Corporate social responsibility

Impact of Agriculture Development on the Rural Economy /Dwellers in Nigeria



  1. 1 Background to the Study

The impact of agricultural sector on rural development cannot be over emphasised. The work examined agricultural sector and rural development in Nigeria.

The word agriculture is an English adoption of the Latin word agricultura, which was derived from the root words ager, which means field and cultura, which means cultivation or growing. According to Komlafe (1985), agriculture is the science and act of cultivating the ground for production of crops, and the preparation of plant products for man’s consumption. Agriculture is also an act of rearing animals (including fish production) as well as production and processing of raw materials for industries. Anyanwu (1997) was of the opinion that agriculture is the main source of gainful employment from which a nation can feed its teeming population, providing the nation’s industries with local raw materials and as a reliable source of government revenue.

            In the 1960s, the agricultural sector contributed greatly in domestic production of goods, employment generation and in foreign exchange earnings for Nigeria (Famogbiele, 2013). This was the situation for almost three decades before oil was discovered in Nigeria. Since then, the agricultural sector has lost its top spot as the foremost revenue earner for the country and also have witnessed sharp decline in the engagement of agricultural activities in the rural economy, this has also resulted to another economic issue in the form of rural-urban migration. One thing however is clear; the phenomenon of rural-urban migration is grounded in the persistent inequality in the allocation of social and economic infrastructure such as pipe borne water, good roads, electricity, health facilities, and industries, among others in rural and urban communities. This has been experienced since the colonial era. To Braun (2004), people tend to be pulled to e areas of prosperity and pushed from areas of decline. Migrants are usually concerned with the benefits they hope to gain by moving and usually give less thought to the problems that they will incur as a result of the migration process. Migration is an inevitable pan of human existence, with a long history. However, its pattern has changed considerably over time, from the search for space, especially in the middle-ages o that of congestion in large cities (rural-urban migration) in the modem age, especially in the last millennium. Useful natural resources, which can be harnessed for socio-economic development, abound in Nigeria particularly in the rural areas. Coincidentally, Nigeria has a large proportion of both rural sector and rural people, which is a quintessential feature of developing countries (Akande, 2002).

            The most distinct characteristic of Nigeria’s rural areas is the widespread in of involvement of the inhabitants in agriculture. Agriculture is the most important economic sector in term of its contribution to the GDP of the Nation after Oil. Before the discovery of Oil in Nigeria, the agricultural sector contributes over 80% of the country’s GDP as the sector was the bane of the economy. Since the Oil boom in the 1970’s, the sector’s contribution to GDP has not been encouraging given the abundant resources the country poses, the sector now contributes about 41 percent of the country’s GDP, currently agriculture employs about 65 percent of the total population and provides employment to about 80 percent of the rural population though larger percent of the people engage in subsistence means of agriculture (ADF, 2015). The reason for the subsistence means of agriculture is the improper funding of the agricultural sector, fund are needed by farmers to purchase farm implements and input at the required time as well as to hire labourers or workers needed for the day to day activities of the farm. Most times, funds provided by the Federal Government in from of agriculture finance are usually not sufficient. As a result of this many farmers sort for extra credits from private sectors, specialized banks and commercial banks. However, these credits require stringent conditions for accessibility. In Nigeria, the rural sector is distinguishable from the urban sector in terms of the respective volumes of agricultural and non-agricultural components of economic activity that take place in the two sectors. Thus, economic activity in the rural milieu revolves around the exploitation or utilization of land. It centers principally on farming, animal husbandry, poultry, fishing, forestry, food processing and cottage industry. It has been estimated that agricultural activity occupies four-fifth of the rural population in Nigeria (Iruonagbe, 2009: 29). The unavailability of basic economic and social infrastructure such as water, roads, and electricity and health facilities due to rural-urban investment imbalance is one of the major causes of low rural employment, low agricultural productivity and low standard of living of rural people. It is mainly in the rural sector that much under-spending of planned expenditure occurs, as evidenced in the relatively low level of private and public investments in the rural areas.             Iruonagbe went further to state that rural dwellers bear the brunt of the incidence of fluctuating prices of their agricultural products on the world market. The consequent effect of this is the depreciating levels of income generated by rural dwellers. The decision to migrate may involve contextual factors, such as ‘push factors’ which force migrants out of rural areas and ‘pull factors’ which attract migrants to urban areas.     Due to rural-urban migration, rural communities suffer from a loss of manpower necessary for agricultural development. The impoverishment of the rural areas in Nigeria is partly explainable by out-migration of able-bodied youths in search of white collar jobs in the cities. Agriculture which was the mainstay of Nigeria’s economy prior to the discovery of Oil has been relegated to the background leading to the country’s mono-economy status. The impact of rural-urban migration is indeed a rapid deterioration of the rural economy, leading to chronic poverty and food insecurity (Mini, 2001).

            Recall that during the pre-independence era, the Nigerian government was able to execute investment projects through earnings from agricultural product exports. In the 1940s and 1950s, Nigeria’s agricultural export commodities contributed over 75per cent of the total annual merchandise exports (Okoruwa et al 2003). During this period, agricultural products dominated Nigeria’s non-oil export trade accounting for nearly 70 percent of the value of non-oil exports. Agricultural export commodities such as cocoa, rubber, cotton, palm oil, palm kernel, groundnut and coffee played a prominent role in economic development by providing the needed foreign exchange for capital development projects. Hence, the study will seek to analyse how the development of the agricultural sector can be a means to the growth of the rural economy.

1.2 Statement of Problem

The contribution of the agricultural sector to the economic growth decreased from about 80% in pre- and post-independence era to about 42% in 2012 despite almost N300 billion sunk into the sector through various agricultural financing agencies (Famogbiele, 2013). This decrease in growth mean an abysmal low contribution to the economy for a sector which was once the mainstay of the economy in the 1960s and is also a better alternative to oil sector in solving Nigeria’s economy woes in the present dwindling of oil prices. The Federal Government of Nigeria has initiated policies, schemes and established institutions such as the Nigeria Agricultural Co-operative and Rural Development Bank (NACRDB) to ensure adequate funding of the agricultural sector, economic revival and growth (Famogbiele, 2013). In spite of these numerous policies and ideas, the sector is still plunged.

One of the objectives of the NACRDB is to contribute to the overall growth and development of the economy (Ezike, Nwibo, Odoh, 2009). However, this objective cannot be achieved with meagre budgetary allocation to the agricultural sector in general. Relative to the amount of money budgeted to other sector of the Nigeria economy, the total budgeted amount to agriculture each year is structurally deficient, insignificant and inadequate (Famogbiele, 2013). For example, only 4% of the Federal Government’s annual total budget has been consistently allocated to agricultural sector since 2006 (Sanusi, 2011).

Since the Commodity Marketing Board (CMBs) were scrapped in the late 1980s in Nigeria, the agricultural sector took a nosedive. The CMBs ensured effective channel of stable, good market and pricing for farm produce as well as ensured a proper link between the peasant farmers, the commercial farmers and the outside market (Famogbiele 2013; Owofemi, 2011). This means that the agricultural sector has been stripped of one of its power of contributing to the economic growth. One of the activities of the defunct CMBs which helped the Nigeria’s economy in the 1960s and favoured life of the farmers at the grassroots was the promotion of and establishment of adequate storage facilities which enable the CMBs to affect the right pricing and distribution of farm produce (Fomogbiele, 2013). Since these adequate storage facilities and other efficient farming implements are lacking, it has resulted to ineffective price control, an all-round seasonal distribution of farm produce, and hence low economic growth especially that of the rural economy.

Most farmers are faced with difficulties in loan repayment and collaterals. Awoyemi (1981), regarded collaterals as the greatest obstacle confronting farmers in sourcing out credits both from formal and informal sectors. This is often as a result of unforeseen circumstances which in turn results to inability of farmers to capture financial services. The main thrust of this study therefore, is to verify how government through its policies, schemes and programmes can increase agricultural and economic growth, which has been underdeveloped.

1.3 Research Questions

           The following research questions are considered relevant to the study.

  1. What is the level of impact of agricultural credit guarantee scheme fund on the growth of the rural economy in Nigeria?
  2. What is the level of impact of interest rate on the growth of the rural economy in Nigeria?
  3. How has youth unemployment affect the growth of rural economy in Nigeria?

1.4       Research Objectives

The general objective of this research is to examine agricultural development in Nigeria as a prerequisite for growth of rural development in Nigeria within the period under study. To achieve these objectives, two specific objectives have been identified. These are to;

  1. examine if agricultural credit guarantee scheme fund have any impact on the growth of rural economy in Nigeria.
  2. investigate if interest rate have any impact on the growth of rural economy in       Nigeria.
  3. Verify the impact of youth unemployment on the growth of rural economy in      Nigeria.

     3.    Verify if youth unemployment have an impact on the growth of rural economy in Nigeria.          

1.5       Research Hypotheses

H0:  Agricultural credit guarantee scheme fund do not have any significant impact on growth of rural economy in Nigeria

H0:  Interest Rate does not have any significant impact on growth of rural economy in Nigeria.

H0:  Youth Unemployment does not affect the growth of rural economy in Nigeria.

1.6    Significance of the Study

Agriculture is expected to make significant contribution to the general economy and also to the net foreign exchange earnings. The findings of this study will be useful to different categories including students of agricultural economics, economics and policy makers who are interested in the contribution of agriculture to the economic growth of Nigeria. Agricultural financing has vital and significant importance in the agro-socio-economic development of the economy both in macro and micro levels. Therefore, this research would also enable the government to make decisions on how to determine the suitable financial policies to adopt to help in solving financial problems associated with the agricultural sectors such as loan procurement and effective lending to benefit the micro farmers. Agricultural financing can also reduce regional economic imbalances and in reducing wealth variation. Hence, this research will serve as an avenue for both the public and private sector or investors to invest tremendously and to contribute to agricultural growth thereby stimulating economic development and growth. This research would also contribute tremendously to the existing knowledge in the area of agricultural financing by teaching the public about agriculture, its various financing policies toward achieving sustainable economic growth in Nigeria.

 1.7      Scope and Limitation of the Study

The study will analyze agricultural development in Nigeria as a prerequisite for growth of rural development in Nigeria for the period of 27 years (1990-2017) using annual data reports from the CBN statistical bulletin and various online sources.

            The major limitation of the study is that there is a discrepancy and inconsistency of data. The data reports from the central bank of Nigeria are sometimes different from that of federal bureau of statistics. Most times there are series of omitted data which relevant to the study.



2.1       Conceptual Review

2.1.1    Rural Development via Agriculture in Nigeria

This work examine the role of agriculture sector in rural development.

            Rural development strategies in Nigeria were articulated under the various national development plans namely, the first national development plan (1962-1968); second national development plan (1970-1974); the third national development plan (1975-1980); the fourth national development plan (1985-1990). The major objective of Nigeria’s first national development plan was to maintain and, if possible, to surpass the average rate of growth of 4% per year of its gross domestic product at constant prices. To realize the aim, government planned a yearly investment of approximately 15% of Nigeria’s gross national product. Given that agriculture was the major strength of Nigeria’s economy, and which was largely identified with the rural areas, policy attention and governmental investment in it were seen as direct and indirect avenues of developing the rural areas. Using agriculture to develop the rural areas was, therefore, at the top of Nigeria’s first national development plan agenda.

            According to Saheed (2010), interest in rural development owed much to a number of events which had their origin in the colonial heritage and the unanticipated oil boom of the seventies. The author classified such driving factors to include massive rural-urban drift of able-bodied young men and women, declining productivity in agriculture, increasing food imports, growing unemployment and the widening gap in welfare terms between the urban and rural areas. Despite this policy effort at developing agriculture, and by implication the rural areas, the first national plan was more of an extended colonial policy and practice of exploitation. Abass (1993) argues that under the first national development plan period, peasant farmers were further squeezed to produce cash crops, at the expense of the subsistence crops, for export. The plan itself did not articulate any clear statement or policy on rural infrastructural development. Rather, emphasis was placed on encouraging the assemblage of agricultural produce for export purpose, without strengthening the real agricultural base of the country by providing necessary infrastructures such as good road network, electricity, agricultural processing facilities, and water, among several others.

            The second national development plan (1970-1974) came as post-civil war development initiatives. It was also during this plan period that Nigeria had the ‘phenomenon of oil resource boom’. Fundamentally, the plan was aimed at: a) building a united, strong and self-reliant nation; b) building a great and dynamic economy; c) building a just and egalitarian society; d) building a land of bright and full opportunities and; e) building a free and democratic society. The plan placed high priority on reducing the level of inequality among the social classes and between urban and rural areas.

            One important feature of the second national development plan as observed by Marcellus (2009) was its democratic content, having emerged from a participatory process that involved stakeholders at every level of governance. Although it’s primary focus was not about rural development, the plan’s intention of building a just and egalitarian society suggested holistic development whereby every segment of the Nigerian space and population were to be covered. These ideals were not realized principally owing to the phenomenon of ‘oil boom’, which ended up diluting every attention and commitment at mobilizing material and human resources for the achievement of the primal objective of building an egalitarian and self-reliant society. ‘Oil boom’ soon translated into struggle for ‘oil rents’ which led to massive corruption at every levels of governance. Huge spending and import of food characterized the state activity while agriculture that served as the mainstay of the economy was relegated to the background. Given the consistent synonymity of agriculture with rural development in Nigeria, government massive dependence on oil revenue during this period meant that all policies on rural development could no longer be on the agenda of government. Olayiwola and Adeleye (2005) argued that although it was stated in the plan that government was committed to spending N500,000 for village regrouping, such projection was perhaps to reduce the cost of providing economic and social infrastructure such as health, electricity, water and educational facilities for the rural areas.

            In the third national development plan (1975-1980), rural development was revisited based on government conviction that such investment will contribute in closing the yawning gap between the demand for food and the supply capacity of the home-based industries. Consequently, government developed interest in modernizing agriculture and introducing new initiatives to strengthen the agricultural and food base of the nation. Although the objectives of the plan looked similar to those of the second national development plan, there was a significant and radical approach as the plan emphasized the need to reduce regional disparities in order to foster national unity through the adoption of integrated rural development. Increased budgetary allocations was provided to fund diverse and interrelated rural development sectors as the provision for nationwide rural electrification scheme; the establishment of agricultural development projects (ADPs); the establishment of nine river basin development authority’s (RBDAs); the construction of small dams and boreholes for rural water supply and the clearing of feeder roads for the evacuation of agricultural produce; the supply of electricity to rural areas from large irrigation dams; commitment of resources to large scale mechanized state farming enterprises; the introduction of Operation Feed the Nation (OFN) campaign and the Green Revolution and; public efforts at land reforms through the Land Use Act of 1978. From the first to the third national development plans, there was observable progressive budgetary improvement to enhance agricultural productivity. Olorunfemi and Adesina (1998) reported increasing financial allocation for agricultural development as follows: first national development plan had a total financial allocation of N30,835,000; second national development plan was allocated a total amount of N71,447,000; while the third national development plan had the highest allocation of N2,201,373,000 for agricultural development. Investment in rural agricultural sector is one component that could catalyze substantive improvement in individual capabilities. However, such lopsided development interest was not enough for transforming rural areas without corresponding investment in rural infrastructures such as roads, electricity, health care, among several others.

            The Fourth National Development Plan (1980-1985) came with several distinguishing features. First, it was formulated by a civilian government under a new constitution based on the presidential system of government. Second, it was the first plan in which the local government tier was allowed to participate fully in its own right (FGN, 1981). The plan emphasized among other things the need for balanced development of the different sectors of the economy as well as the various geographical areas of the country. It emphasized the importance of rural infrastructural development as a vehicle for enhancing the quality of rural life. The period saw improved budgeting to the eleven River Basin Development Authorities whose functions include among other things, the construction of boreholes, dams, feeder roads and jetties. In this case the RBDAs was, to a large extent, empowered to develop the rural areas by opening up feeder roads, drilling boreholes and wells, building farm service centers and earth dams, among several others. This period saw increasing participation of all tiers and levels of governments in rural development activities especially in the areas of roads construction, health care services, and electricity provision, water supply etc. According to Filani (1993), ‘the 1981-1985 national development plan marked a turning point in rural development efforts in Nigeria because it was the first to recognize the rural sector as a priority area. It made provisions for integrated packages such as the infrastructure, institutional and administrative apparatus to facilitate rapid development of the country’s agricultural potential’. The author observed that increase of 12% specific allocation to agriculture and rural development over 5% in the 1962-1968 plan represented significant political commitment to rural development practice.

            The post-Fourth plan period (1986-1998) did not feature articulated development plan However, key programs and policies such the structural adjustment program 1 (SAP) and the vision 2010 were prominent. The structural adjustment program, for instance, witnessed the establishment of the Directorate for Food, Roads and Rural Infrastructure (DFRRI) in 1985 for the purpose of providing rural infrastructures in the country side. The laws establishing the directorate was promulgated under decree number four of 1987. The core of the Directorate’s program was to promote productive activities. Besides, the directorate recognized the provision of rural infrastructure such as feeder roads, water, electricity and housing as essential for the enhancement of the quality of life in the rural areas. The program of the directorate included:

  1. the organization and mobilization of the local people to enhance or facilitate closer interaction between the government and the people. In addition the local communities were asked to form unions or associations for the purpose of providing common facilities for themselves;
  2. the provision of rural infrastructures such as rural feeder roads, rural water and sanitation, rural housing and electrification;
  3. the promotion of productive activities such as food and agriculture, rural industrialization and technology;
  4. The promotion of other extracurricular activities such as socio-cultural and recreational programs, intra and inter community cohesion activities.

The plan for the implementation of DFRRI program was organized into two phases. In phase one, the target was to provide water for 250 communities in each of the states of the federation, to construct 90,000 km of feeder roads, and to promote rural housing, health and agriculture. To facilitate industrial growth, and improve the attractiveness of the rural environment, the directorate planned to commence its rural electrification program in the second phase starting in June 1987. In pursuit of its objectives, DFRRI also planned to co-operate with organizations like Nigerian Building and Road Research Institute (NBRRI) as well as rural water supply and sanitation program (RUWATSAN). The Directorate of Food, Roads and Rural Infrastructures (DFRRI) was not to be involved in direct implementation of the programs. Rather, for the purpose of the program implementation, the directorate used as its main agents, the states and the local governments, to execute its programs. The funds for the program of the directorate were made available directly to each state government who then saw to the disbursement of such fund to the local governments. The local governments in the federation were constituted into rural development committees. These committees comprised of the local government officials and the rural communities. The vision 2010 which came around 1997 and 1998 could not survive following the death of the then General Sani Abacha. On the whole, this period witnessed radical and more holistic intentions towards the development of rural areas. Subsequent efforts at rural development came in the light of Nigeria’s democratic dispensation (1999-to date). A four-year development plan was initially articulated (1999-2003) with the objective of pursuing a strong, virile and broad-based economy that is highly competitive, responsive to incentives, private sector-led, diversified, market-oriented and open, but based on internal momentum for its growth (Marcellus, 2009 cites Donli, 2004). Emphasis on private sector-led growth did not carry sufficient message for rural development. As the prospect of achieving the intended objective of the plan did not materialize, a re-think was therefore necessary. When the ruling party got re-elected in 2003, they came up with a new program namely, the National Economic Empowerment and Development Strategy (NEEDS: 2003-2007). NEEDS was quite comprehensive and ambitious, as it was not only duplicated at all levels of governments (State Economic Empowerment and Development Strategy-SEEDS; and Local Economic Empowerment and Development Strategy-LEEDS), it incorporated the private sector, non-governmental organization and the general public in pursuits of its developmental goals. By attempting to empower the rural populace, NEEDS had a substantive vision of eliminating rural poverty and promoting the development of the rural space.

            However, given the current state of the rural economy and the volume of programmes that has been initiated to revamp the rural economy, one will agree that the rural economy has witnessed stunted growth s a result of inefficiency and effectiveness in the application of the initiated policies of the government.

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