasonable levels of capacity utilization rates.

1.3 STATEMENT OF THE PROBLEM

The development of a sound industrial base depends on the proper harnessing of agricultural and water resources of the country. Undoubtedly, agricultural progress is a prerequisite for industrial development and by extension for economic growth and development. The agricultural sector has been described by a host of economic historians as been indispensable in achieving industrial development in an economy. However, the problem of food supply and demand and their implications for Nigeria’s overall development have become major national issues. The amount of resources that have been allocated to agriculture in general and the food sub-sector in particular, the supply of local raw materials for industrial development would seem justified only if the anticipated increased in agricultural production and supply are realized. Opinion have been expressed on the linkage between agricultural sectors and industrial sectors as been interwoven judging from the sense that all nineteenth century industrialization were accompanied in their early stage by an increased in agricultural output.

Therefore one can assume that industrialization and agricultural development are not valid alternatives, but rather effective developmental plans must embrace both goals. Thus it remains an empirical issue for verification in Nigeria whether in the country’s development process the agricultural sector is really complementing to the industrial sector’s development given past and present antecedents, if the answer is in the affirmative, we need to establish the link between these two man sectors and the extent of their linkage in Nigeria. Moreover, the importation of finished goods to the country brings about the low growth in industrial sector. However the role of agriculture since independence in the economy has been on the downward trend especially its contribution of Gross Domestic Product (GDP). Its share top GDP fell from 39.9 percent in 1970/71 to 20.0 percent (based on constant prices) in 1988. This situation has been partly due to the mergence of oil as an important commodity and partly to the poor performance of the sector.

1.4 OBJECTIVE OF THE STUDY

The general objective is to look into how industrial development could be attained through effective resources mobilization from the agricultural sector, given the country’s social, economic and political constraints.

The specific objectives are to:

1. Analyzing the agricultural and industrial production growth rates in order to determine if the performance of the agricultural influences the growth and performance of the industrial sectors, because the growth of industry brings about economic growth and development.

2. Analyze agriculture’s contribution to developments materials for sustaining the production of manufactured goods up till today. This period could be said to mark the birth of the agro-allied industries in Nigeria. Sugarcane is used in sugar producing industries, maize is used in beer production with coca serving in the production of beverage in the beverage industries. Agriculture affects and influence industrialize when we consider in terms of its impact on the operations of our food industries it provides the food requirement of the rapidly growing rural and urban Nigeria population.

Agriculture provides employment for over 70% of Nigerian labour force. The agricultural sector has been contributing substantially to the gross domestic products of Nigeria. This contribution has been declining over the years in some countries because of the discovery of some mineral resources and in Nigeria case with the oil boom era, which reduced the emphasis on agriculture also in development plans, for example agriculture contributed 63% to the Nigerian GDP in 1960 but declined to 23.4% in 1975 (United Nation year Book of National Account 1979). Agriculture also provides raw materials which implies a growth and adaptation of agricultural production. With the decline of the oil boom era, the stage is now set for agriculture to take up the prominent role it used to play then.

However, the structural adjustment programme (SAP) embarked upon in lake 1986 by the government to stabilize the economy had a salivary effect on the industrial sector, as the sector recorded an annual average growth of 10.4 percent between 1986 and 1990, with positive growth rates in each of the years. The pace continue but at a decreasing rate, accounted for by sharp fall in manufacturing component, which experienced very low capacity utilization as a result of lack of raw materials, spare parts and other production bottlenecks. For instance, the annual average growth rate of manufacturing component increased form 14.4 percent during 1971/75 to 19.4 and 17.6 percent during 1976-80 and 1981/85 periods respectively. Thereafter the rate of growth of this sub-sector decelerated as a result of factors enumerated above. Indeed, for the first time during the period of analysis, this sub-sector recorded a negative growth rate of 2.4 percent compared with all industry average growth rates of 4.8 percent.

The year to year changes have been uneven in industrial sector, therefore, government has reacted to the declining trends in the manufacturing output by the creation of raw materials research and development council and a raw materials data bank. Through these institution and others, the government hope to improve the capacity utilization through available local raw materials manufacturing using raw materials from local sources were at a strong advantage after the 1986 reforms. By 1989, manufacturers with locally sourced inputs achieved relatively high levels of capacity utilization, tyres (59.8%) leather products (60.3%). Beer and stout (53.4%) textiles (60%) and industrial chemicals (46%). Agro business grew rapidly due to the government policy.

3. Investigate into the problem of agriculture in industrial development in Nigeria.

4. Proposed policy measure on how agricultural productivity can be improved.

1.5 RATIONALE OF STUDY

Agriculture is still the main stay of the Nigerian economy with about 70% of the country’s labour force there in. at independence (1960) the percentage contribution of the sector to GDP was about 70%. And over view of the Nigerian economy shows that agriculture is still predominant in spite of the increased industrial growth over the years. The agricultural activity dominated the economy between 1950-1974 contributing N1,342 million to GDP in 1959 and N1,308.7 million in 1974. It highest contribution was in 1971/72 when it stood at N1982.9 million as revealed by the federal office of statistics, national account of Nigeria (Lagos, 1976). In 1995 the agricultural sector contributed N520,999.4 million to the GDP, while the industrial via manufacturing sector contributed N116,820.6 million to the GDP. The fall in the share of the agricultural sector between 1960 and 1980 is partly due to the normal growth pattern and the neglect of the sectors as a result of large return accruing from crude oil production.

Fall in the share of manufacturing sub-sector of the industrial sector in 1980s that made the procurement of imported raw materials difficult and expensive. The continue poor performance of the external sector especially the crude oil has forced the government to re-order his priority such that agriculture and self-reliance is given emphasis. Although by 1995 the increase in agriculture’s share in GDP was quite small as it managed to move to 35.4% yet it is quite better than the industrial sectors share of 70.9%. In essence this shows that in spite of the fact that the decline in agricultural activity appears natural in many development process, it is obvious that in Nigeria, agricultural activity will remain the most single sector for some time to come, hence more attention should be directed to the agricultural sector to enable it move to heights that would help it play its role in the industry.

1.6 HYPOTHESIS

The relationship between the agricultural sector and the industrial sectors has accounted for a large proportion in the strategy for economic growth and development. In an attempt to understand the degree of inter-dependence among the different sectors of an economy and therefore the relative importance of each sector, a number of devices have been employed to measure movement of resources among sectors. One of these devices is the input-output table, which measures the degree of inter-dependence among the different sectors of the economy.

1.7 METHODOLOGY OF RESEARCH AND SOURCES

The techniques to be used in this study will be descriptive analysis in which table will be employed. The data needed for this study will be collected from published and unpublished works, the central bank of Nigeria, economic and financial review, central bank annual report and statement of account, the CBN statistical bulletin.

The technique of analysis is descriptive in nature, the analysis used tables being the most frequently used method of data analysis tables used in the form of general descriptive tables, which are in use in summarized and condensed data, the data used have already been compiled by CBN.

1.8 SCOPE OF THE STUDY

The study will cover the output of the agricultural sector (crops) and industrial sector (manufacturing). The work will critically examine the role and contribution of agricultural sector in the industrial development in Nigeria, the project will focus on Nigeria, but many scathingly sight example from some other countries in analyzing some points.

1.9 ORGANIZATION OF WORK

For ease of presentation the project has been divided into chapters. Apart from chapter one, which deals with the introduction, there are four other chapters.

Chapter two review existing literature and theoretical framework on agricultural sector and industrial sector. Chapter three consist of the overview of the role of the agricultural sector to economic development and growth, also the contribution to industrial sector. Chapter four is on data analysis and in which the agricultural-industrial relation in Nigeria is explored. Chapter five comprises of the summary, recommendation and conclusion on the role and significance of the agricultural sector contribution to industrial sectors.

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THE EMPIRICAL INVESTIGATION OF THE RELATIONSHIP BETWEEN THE AGRICULTURAL SECTOR AND THE INDUSTRIAL SECTOR AS A STRATEGY FOR ECONOMIC GROWTH AND DEVELOPMENT IN NIGERIAN


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