CHAPTER ONE

INTRODUCTION

1. BACKGROUND OF THE STUDY

Government involvement in economic activities could be traced to the emergence of the Keynesian school of thought in the early 1930s. The introduction of fiscal policy as a tool of macroeconomic management brought about the use of public expenditure to achieve stability in the economy. Fiscal policy refers to the use of government spending and tax policies to influence economic conditions especially macroeconomic conditions, including aggregate demand for goods and services, employment, inflation, and economic growth. It involves government’s use of its expenditure and revenue plans to achieve desirable effects while avoiding those effects that are not desirable on a nation’s output, production, and employment levels.

The role of agriculture in the development of any economy can never be over emphasized. Agriculture provides food for the citizens, raw materials for the industries, employment, and income for the farmers, enhances society’s well-being. Prior to the discovery of crude oil in Nigeria and even before the civil war in the late 1960s, the Nigerian economy was predominantly agricultural. The revenue from crude oil was so huge that political leaders began to shift emphasis from agriculture to mining and quarrying. In spite of the neglect of the agriculture sector, agriculture still remains the mainstay of the Nigerian economy; directly, in terms of volume of employment opportunities it offers, as the sector provides for a significant proportion of the country’s employed labor force; and indirectly, through the important linkages it provides with the rest of the economy (Udoh, 2011).

It is quite commonly explain that agriculture is the mainstay of an economy, especially in the developing one like Nigeria. However, this assertion has become triviality in Nigeria’s scenario over the years. Agricultural output growth is the most vital component of general economic growth attainment, which could be achieved through aggressive investment in the agricultural sector. Ogiogio, (1995) posits that agricultural contribution to economic growth cut across four cardinal points thus; factor earning, product earning, market earning and foreign exchange earnings (Jhingan, 2003). Despite all these benefits, little attention has been drawn towards actualizing the above benefits in case of Nigeria, although government in the past had come up with different attempts to harness these benefits, such as structural adjustment programme (SAP), operation feed the nation (OFN) among others, but the agricultural growth continuously remains slow, coupled with poor agricultural funding by the government across all tiers. Interestingly, the sector witnessed it first major set-back in the early 1970s when oil discovery took the center stage and this attracted huge revenue deposit in the government convers which was termed as free money by most politicians in the helms of the nation’s affairs. As a result, government attention was drastically shifted from the agricultural sector to petroleum sector hence agricultural product dropped sharply to less 1 percent on it contribution to annual growth. The crop export also fall with marginal rise in food production due short labour supply in the sector. This ugly trend brought about general fall of domestic food supply, which led to augmentation of this shortages through foreign imports. According to the nation’s apex bank in 2003, food import expenditure rose between 1970s and 1990s. This is connected to macroeconomic disequilibrium such as exchange volatility, skyrocket consumer price index with poor infrastructural based, policy inconsistence, over reliance on crude oil among others (Keji, 2018).

In Nigeria, due to the importance of agriculture, a policy was initiated by Federal Government asking the Ministry of Agriculture to work with Ministry of communication Technology to provide 5 million women farmers and agricultural entrepreneurs to receive mobile phones so as to access information on agro-inputs through an e-wallet scheme. However, this policy has since been dropped due to the reactions from the public and the National Assembly Members. In Nigeria, agriculture was contributing nearly 60 percent of the Gross Domestic Product (GDP) and more than 70 percent of foreign exchange earnings, but today agricultural production shows a declining trend in the growth of export crops production and this as a reflection of the weakness in the efforts of government to diversify the export base of the economy to non-oil exports (NISER, 2000).And again inadequate funding of the agricultural sector has been raised by experts as an obstacle to increases agricultural output (CBN, 2001; Bernard 2000).

1. STATEMENT OF THE PROBLEM

As noted by the World Bank (2000) agricultural and rural sector had suffered neglect and under investment in the last twenty years. The World Bank in its report called for greater investment in agriculture in developing countries. They warn that the sector must be placed at the centre of development agenda of the countries, if the goals if reducing poverty and hunger by 2015 are to be realized. Kormain and Bralimasrene (2000) study the economy of Thailand. They made use of the granger causality tests. Their finding suggests that government expenditure and economic growth are not cointegrated but indicated a unidirectional relationship. This is so because according to them, causality runs from government expenditure to growth, and also detected a significant positive effect of government spending on economic growth.

Notably, over the years, several measures were put in place to change the ugly scenario in the agricultural sector especially through agricultural financing, policy implementation like increase in agricultural budgetary allocation, among others, yet these measures fail to transmit to growth of the Nigerian economy, that is, measures without explicitly translating to an equivalent expansion in agricultural output hence slow economic growth is achieved. Consequently, several studies were carried out to examine what might had caused the slow growth in agricultural sector from different perspectives with little or no attention on the nexus between government expenditure and agricultural output growth. For example, studies like Oboh & Ekpebu (2010), Akintola (2004), Iganiga & Unemhilin (2011), Adekanye (2005), Rhaji, (2008), Egwu (2016) and Ebere, (2014) attempted to explain some other factors that affect agricultural output in broader perspective without specifically focus on factor such as government expenditure and agricultural output growth. Therefore, in the light of the above gap in the literature, it is pertinent in this study to investigate the relationship between government expenditure and agricultural performance in Nigeria.

1. AIM AND OBJECTIVES OF THE STUDY

The aim of the study is to investigate the relationship between government expenditure and agricultural performance in Nigeria.

Specifically, the study seeks to:

1. Examine the trend of government spending on agricultural output growth in Nigeria
2. Assess the relationship effect of government expenditure on agricultural performance in Nigeria
3. Investigate the hindering factors to agricultural performance despite agricultural financing, policy implementation and increase in budgetary allocation
4. Find out effective ways government expenditure can boast agricultural performance in Nigeria

1. RESEARCH QUESTIONS

The following research questions will be addressed in the study

1. What is the trend of government spending on agricultural output growth in Nigeria?
2. What is the relationship effect of government expenditure on agricultural performance in Nigeria?
3. What are the hindering factors to agricultural performance despite government financing, policy implementation and increase in budgetary allocation?
4. What other effective ways government expenditure can boast agricultural performance in Nigeria

1. STATEMENT OF THE HYPOTHESIS

The following hypothesis is formulated to guide the study

H0 there is no significant relationship between government expenditure and agricultural performance in Nigeria

H1 there is significant relationship between government expenditure and agricultural performance in Nigeria

1. SIGNIFICANCE OF THE STUDY

The study is to investigate the relationship between government expenditure and agricultural performance. It is very important because agricultural has not only come to stay; it has become one of the major sources of income generation to individuals and economic growth to a given society.

The study will be highly beneficial to both commercial and subsistence farmers and the ministry of agriculture as it will reveal the importance of government expenditure to agricultural performance.

Interestingly, the findings from this study would serve as policy guide to the policy makers in the future. Also, it can be used by other researchers as point of references in the cause carrying further studies.

1. SCOPE OF THE STUDY

The study focuses on investigating the relationship between government expenditure and agricultural performance in Nigeria. Specifically, the interest of the study will be restricted on Nigerian farmers, due to time and finance constraints. The focus of the study will be on the trend of government spending on agricultural output growth in Nigeria; the relationship effect of government expenditure on agricultural performance in Nigeria; the hindering factors to agricultural performance despite government financing, policy implementation and increase in budgetary allocation; other effective ways government expenditure can boast agricultural performance in Nigeria.

1. LIMITATION OF THE STUDY

TIME CONSTRAINTS: One the challenges experienced by the researcher is the issue of time; the research will simultaneously engage in departmental activities like seminars and attendance to lectures. But the researcher was able to meet up with the deadline for the submission of the project.

FINANCIAL CONSTRAINTS: Every research work needs funding; however lack of adequate funds might affect the speed of the researcher in getting materials for completion of the project.

1.9 DEFINITION OF TERMS

Agricultural output

Agricultural output measures the value of agricultural products which, free of intra-branch consumption, is produced during the accounting period and, before processing, is available for export and/or consumption.

Food security

Food security, as defined by the United Nations’ Committee on World Food Security, means that all people, at all times, have physical, social, and economic access to sufficient, safe, and nutritious food that meets their food preferences and dietary needs for an active and healthy life.

Government expenditure

Government spending or expenditure includes all government consumption, investment, and transfer payments. In national income accounting, the acquisition by governments of goods and services for current use, to directly satisfy the individual or collective needs of the community.

Economic Growth

Economic growth is an increase in the production of economic goods and services, compared from one period of time to another. It can be measured in nominal or real (adjusted for inflation) terms. Traditionally, aggregate economic growth is measured in terms of gross national product (GNP) or gross domestic product (GDP), although alternative metrics are sometimes used.

Entrepreneurs

An entrepreneur is an individual who creates a new business, bearing most of the risks and enjoying most of the rewards. The process of setting up a business is known as entrepreneurship. The entrepreneur is commonly seen as an innovator, a source of new ideas, goods, services, and business/or procedures.