CHAPTER ONE

INTRODUCTION

1.1       Background to the Study

Agriculture in the context of the economy is tied with the various sectors and is essential for generating broad based growth necessary for development. As such, it is fundamental to the sustenance of life and however poses as the bedrock of economic development, especially in the provision of adequate and nutritious food so vital for human development and industrial raw materials.

Specifically, agriculture comprises of the main fields of human activity and basically characterizes of primary production of food and cash crops, livestock, fishing, forestry and marketing of the products realized in these activities. It contributes immensely to the development of the economy in various ways, ranging from the provision of food for the increasing population, supply of adequate raw materials (and labour input) to a growing industrial sector, a major source of employment, generation of foreign exchange earnings and, provision of market for the products of the agrarian sector (Okumadewa, 1997). The agrarian sector has a strong relationship with the economy; hence, this raises concern for the implementation of effective agricultural policies within the Nigerian economy.

Support for agriculture is widely driven by the public sector, which has established institutional support in form of agricultural research extension, commodity marketing, input supply and land use legislation, to fast-track development of agrarian sector to achieve the aim of economic development. The importance of the agrarian sector, also suggests the intervention of the private sector through sponsorship of research and breakthrough on agricultural issues in Universities, capacity building for farmers and, most importantly, the provision of fund for farm businesses. In addition, international governmental and non-governmental agencies including the World Bank Fund and Agricultural Organization of the United Nations, also contribute through on-farm and off-farm support in form of finance, input supply, strengthening of technical capacity of other support institutions, among others.

For developing countries, agriculture plays the role of promoting economic development by increasing availability of food and provision of raw materials for industrial production. Also, it expands the size of the domestic market for industrial goods; raises the level of savings and capital formation, and also earning foreign exchange from exports. In the case of Nigeria, the attention given to the agricultural sector has also given room for capital development, revenue generation and job creation, since most economic activities are predominantly agricultural. Indeed, as observed in some quarters, the country received its principal stimulus for growth from agriculture in the 1960s and 1970s (Anyanwu, 1997; Central Bank of Nigeria, 1997).

In the light of the above reality, the Nigerian economy, 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). 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 skin (Alkali, 1997). The agricultural sector contributed over 60% of the GDP in the 1960s and despite the reliance of Nigerian peasant farmers on traditional tools and indigenous farming methods, these farmers produced 70% of Nigeria’s exports and 95% of its food needs (Lawal, 1997).

However, at the dawn of the 1970s, agriculture lost its dominant position to crude oil and natural gas production, in terms of contribution to GDP, the export basket, foreign exchange earnings, government revenue and so on. Output deteriorated and the sector generally stagnated. The food situation became disturbing and almost alarming to the extent that, Nigeria, once one of the leading producers of certain agricultural goods, became an importer of some of the same products, especially food grains.

In order to reverse this trend, the country adopted series of agricultural revival strategies and programmes targeted at different activities in the agricultural sector, ranging from finance, pricing, infrastructure, institutional development, marketing, storage and so on. The efforts were further boosted by increased earnings from crude oil sales. Massive funds were invested in the sector, several institutions were created and the work force developed. In spite of all this, agricultural production remained low and lagged behind other sectors. Food supply was still below the demand and the food import bill continued to grow. The sector was also seen as a drag on the other sectors of the economy.

According to Prabuddha and Babu (2010), Agricultural policies in Nigeria have undergone four main phases: The first from 1960 to 1969; the second from 1970 to 1979, the period of the oil boom; the third from 1980 to the late 1990s, during the structural adjustment program (SAP); and the period of the NEEDS framework. On the contrary, Ayoola (2011) classified agricultural policies and programmes in Nigeria into four categories, namely: agricultural policies and programmes in the colonial era, the post-colonial era, the military era and the present Fourth Republic.

Contrarily, sustainable agricultural development is propelled by agricultural policies. The first national policy on agriculture was adopted in 1988 and was accepted to remain valid for about fifteen years, that is, up to year 2000. Also, in year 2001, a new policy document on agriculture, was lunched. The new policy document has most of the features of the old ones, but with more focused direction and better articulation (Uche, 2011). However, the Fourth Republic has witnessed the emergence of several policies and programmes channeled towards agriculture, and these range from the National Economic Empowerment and Development Strategy (NEEDS), National Special Programme on Food Security (NSPFS), and the Root And Tuber Expansion Programme (RTEP) of the Obasanjo administration; the 7-Point Agenda of Yar’Adua administration which anchored on land reforms and food security; the Agricultural Transformation Agenda of Jonathan administration, and the Agricultural Promotion Policy (APP), otherwise referred to as the “Green Alternative” which represents a policy document of the present administration of President Muhammadu Buhari that seeks to build upon the goals of the ATA.

Furthermore, agricultural policies are supported by sub-policies that facilitate the growth of the sector. As such, the implementation of agricultural policies is however moderated by macro-economic policies which provide the enabling environment for agriculture to grow alongside other sectors. These policies usually have major impact on profitability of the agricultural system and the welfare of farmers as they affect the flow of funds to the sector in terms of budgetary allocation, credit, subsides, taxes and therefore, must be in harmony and mutually reinforcing with the agricultural policies. The macro-policies comprise the fiscal, monetary, trade budgetary policies and other policies that govern macro-prices.

In a nutshell, agricultural policies provide for among others, the adequate financing of agriculture. As such, the role of the agricultural sector in the diversification of the economy cannot be over emphasized, given that it guarantees food security of any nation.

It is against this background that this study seeks to undergo a critical assessment of the impact of agricultural policies on the Nigerian economy.