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07030248044CHAPTER ONE
INTRODUCTION
BACKGROUND OF THE STUDY
Overtime, Nigeria used to be heavily dependent on the agricultural sector prior to the discovery of crude oil. In the 1950’s through to the 1970’s before the discovery of crude oil, agriculture was the mainstay of the economy, employing over 70 per cent of the total working population. Although subsistence farming was predominant, it was a major revenue earner for the country. In the early 1980’s, it became more apparent that the agricultural sector could no longer perform its traditional role of meeting domestic food requirement, raw materials for industry and started to decline as a major foreign exchange earner through exports due to economic , social and political problems.
Nigeria's soils and climate allow cultivation of a wide variety of crops, including cassava (of which Nigeria is the largest world producer), millet, sorghum and maize. Agriculture is Nigeria's biggest employer of labour, accounting for over 60 per cent of the working population, working mainly in small-holdings using basic tools. Together with livestock rising, it provides a third of gross domestic product.
Growth in agricultural output averaged 3.5 per cent over 1993-1997, higher than the population growth rate, 4.0 per cent, 5.2 per cent, 2.9 per cent, 5.1 per cent from 1998-2000 respectively (CBN 2000). This compares with a period of stagnation in the first half of the 1980’s when growth averaged just 0.5 per cent, due to low producer prices, marketing restrictions and a drought. Agriculture picked up after the economic reforms introduced in 1986, which included trade liberalization, dissolution of price-fixing marketing boards and improved producer prices facilitated by devaluation of the naira. Growth in the sector averaged 3.8 per cent in 1986-92, and there was a burst of activity in the cash crop sector, with many farmers returning to previously abandoned fields. However, the renewed interest was not sustained, nor did it result in increased investment in cash crop production, mostly carried out by smallholders. Improved food crop production contributed to a sharp fall in food imports, from 19.3 per cent of total imports in 1983 to 7.1 per cent in 1991, although this crept back up to 13.1 per cent in 1996. Much of the increase in agricultural output in recent years has resulted from expansion of the area under cultivation, rather from increased productivity. The sector has been hampered by lack of investment in improved farming technology. Over-farming of fragile soil has worsened.
The share of agricultural products in total exports has plummeted from over 70 per cent in 1960 to less than 2 per cent today. The decline was largely due to the phenomenal rise of oil shipments, but also reflected the fall in the output of products like cocoa, palm oil, rubber and groundnuts, of which Nigeria was once a leading world producer. For example, production of cocoa, currently Nigeria's biggest non-oil export earner, has remained around 160,000 tonnes per year since 1995, compared with an annual average of 400,000 tonnes at its peak before the oil boom. The government has made some effort to encourage private investment in agriculture and agro-industries by providing incentives, including tax breaks, finance credit and extension services, but without much success
STATEMENT OF THE GENERAL PROBLEM
Nigeria remained a net exporter of agricultural products between 1960 and 1970. Goods exported include palm oil, palm kernel cotton, groundnut, etc; agriculture through export of non-oil products has a rosy record contribution up to 80% of the gross domestic product and providing employment for over 70% of the work population. But recently there has been a steady decline in terms of agricultural product, to export and an abandonment of sector by a large percentage of the workforce.
But the story of its decline is as pathetic as its impact on industry that relied heavily on the sector for raw material. Thus, the decline comes with surge of revenue from oil (oil export). But the discovery of crude oil alone cannot be held responsible completely for the misfortunes or decline of the agricultural sector. The policy instruments put in place by successive government were more of lip- service than concrete action.
The creation of marketing board contributes greatly to the decline of non-oil export since the board has the stole right to export the commodities. It is also pertinent to say that fixing of export product prices by marketing board discouraged further private investments in the sector. Further, the sector suffers from inadequate credit facilities; they have no security to back up their loan applications. Those who are lucky to be given loans do not make proper use of them. Even existence serious was neglected, infrastructural facilities, not provided, CBN objectives on agricultural loans floated. The package of policies used did not only discriminate against export development but also disturbed the economy in several other ways. For instance an exchange rate of an artificially high level was maintained which in turn reduced the profitability of exports, raised domestic cost alone world process and reduced level maintenance uncompetitive in the world market.
In view of these problems resulting from the inappropriate use of policies persisted over times and necessitated the need to change policy direction by recommending was of improving export subsidies. More emphasis was directed towards the promotion of export subsidies. Various monetary and fiscal policies have been restored to various governments in Nigeria to encourage the agricultural performance and the economy generally.
AIMS AND OBJECTIVES OF THE STUDY
The major aim of the study is to examine the impact of export subsidy on agricultural output in Nigeria. Other specific objectives of the study are;
RESEARCH QUESTIONS
RESEARCH HYPOTHESIS
Ho: There is no significant impact of export subsidies and agricultural output in Nigeria
H1: There is a significant impact of export subsidies and agricultural output in Nigeria.
SIGNIFICANCE OF THE STUDY
The study of the impact of export subsidies on agricultural output is significant and important, for this knowledge, it will enable the policy makers to formulate appropriate policies that will aim at improving on the quota of the total revenue brought about by the Agricultural sector of the economy. This study is also important and significant in that it will examine the various ways of improving the agricultural sector towards raising the living standard of Nigerians in the period under review (1987-2017).
SCOPE AND LIMITATION OF THE STUDY
This study is an attempt to evaluate and review agricultural products and export subsidies towards agricultural output in Nigeria. It intends to cover the period 1987 to 2017. It also intends to evaluate the contribution of Agricultural exports to Nigeria economic growth and development. This study would be based largely on secondary data the reliability of the findings of this study would largely depend on the liability of these data. Again, our discussions will be restricted to impact of export subsidy on agricultural output in Nigeria.
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