ABSTRACT
This study aims at evaluating the oil
sector vis- a vis the agricultural sector in Nigeria from 1981-2007. The role
of agriculture in the Nigerian society has been quite significant even in the
pre-colonial times. The attractiveness of the Nigerian agricultural sector to
the colonialist largely formed the basis for the development of the railway
system from the north to the coast through the eastern and western of the
country given that there was the need to evacuate agricultural produce from the
hinterland to the coasts for onward shipment to Europe as raw material to feed
British industries. The agricultural sector used to be the mainstay of the
Nigerian economy. It provided for the nation, generated revenue and foreign
exchange earnings for the government, supplied raw materials to the industrial
sector, generated employment and contributed over 50% of the Gross Domestic
Product (GDP). This occurred until the 1970’s when the oil sector came in and
took over from agriculture in such a way that there was a rapid decline in the
agricultural sector output. Nigeria became solely dependent on the oil sector
for its revenue such that policies that were formulated were usually in favor
of the oil sector. This obviously has led to the neglect of the agricultural
sector as all focuses are on the oil sector. This research work aims at
determining the relationship between the oil sector and the agricultural
sector, the impact of the oil sector and the effects of exchange rate on the
agricultural sector and to find out ways to solve the problem, and make some
recommendations that can bring about positive change.
TABLE OF CONTENTS
CHAPTER ONE –
INTRODUCTION……………………………………. 1
1.1 Background of
the study………………………………………………. 1
1.2 Statement of
the problem……………………………………………… 5
1.3 Objective of
the study…………………………………………………. 6
1.4 Research
hypothesis…………………………………………………… 6
1.5 Significance
of the study………………………………………………. 7
1.6 Scope and
limitation…………………………………………………… 7
CHAPTER TWO –
LITERATURE REVIEW……………………………. 8
2.1.1 Theoretical
literature………………………………………………… 8
2.1.2 Crude oil and
the Nigerian Gross Domestic Product……………….. 10
2.1.3 Crude oil as
a source of federally collectable revenue and source of energy…………………………………………………………………….. 13
2.1.4 Petroleum
and Balance of Payment…………………………………. 15
2.1.5 Historical
development of agriculture and agricultural sector in Nigeria 17
2.1.6 The impact
of petroleum production on Nigeria agricultural policy……………………………………………………………………… 22
2.1.7 The effects
of oil production on policy maker’s perception of the role of agriculture in
Nigeria…………………………………………………….. 23
2.1.8 The impact
of oil revenue on the scope and character of the government’s intervention in
agricultural development…............................................... …..
27
2.1.9 Past effort
at revamping agriculture in Nigeria………………………… 29
CHAPTER THREE –
RESEARCH METHODOLOGY……………………. 34
3.1 Research
design…………………………………………………………. 34
3.2 Research
methodology………………………………………………….. 34
3.3 Model
specification…………………………………………………….. 35
3.4 Method of
evaluation…………………………………………………… 37
CHAPTER FOUR -
DATA PRESENTATION AND ANALYSIS…………. 40
4.1 Data
presentation and analysis of result………………………………… 40
4.2 Economic A
priori expectation test…………………………………….. 41
4.3 Evaluation
Based On Statistical Criteria (First Order Test)………….. 42
4.3.1 T- test…………………………………………………………………. 42
4.3.2 F-
test…………………………………………………………………. 43
4.4 The
coefficient of determination R2……………………………………. 44
4.5 Economic
Criteria (Second Order Test)……………………………….. 45
4.5.1
Autocorrelation test………………………………………………….. 45
CHAPTER FIVE –
SUMMARY OF FINDINGS, RECOMMENDATION AND CONCLUSION……………………………………………………………. 47
5.1
Summary……………………………………………………………… 47
5.2
Recommendation…………………………………………………….. 49
5.3
Conclusion……………………………………………………………. 50
CHAPTER ONE
INTRODUCTION
1.1
BACKGROUND
OF THE STUDY
Agriculture,
according to Omidigi (1993), is an applied science that deals with the preparation
of land, cultivation of crops and rearing of animals.
Akinsami
(1973:p1) defined agriculture as the production of plants and animals useful to
man. It covers not only the cultivation of soil and the feeding and management
of crops and livestock, but also the preparation of plants, and animal products
for man’s use and the disposal of those products by marketing.
The
role of agriculture in transforming both the social and economic framework of
an economy cannot be overemphasized. It is a source of food and raw materials
for the industrial sector. It is also essential for expansion of employment
opportunity, for the reduction of poverty and improvement of income distribution
for speeding up industrialization and easing the pressure of balance of
payment. In essence, it has been the main source of gainful employment; from
which the nation can feed its teeming population, a regenerative, providing the
nation’s industries with local raw materials, and as s reliable source of
government revenue.
The
agricultural sector constitutes one of the most important sectors of the
Nigerian economy. Its importance stems from the abundance of agricultural
resources and the high percentage of the active population engaged in
agriculture. In addition to this, is its contribution to the country’s gross
domestic product (GDP) as well as foreign exchange earnings. (Moro (1995:29)). The contribution of
agriculture to GDP, in 1960 was 63%while the percentage share was 74% of the
total domestic exports. At this period, agriculture was the mainstay of the
Nigerian economy.
Oil
or petroleum, on the other hand, is a very versatile and flexible, non
–reproductive, depleting natural (hydrocarbon) resource that is a fundamental
input into modern economic activity, providing about 50% of the total energy
demand in the world, excluding former centrally planned economies. Oil
exporting countries of the developing world depend heavily on oil revenue for
foreign exchange earnings and for the government budget, in most cases reaching
90% and above.
In
Nigeria, the oil sector has assumed a central role in the economy in such a way
that it cannot be overemphasized. In fact, Iyoha(2005) had it that between 1981
and 1999,Nigeria received over 228billion US dollars from petroleum export. The
inflow of foreign exchange from petroleum export has overwhelming influence on
the economy. The growth in GDP since the early 70s is largely attributable to
crude oil production.
Moreover,
our development plans were focused on the expected earning from crude oil
export as a source of finance. More specifically, the Nigerian revenue budget
since oil took a primal position in revenue attraction is directly a function
of the price per barrel of crude oil and the projected total sales.
Nigeria
was a predominantly agrarian economy before the discovery of oil in commercial
quantity in 1956 and remained so up to the early part of the 1970s, thereafter
oil exerted tremendous impact on the economy.
In Nigeria’s attempt to make oil exploration a lucrative business, there
was a shift in its dependence from the agricultural sector to the oil sector,
largely based on the innumerable benefits it derived from the later (oil
sector). This attitude has brought about a major decline in the agricultural
sector and even other sectors of the economy, thereby making the Nigerian
economy a mono-economy.
Gone
are the days when ships used to sail from Nigerian parts, laden with
agricultural products such as cocoa, timber, groundnut, oil palm, rubber,
cotton, cassava etc, when the country derived most of its revenue from the
export of agricultural products, then the economy was diversified with more
focus on the agricultural sector. Then Nigeria’s budget reflected that it was
proud of its agricultural heritage. Then, agriculture used to be the backbone
of the economy, inviting foreign investors from far and near.
Nigeria’s
economy has gradually become one that is almost completely dependent on the oil
sector for its sustenance, thereby causing the neglect of the agricultural
sector that used to be the foremost of the Nigerian budget.
According
to Moro (1995), it is believed that the problem of food crisis has its roots in
the gradual transformation of the Nigerian economy accelerated with the impact
of the oil price increases during the 1970s, Nigeria who could provide her own
food, regardless of its population now has to import staple commodities such as
rice, sugar etc.
The
agricultural sector has gradually ceased to be what it used to be because of
the new rave for oil. States like Delta state Rivers Bayelsa etc are worst as
they all have tales of woe to tell, as the catastrophic effects of oil spillage
has led to inestimable losses that has led to gradual decline of agriculture in
some areas of the region.
Many
financial experts are of the view that an economy that largely depends on a
sector is definitely not a healthy one. A healthy economy is one that is
diversified and not mainstreamed. It appears as if Nigeria has put all her eggs
in one basket, standing at the risk of loosing if something should go wrong.
1.2
STATEMENT OF THE PROBLEM
This research work is
determined to finding answers to the following problems stated below:
·
The persistent decrease in agricultural production for the period
under review:
This has resulted to scarcity
of food supply with increased prices for them.
·
The problem of inadequate modern farm implements:
This has contributed to the decline in productivity, as the crude
implements can no longer increase output to meet with the increasing population
and demand for agricultural products.
·
The decline in government’s revenue from the agricultural sector:
This trend
limits various development works that should have been carried out.
·
The problem of shortage or inadequate local raw material for
industrial use:
This
in-turn negatively affects the industrial development in the country, as
industries are forced to close up, owing to the inability to import the high
cost of imported raw materials.
1.3
OBJECTIVES OF THE STUDY
This study is designed to achieve the following objectives;
1. To determine the relationship that exists between the petroleum
sector, exchange rate, and the agricultural sector in Nigeria.
2. To know the relative contribution of both the petroleum and the
agricultural sector to the economy of Nigeria.
3. To determine the causes of either a boom, or decline in any, and
the economic implications.
1.4
HYPOTHESIS
The hypotheses for this work are;
Ho: - There is no
significance relation between the petroleum and the agricultural production in
Nigeria.
Hi: - There is a
significant relation between the petroleum sector and agricultural production
in Nigeria.
1.5
SIGNIFICANCE OF THE STUDY
This research work is significant as it will be useful to policy
makers and serves as a reference material for members of the academia and the
public to sustain the economy.
1.6
SCOPE AND LIMITATION:
This research work covers only the period
between 1981 and 2007, and only x-rays the petroleum and the agricultural relativities.
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