Relationship between Agriculture and Industry
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Nigeria; Economic recovery; Economic growth; Growth plan View PDF Download PDF Introduction Agriculture has been the main stay of the Nigeria economy right from the time of independencebut due to relevance of oil as a major contributor to the GDP over the years led to its relegation by government.
However, due to fall in international price of oil in the third quarter of resulting to a decline in revenue thereby, leading to contraction of economic activities which subsequently plunged the economy into recession. The shock experienced as a result of the fall in oil price severely affected the Nigerian economy.
The economy drastically slowed down in as annual GDP growth declined to 2. Bythe Nigerian economy registered its first recession sincerecording a growth of Notably, the under performance in the oil sector spilled over to the non-oil sector through the exchange rate channel with non-oil sector contributing 0. However, by the second quarter ofthe Nigerian economy exited its recession recording a positive growth rate of 0.
By and large, the shock experienced during this recession is still being felt by the people to the extent that feeding well becomes a problem. Therefore, in an attempt to revamp the economy from the devastating effects of recession, the government came up with an economic plan known as Economic Recovery and Growth Plan ERGP.
Agriculture and Industry in Economic Growth
Agriculture being one of the key sectors of the economy has been outlined in the ERGP to help arrest the problem of food insecurity, generate employment, improve foreign exchange earnings and drive industrialization.
Thus, it must be pragmatically supported to ensure the achievement of the stated goals. Thus, this research work has as an objective to investigate the impact agriculture will have in the economic recovery and growth plan of the country. Empirical Review Abula and Ben [ 2 ] research into the impact of agricultural output on economic development in Nigeria within the period of to They used annual time series data and employed Augmented Dickey — Fuller unit root test and vector Autoregressive model, the variables used were Agricultural input and public Agriculture expenditure to explain economic development provide by per capita income.
The result shows that agriculture plays an important role on Nigeria economic development. Oje-Okoro [ 3 ] made an analysis of the contributions of agricultural sector on the Nigeria economic development multiple regression was used to analyze the data collected. They used ordinary least square method to analyze the data collected.
They used Gross Domestic product GDP as explained variable while agricultural input on the explanatory variable. The result revealed a positive cause and effect relationship between GDP and agricultural input in Nigeria. Mathew and Adeboye [ 5 ] Studied into the role of the agricultural sector in economic development of Nigeria.
They used empirical data from to and employed the use of Johansen co-integration techniques of regression. The result shows that there is no significant impact of agricultural sector on economic development in Nigeria.
The findings revealed that real GDP, agricultural input and oil rent have a long run equilibrium relationship that is; there is a positive impact of agricultural input in economic growth of Nigeria, although the vector error correction model result shows that the speed of adjustment of the variables towards their long-run equilibrium path is low. Oyinbo and Rekwot [ 7 ] provided an empirical relationship between agricultural production and the growth of Nigerian economy with focus on poverty reduction.
Time series data were employed in the research at the analysis of the data were done using unit root test, and the bounds ARDL testing approach to co-integration.
The result of the data analysis indicated that agricultural production was significant in influencing the favorable trend of economic growth in Nigeria. Tolutope and Chununso [ 8 ] investigated into the contribution of agricultural sector to economic growth in Nigeria using the growth accounting framework and time series data from to They used granger test, which showed that agriculture growth Grangercause GDP growth, however, no reverse relationship was found, the resilient nature of the sector is evident in its ability to recover more quality than other sectors from shocks resulting from disruptive events such as civil war and economic recession.
From the empirical review above, most scholars using various techniques and data agreed from their empirical findings that agriculture had a positive and significant impact on economic growth of Nigeria. However, Mathew and Adeboye used a Johansen cointegration technique found out that agriculture does not have positive effect on economic growth of Nigeria.
This research work however employed the use of normality test to validate the data used in the analysis, in which none of the scholars above made used of. Furthermore, Economic Recovery and Growth Plan were not in place as at the time of empirical studies by the above authors. Thus, this established the premise for this research. Literature Review Agriculture and economic growth Nigeria has every potential to become a major factor in the world economy based on its wealth of human and natural recourses.
However, these potentials are grossly untapped over the years. The country has been relying on revenue generated from crude oil and gas from late s after it had shifted from agriculture which has been the mainstay of the economy. This actually led to recession in the second quarter of The government recognizes that the economy is likely to remain in a path of steady and steep decline if nothing is done to change the trajectory [ 9 ].
Agriculture undoubtedly contributed to GDP growth in Nigeria in a consistent manner. The impact of rising urban incomes and industrialisation has a favourable impact on the demand for food, vegetables, fruits, various raw materials produced in the agricultural sector. It has been an article of faith in India that the demand stimulus for industrial expansion would likely come mainly from agriculture with low social and economic costs.
Finally, there is a savings-investment linkage between these two sectors. A self-reliant agriculture capable of exporting surplus food-grains helps in saving scarce foreign exchange resources of the country.
Now these resources can be better utilised for importing capital goods and crucial raw materials needed for industrialisation effort. As agricultural production and productivity rises above the subsistence requirement, the volume of marketable surplus increases which provides sinews of industrialisation, particularly in the rural sector. Again, the rising volume of savings and capital formation consequent upon rising farm incomes give strong stimulus to demand for manufactured goods.
Investment in one sector pulls investment of other sectors up thereby accelerating overall growth rate of the economy.
Nigerian Economic Growth and Recovery: Role of Agriculture
Similarly, the rise in non-farm incomes leads to an increase in the demand for various agricultural products. In the process, agricultural sector becomes diversified, modernised.
Most importantly, the relative terms of trade between the two sectors affect the flow of resources from one to another sector. Terms of trade will improve for agricultural sector if over a period of time the prices of agricultural commodities move at a higher rate than the prices of manufactured articles.
Thus, the terms of trade favouring agriculture results in an increased real income and hence, increased private saving and investment. The relative terms of trade also influence government saving and investment in these two sectors. How does agriculture contribute towards higher development can be explained in terms of Fig.
Here we consider two sectors—agriculture and industry. Agricultural production and consumption are measured on the vertical axis above the origin while industrial output is measured on the vertical axis below the origin.
Horizontal axis—ON axis— measures the volume of agricultural labour.
Agricultural output is indicated by the OQ curve. Its shape is governed by the law of variable proportions. OC curve measures the volume of consumption of agricultural output. The difference between OQ and OC thus measures the volume of surplus generated in the agricultural sector. At ON, level of employment made in the agricultural sector, C1Q1 becomes the surplus agricultural output.
Investment of this surplus generates N1M1output in the industrial sector. As employment in agriculture increases to ON2, industrial output rises to N2M2 consequent upon a C2Q2 surplus produced in agriculture.