the impact of government expenditure on agriculture and agricultural output in nigeria

SECTION ONE: INTRODUCTION Background to the study Agriculture involves the cultivation of land, raising and rearing of animals for the purpose of production of food for man feed, and raw materials for industries (Anyawu, 1972, cited in Ebomche, 2010). Essentially, it is composed of crop production, livestock, forestry and fishing. The agricultural sector has the potential to be the industrial and economic springboard from which a country’s development can take off. Nigeria, which spans an area of 924,000 kilo meter square, is in West Africa between Latitudes 4 o to 14o North of the Equator and between Longitudes 3o and 15o east of the Greenwich Meridian. To the north the country is bounded by the Niger Republic and Chad; in the west by the Benin Republic, in the East by the Cameroon Republic and to the south by the Atlantic Ocean. Nigeria is generously endowed with abundant natural resources. With its reserves of human and natural resources, Nigeria has the potential to build a prosperous economy and provide for the basic needs of the population. This enormous resource base if well managed could support a vibrant agricultural sector capable of ensuring the supply of raw materials for the industrial sector as well as providing gainful employment for the teeming population (Ukeje 2002). In the last decade, its impact may not have been so prominent because of the dominating effect of the oil sector which annually contributed not less than 96% of the nation’s total export earnings (CBN, 2005). The population involved in farming is between 60 and 70% (Nwajiuba, 2012). The sector contributed an average of 36.6% to the GDP during the years of study 1980-2014, which was highest in 1992, 43.6% and 2002, 43.9% and lowest in 1980, 20.6% The total federal expenditure that was allocated to agriculture between 1980 and 2014 was less than 4% (CBN, 2010). Public spending (e.g. Budget) is one of the most direct effective instruments used by governments to promote agricultural growth and poverty reduction. (Ukeje 2002). Public spending at the federal level and sub-national level follows a basic structure-recurrent spending and capital spending. This spending structure is characterized by different expenditure categories depending on the ministry, department or agency. The nature of support given to agriculture by various governments in the country varied over the years. Before independence, the assistance to the sector was generally aimed at developing the export crops required by the overseas industries. After independence when the national development plans were prepared, agricultural support took a much formal form, and thus presented a more serious impression of what government intended doing for the sector. However what most of the efforts later turned out to be as can be inferred from the allocations made in the various national development plans and annual budgets, leave much to be desired. When compared to other sectors like mining, manufacturing, education, and health, agriculture virtually received the least annual allocations that are often inadequate to put the sector on sustainable grounds. This accounts to a large extent for the poor performance of many institutional reforms and strengthening which were over the years undertaken in the sector (Nwajiuba, 2012). Furthermore, government over the years has embarked on various policies and programmes aimed at strengthening the sector in order to continue performing its roles, as well as measures for combating poverty. Notable among the these policies are the Operation Feed the Nation (OFN), programme was launched with objectives of increasing food production, attaining self-sufficiency in food supply and encouraging all sections of the Nigerian population to grow food, encouraging balanced nutrition and by extension of a healthy nation, the Green Revolution Programme (GR) was establish in 1980 by the civilian regime aimed at wiping away hunger through credit supply to farmers, encourage and intensify cooperative education, mobilizing the local people to actively participate in agriculture, application of research on food and fiber to enhance abundance in staple food production, processing and distribution in Nigeria. Land Use Decree which was promulgated in 1978 in other to first effect structural change in the system of land tenure; secondly, to achieve fast economic and social transformation; thirdly, to negate economic inequality caused by the appropriation of rising land values by land speculators and land holders; and lastly to make land available easily and cheaply, to both the government and private individual developers., The focus of the Decree was to reform the land tenure system, which was believed to constitute a formidable obstacle to the development of agriculture in Nigeria. Rural Banking Programme,(RBP) also establish in 1977 to 1991. Banks were encouraged to not only establish rural branches but also to extend at least 50 per cent of the deposit mobilized from the rural areas as loans and advances to rural dwellers. Defaulting banks were to be penalized. National FADAMA Development Programme aimed at increasing income of beneficiaries by at least 20%. The programme was designed in 1993 to promote simple and low cost improved irrigation technology under World Bank financing. Family Economic Advancement Programme (FEAP), 1997 to 2001. This was established to serve the credit needs of the family in their daily economic activities through input supplies, loan in form of cash, and capacity building. National Poverty Eradication Programme (NAPEP), 1999 to date. Like FEAP, NAPEP was established by the federal government. The mode of operation is tailored towards directed (subsidized) credit to farmers. Microfinance, 2005 to date. Microfinance bring financial services such as savings, deposit, payments, transfers, micro insurance and micro leasing to the active (or productive) poor and low income people, who would otherwise have no access to such services. The National Fertilizer Company of Nigeria (NAFCON) was also established in 1981 but started production in 198 which was envisioned as a competitive private input market to develop and disseminate adequate quantity and quality of fertilizer products that are timely available and accessible to the teeming farm population of 3 Nigeria, operating under a supportive public sector, and without undermining the environment, and the latest is the Agriculture Development Project (ADP). The critical mandate and objective of the ADPs is to boost agricultural production as well as contribute to rural livelihood and food security. Meanwhile, these policies have not helped much in improving significantly the agricultural sector as the costs involved are still more than the benefits realized (Iganiga and Unemhilin, 2011). Average total annual expenditure on agriculture, has been increasing over the years. Total annual expenditure on agriculture increased on the average from N0.02 billion in the 1981-1986 period through an average of N0.2 billion per annum in 1987-1992 to N1.84 billion in 1993-1998 periods. Total annual expenditure on agriculture increased significantly on the average between 1999 and 2006 to N16.97 billion and further to N37.13 billion between 2007 and 2008, but fell to N36.19 billion between 2011 and 2014 (CBN, 2014). Despite these huge sums of money allocated to the sector over the years, the state of agriculture in Nigeria still remains poor and largely underdeveloped. Agricultural sector output has fluctuated widely and productivity has also declined as shown in table 1 below. In terms of contribution to GDP, Available statistics from the CBN shows that the agricultural sector’s share of GDP increased from 28% in 1985 to 32% in 1988, dropped to 31% in 1989, rose again to 37% in 1990 but fell significantly to 24% in 1992 and increased to 37% in1994. It was 32% in 1996 and rose to 40% in 1998, dropped again to 27% in 2000, increased to 37% and fell to 31% in 2002 and 2006 respectively. The percentage contribution of the agricultural sector to GDP fell persistently from 0.37 in 2009 to 0.22 in 2012 and to 0.20 in 2014 (CBN, 2014). Nigeria Agricultural output between 1995-2014 yeas percentage% 1985 28 1988 32 1989 31 1990 37 1992 37 1996 32 1998 40 2000 27 2001 37 2002 31 2006 31 2009 0.37 2012 0.22 2014 0.20 Table1. Source: CBN annual bulletin (2014) The poor state of the sector has been blamed on oil glut and its consequences on several occasions, as this pattern was not an outcome of increased productivity in the non-agricultural sectors as expected of the industrialization process; rather it was the result of low productivity due to negligence of the agriculture sector (Christaensen and Demery, 2007; and Falola and Heaton, 2008). Ogen (2007) believes that the agricultural sector has a multiplier effect on any nation’s socio-economic and industrial fabric because of the multifunctional nature of agriculture. Ogwuma (1981), studied on public expenditure in agricultural sector using econometric analysis. Based on his report, agricultural financing in Nigeria shows positive relationship between interest rate and loanable funds on the level of agricultural output. Using time series data, Lawal (2011) attempted to verify the amount of federal government expenditure on agriculture in the thirty-year period 1979 to 2007. Significant statistical evidence obtained from the analysis showed that government spending does not follow a regular pattern and that the contribution of the agricultural sector to the GDP is in direct relationship with government funding to the sector. Adofu (2012) in their work; effects of government budgetary allocation to agricultural output in Nigeria (1995-2009) show that the percentage, degree or amount of budgetary allocation to agricultural sector has a positive relationship with the total agricultural production in the country. This implies that the more the public spending on agricultural sector, the more the improvements in the performance of the agricultural sector. Also, a large degree of change in agricultural output is accounted for by change in budgetary allocation to agricultural sector. Thus, budgetary allocation to agriculture has a large impact on agricultural output. However, none of these studies employed Granger Causality to analyze the relationship between government expenditure and agricultural output that is if government expenditure granger causes agricultural output or agricultural output granger cause government expenditure. This study is an improvement on other studies on the relationship between government expenditure on agriculture and agricultural output in Nigeria. 1.2 Statement of the Problem Prior to the discovery of oil in the late 1950s and early 1960s, agriculture was the dominant sector of Nigeria economy. It consisted over 65 per cent of the country's Gross Domestic Product (GDP) and provided the bulk of the foreign exchange earnings through the export of cash crops. But with the emergence of oil as a major source of government revenue and exchange earning, the sector was neglected and hence led to its decline in output (Ukpong and Malgwi 1993; Iwayemi 1994; Ijaiya 2000). Having realized the declining of agriculture output, government over the years has put in place certain policy measures and, programmes with a view to increasing the output. However a peep into the Federal Government capital expenditure on agriculture; as a ratio of the total Federal Government capital expenditure shows a gloomy future for sector development in the country. As from 1977 to 2002, the federal government capital expenditure on agriculture were low except in the following years; .1980,1984,1987,1988,1993.1994,19 and 2002, because those were the years that coincides with different government agricultural development policies and programmes such as the Green Revolution in 1980, Food for all Programme in 1987, the Better Life for Rural Women Programme also in 1987, the Family Support Programme in 1993 and the Economic Empowerment Development Strategy. Overtime, this expenditure has been on agriculture without expressly translating to a corresponding agricultural output. Therefore the interest of this research work is to investigate the relationship between government expenditure and agricultural output in Nigeria from 1980-2014. 1.3 Research Questions At the end of this study, the researcher will provide answers to the following questions: How much has government invested on agriculture in Nigeria from 1980 to 2014? What has been the agricultural output from 1980 to 2014? In what ways have the government policies on agriculture aid encouraged private and public participants in the sector? In what ways government expenditure on agriculture can be made effective to increase its output? 1.4 Aim and Objective of the study The aim of this study is to examine the impact of Nigeria’s Federal Government expenditure on the agriculture output. To achieve this aim the following objectives are formulated: To ascertain the amount of money spend on agricultural sector by government from 1980 to 2014. To determine agricultural output from 1980 to 2014. To examine the ways government policies on agriculture will enhance private and public participants in the sector? To help in highlighting alternative procedures that can be taken to impure methods of enhancing agricultural output effectively. 1.5 Hypothesis of the Study Ho = Public expenditure on agriculture has no significant impact on agricultural output. 1.6 Significance of the Study The significance of the study presents the value or contribution which the research will make to the existing knowledge. Obasi (1999:73) asserts that research is most important tool for advancing knowledge and enables man to relate more effectively to his environment. The significance of this study is categorized into theoretical, empirical and practical significance. 1.6.1 Theoretical Significance: Theoretically, this study has the potential of contributing greatly to the growth of existing theories in social sciences particularly in public administration by helping to enrich the bank of knowledge through its reliable findings on the assessment of the impact of public expenditure on agricultural output in Nigerian economy. This is to say that our study would assist in improving the frontiers of knowledge especially in the management of the public policies in Nigeria especially in the agricultural sector. The study will be of immense significance in ascertaining the progress so far made by the government in improving Nigerian economy through agriculture. On the other hand, the study will assist in unveiling the challenges or factors militating against effective implementation of government policies and programmes on agriculture and will make useful suggestions towards ensuring the achievement of goals of such agricultural policies and programmes. This is important because it is only through viable agricultural policies that the Government can revamp the agricultural sector and ensure its target goals and objectives in national development. This study also has the potentials of contributing immensely to the existing body of literature on this subject matter. Literatures on the assessing of the impact of public expenditure on agricultural output on Nigerian economy are richly available but few have been able to justify the current poor state of agriculture in Nigeria from policy perspectives. 1.6.2 Empirical Significance: Empirically, this study will serve as a foundation or base for future researchers who may in due course of time wish to embark on the investigation on assessing the impact of public expenditure on agricultural output of Nigerian economy. In other words, this research will serve the academia as a useful and veritable bibliographical reference which will stimulate research for other related studies in relation to agricultural policies and their impact in its output in the Nigeria economy. 1.6.3 Practical Significance: Practically, this study is considered significant because it will contribute in providing the decision makers and other key actors in the government with the road- maps that will necessitate prompt, responsive and efficient policy making in Nigerian agricultural sector. It will also suggest the panacea through which frequent failures in Nigerian agricultural policies can be effectively tackled. Once regarded as the mainstay of the economy, adequate public agricultural expenditure on the agricultural sector is significant. It is believe that the discovery of the study will benefit the government of Nigeria tremendously, in terms of agricultural policies, budgetary allocation on agricultural expenditure, the importance of agriculture output and its effects on growth of the country, also to encourage participants both the private and the public alike, provision of adequate subsidies will enable the famers achieve whatever goals and objectives. Furthermore, most areas of output have their benefit as well as challenges in Nigeria. Thus, the study will render solutions to such challenges. The literature review will serve as a useful source of secondary database for the academic world and Nigeria at large. Last, but not the least, this study has the potential to strategically improve the practical steps in implementations of the government agricultural policies through its advocacy on reforming the public bureaucracies in Nigeria especially those concerned with the implementation of government policies on agriculture. In this regard, this work is a practical pain staking “post mortem” surgical examination of the problems of Nigerian agricultural sector as well as the way forward. 1.7 Scope of the study This study is limited to the analysis of the impact of public expenditure on agricultural output in Nigeria. Therefore, the study intends to cover the period of thirty four years from 1980-2014; Basically this research focuses on the trend of public agricultural expenditure and some contributions of agriculture to the output of the Nigerian economy itself during the period under study. The scope will also comprise of some inherent problem facing the agricultural sector, its prospects and policy recommendation to attain a high level of productivity. The choice of this study period is based on the availability of data. 1.8. The Study Area. 1.8.1. Location of the Study. The Federal Republic of Nigeria is in West Africa between Latitudes 4 o to 14o North of the Equator and between Longitudes 3o and 15o East of the Greenwich Meridian. To the north the country is bounded by the Niger Republic and Chad; in the west by the Benin Republic, in the East by the Cameroon Republic and to the south by the Atlantic Ocean. Nigeria has a land area of about 923 769 kilo meter square (FOS, 1989); a north-south length of about 1 450 kilo meter square and a west-east breadth of about 800 kilo meter square. Its total land boundary is 4 047 km while the coastline is 853 km. estimate of irrigated land in 1993 was 9 570 km2 and arable land about 35 %; 15 % pasture; 10 % forest reserve; 10 % for settlements and the remaining 30 % considered uncultivable for one reason or the other (FMEN, 2001). Nigeria has diverse biophysical characteristics, ethnic nationalities, agro-ecological zones and socio-economic conditions. It has evolved over time and space in terms of administrative structures and nature of governance. It started as an amalgamated British colony in 1914, became a federation in 1963; then became independent in 1960 as a two-unit region comprising the Northern and Southern provinces. An additional Mid-Western region was created in 1963. Also in 1963, Nigeria was proclaimed a republic. The three former regions (Western, Eastern and Northern) excluding the Midwest were later divided into 12 states in 1967 along with a number of sub-administrative divisions for each state. In 1976 the states were increased to 19, in 1987 to 21 and 30 in 1987 (Figure 1). Further changes in the administrative composition of the country include the redefining of the political regions as local government areas (LGAs) and the creation of the new Abuja Federal Capital Territory (FCT) on December 12 1991. With this, Lagos ceased to be the country’s capital, a position that it held right from before independence. Thus today Abuja is the capital while Lagos is the largest city in terms of population and the main commercial centre. There are now 744 LGAs. The present 36 States structure emerged in 1996 during the time of erstwhile Babaginda, with the creation of 6 additional states namely Bayelsa, Ebonyi, Ekiti, Gombe, Nasarawa and Zamfara. Today Nigeria consists of 36 states and the Federal Capital Territory located at Abuja as shown in (figure 2) bellow:(Figure 2) Nigeria map showing the thirty six state and the FCT 1.8.2. Population Nigeria is the most populous country in Africa with a population of 140,003,542 inhabitants (2006, National population Census). The average annual growth rate according to the 2006 was 2.38 %. Nigeria’s population is divided among 478 different ethnic groups, some numbering fewer than 10 000 people. Of the different ethnic groups, ten (Hausa, Fulani, Yoruba, Ibo, Kanuri, Tiv, Edo, Nupe, Ibibio and Ijaw) account for nearly 80% of the population. Twenty-five percent of the population is in the former Western Region (12% of area), 21% in the former Eastern Region (9% of area), and 53% in the former Northern Region (79% of area). The lowest population densities are in the northern regions, especially in Borno, Adamawa, Kebbi, Kwara, Taraba, Yobe and Zamfara States. 1.8.3 Economic activities of the study area Nigeria's economy has been dominated since the late nineteen-sixties by the export of oil, a sector dominated by the Government. By the mid-nineteen-seventies, about 75% of Federal revenue came from petroleum. The share of exports accounted for by fuel, mineral and metals continued to rise and stood at 96% in 1991 (World Bank, 1993). In 2004, the share of export commodities from petroleum and petroleum products was 95 %, while cocoa, rubber and others contributed most of the remainder of exports. Nigeria’s industrial production growth rate was 2.3 % (2004 estimate) (CIA World Factbook, 2004). GDP growth rose marginally in 2004, led by oil and natural gas exports. The capital-intensive oil sector provides 20% of GDP, 95% of foreign exchange earnings, and about 65% of budgetary revenues (2004 estimate) (CIA World Factbook, 2004). Table 2 shows production indices for Agriculture from 1995 – 2004. Agriculture Production indices Indices 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Total Agricultural Production  (Export value at base year quantity (1000$) 613,602 549512 456341 398473 469088 330198 413574 397916 602804 - Total food production (Export value at base year quantity (1000$) 287436 347407 285344 302309 404829 235292 271467 293470 514817 - Per caput 84.9 89.0 92.4 96.6 100 1004.4 96.6 102.8 104.7 104.9 Food per caput 97.8 99.5 100.4 102.0 102.7 100.3 97.0 97.5 97 94.8 Roots and Tubers total (MT) '000 56667 57391 59450 62953 65429 65164 65942 68386 66629 66629 Coarse grains total (MT) '000 19549 18496 18519 18667 19027 17999 17311 18821 19432 19432 Cereals total (MT) '000 22512 21665 21853 22040 22405 21370 20114 22090 24257 24457 Vegetables total (MT) '000 2608 3506 3657 3815 3868 3945 4000 4276 4300 4300 Table 2. Source: FAOSTAT data 2005 (accessed June 26, 2005). During the early nineteen-seventies Nigeria experienced growth rates of 8% -10% per annum, while the increase in agricultural production declined to around 4% per annum towards the end of the decade. The slow growth continued into the nineteen-eighties, with output rising by only 3.4% in 1981 and by 2.7% in 1982. The effects of drought and the government's austerity program resulted in severe 9.4% fall in agricultural output in 1983. However, a succession of good harvests, higher producer prices, reductions in cereal imports and a resurgence of public and private investment in crop production resulted in a sharp recovery in production (FAO, 2001). Table 2 presents output of some major staple food crops from 1995 – 2004. Food output showed the strongest growth, rising by 7% in 1984 and by an estimated 10% in 1985, while total agricultural output increased by 3.8%. Agriculture was the only sector to show any significant expansion in 1986, with an estimated increase in overall agricultural production of 2.1%. From 1981-94 the average annual growth of GDP was 2.3% compared to 4.6% for the earlier period 1970-80. Average growth from agriculture from 1980 to 1992 was estimated to be 3.6% and this compares favorably with an average of 1.7% for Sub-Saharan Africa. For the earlier period agricultural production in Nigeria declined by -0.1% (World Bank, 1993). Agriculture (including hunting, forestry and fishing) contributed 33.5% of GDP in 1993 and an estimated 63.7% of the labour force was employed in the sector in that year Production statistics of some major staple foods (MT) Staples 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Maize ('000) 6931 5667 5254 5127 5476 4107 4620 4934 5150 5150 Millet ('000) 5563 5881 5902 5956 5960 6105 5530 6100 6100 6100 Sorghum ('000) 6997 7084 7297 7516 7520 7711 7081 7704 8100 8100 Rice ('000) 2920 3122 3268 3275 3277 3298 2752 3192 4952 4952 Wheat ('000) 44 47 66 98 101 73 51 77 73 73 Cassava ('000) 31404 31418 32050 32695 32697 32010 32586 34476 33379 33379 Yam ('000) 22818 23201 23972 24768 25873 26201 26374 26849 27000 27000 Cocoyam ('000) 1182 1195 1832 3823 3835 3886 3910 3929 3500 35000 Sweet potato ('000) 1168 1478 1493 1560 2451 2468 2473 2503 2150 2150 Potato ('000) 95 99 103 107 573 599 599 629 600 600 Plantain ('000) 1632 1687 1744 1803 1902 1969 1999 2058 2110 2110 Other crops                     Groundnut ('000) 1579 2278 2531 2534 2894 2901 2683 2699 2700 2700 Soyabeans ('000) 287 322 361 403 410 429 436 437 484 484 Melon ('000) 287 317 330 330 338 345 348 347 347 347 Tomatoes ('000) 569 569100 650 810 879 879 879 889 889 889 Chilli/peppers ('000) 612 633 745 709 715 715 715 720 720 720 Onions ('000) 500 550 567 580 596 600 600 600 615 615 Pineapples ('000) 800 800 830 857 881 881 881 889 889 889 Mangoes ('000) 631 656 689 731 729 730 730 730 730 730 Papaya ('000) 648 662 675 751 748 748 748 755 755 755 Okra ('000) 630 650 612 638 719 719 719 730 730 730 Green corn ('000) 575 575 575 575 575 575 575 576 576 576 Carrots ('000) 198 203 210 225 231 231 231 235 235 235 Coconut ('000) 149 151 152 152 158 160 161 161 161 161 Kolanut ('000) 95 85 82 82 82 82 82 85 85 85 Cashew nut ('000) 95 110 125 152 176 184 185 186 186 186 Tobacco leaves ('000) 9200 9200 9200 9200 9200 9200 9200 9200 9200 9200 Table 3. Source: FAOSTAT data 2005. Agricultural output increased by an estimated 4.1 per cent during 1993 compared to 1995 and 1996 with increases of 3.5 and 3.7 per cent, respectively. The value of agricultural production constituted 38.7 per cent of the nation's GDP. In spite of the continued satisfactory performance of the agricultural sector, it still fell short of the 5.5 per cent growth rate stipulated in the National Rolling Plan for 1997 – 1999 and to this date continued to decline because of lack of interest in farming by young people. The largely subsistence agricultural sector has failed to keep up with rapid population growth and Nigeria once a large net exporter of food, now must import food. According to 2004 estimate the value of agriculture production constituted 30.8%; industry, 43.8 % and services 25.4 %, of the nation’s GDP, respectively. The nation’s GDP real growth rate stood at 7.1% (CIA World Factbook, 2004). Traditional smallholders, who use simple techniques of production and the bush-fallow system of cultivation, account for around two-thirds of Nigeria's total agricultural production. The number of state farms is relatively small, and of decreasing importance. Subsistence food crops (mainly sorghum, maize, taro, yams, cassava, rice and millet) are grown in the central and western areas of Nigeria, and are traded largely outside the cash economy. Cash crops (mainly palm kernels, cotton, cocoa, rubber and groundnuts) are grown in the east, west, mid-west and northern states of the country. It is estimated that Nigeria has about 71.2 million hectares of available agricultural land and about half of which is currently being utilized. Increasing rainfall from the semi-arid north to the tropical rain forested south allows great crop diversity, from short season cereals, sorghum, millet and wheat in the north to cassava, yams and rice in the wetter areas. In the drier north cash crops include cotton, groundnuts and tobacco, while in the south cocoa, coffee rubber, oil palm, sugar and ginger are grown. (CIA World Factbook, 2004). A steady growth has been observed in the agricultural production of both staple and cash crops since 1990 and the aggregate index of agricultural production increased by 4.1 per cent in 1997 but declined in 1998. However, from 1999 all the major staples recorded significant increases over the proceeding years’ level. The intensification of on-farm adaptive research by some relevant agencies, the supply of high quality seeds/seedlings and better usage of improved storage facilities contributed to the observed improvement in staple food production. Estimates of production output for principal staple crops in 2003 were maize (5.2 million tons), sorghum (8.0 million tons), millet (6.1 million. tons) and rice (4.9 million. tons). Others include cassava (33.5m tons), yams (27.0 million tons), potatoes (6.0 million tons) and vegetables (9.1 million tons). (CIA World Factbook, 2004). Among the cash crops, only cocoa makes any significant contribution to exports. Nigeria was the world's fourth largest exporter of cocoa beans in 1990/91, with sales of 135 000 tons accounting for about 7.1% of world trade in this commodity. But Nigeria's share of the world cocoa market has been substantially reduced in recent years, owing to aging trees, low producer prices, black pod disease, smuggling and labour shortages. Recent emphasis has been placed on encouraging domestic cocoa-processing, to provide higher-value products for export. Table 4 presents major cash crops production outputs in Nigeria from 1995 – 2003. Nigeria was the world's leading exporter of palm oil, until overtaken by Malaysia in 1971. The production of oil palm products has increased somewhat since 2000 however the country is still heavily dependent on imports in order to satisfy domestic needs. Like other cash-crop sectors, output of palm products suffered from labour shortages, inefficient traditional harvesting methods, and lack of vital inputs and low levels of capital investment. However, a sharp reduction in imports and large-scale replanting resulted in a substantial increase in production during the mid-nineteen-eighties. Trade liberalization and the exchange rate policies adopted in the nineteen-eighties have contributed to the improvement in palm oil production. Also there have been substantial investments in oil-milling facilities to produce vegetable oil for domestic use and since 2000 oil palm products continued to increase for the reasons stated above. Major cash crops production outputs (1 000 tons) Crops 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Oil palm fruit ('000) 7800 7750 7750 7800 8000 8220 8500 8500 8600 8700 Palm kernels ('000) 543 548 545 545 562 577 579 608 610 610 Palm oil ('000) 860 776 810 845 896 899 903 908 910 910 Cocoa beans ('000) 203 323 318 370 225 338 340 340 361 366 Coffee 3090 3780 3700 3700 3750 3830 3850 3910 3320 3520 Rubber ('000) 125 130 120 120 107 107 108 112 142 142 Seed cotton ('000) 251 301 341 348 381 399 402 403 397 417 Cotton lint ('000) 95 116 130 135 145 147 148 150 140 140 Cotton seed ('000) 153 183 208 212 236 247 248 250 250 250 Sugar cane ('000) 589 615 675 675 682 695 705 747 739 776 Table 4. Source: FAOSTAT data 2005. In 1990 Nigeria overtook Liberia as the largest rubber producer in Africa. Production rose from 60, 000 tons in 1986 to 147, 000 tons in 1990. It dropped to 125,000 tons in 1995 and 107, 000 tons in 2000 but went up again in 2003 to 142,000 tons and remained at 142, 000 in 2004. Benefits from a replanting programme in the eastern States, Edo and Delta states have yet to materialize, and local demand from tyre and footwear industries continues to outstrip domestic supply. A programme to increase output of rubber and palm kernels, with financial assistance from the World Bank, is being implemented. Also various state governments are encouraging farmers to increase rubber production by providing interested farmers with subsidies (FMEN, 2001). Compared to the previous years’ production (1995 – 1997), cottonseed has continued to increase and some of the reasons for the increase were considerable public and private investment in the sector, as well as incentives for local textile companies and higher tariffs on imported cotton. The supply of animal products has been declining over the past two decades, while demand has been increasing, as a result of increases in population and urbanization. Consequently, Nigeria has remained a net importer of livestock and livestock products. Restrictions placed on imports of animal products and foodstuffs in the nineteen-eighties coupled with the introduction of the Structural Adjustment Program (SAP), which saw a massive devaluation of the Nigerian currency, initially reduced the imports of meat and dairy products. However, during the period 1995 to 1999, expenditure on the import of food and live animals (Table 5) continued to increase (FMEN, 2001). Importation of food and live animals from 1995 - 1999 (Nigerian naira (N) × 106) Item 1995 1996 1997 1998 1999 Food and live animals 88 349.9 75 954.6 100 640.3 102 165.1 103 489.9 Table 5: Source: CBN (1999). US $ 1 = 129.51 Naira in May 2005 1.8.4 Topography The geology of Nigeria is dominated by igneous structures that form most of the highlands and hills. The rocks of the basement complex, mainly of igneous origin, are encountered in over 60 % of the surface area. The landforms can simply be classified into highlands, plateaux, hills, plains and river valley systems. The landforms are more deeply dissected in the south than in the northern parts (Udo, 1970). The topography of the country shows that Nigeria is highest along the eastern border and rises to a maximum of 2,040 m above sea level at Vogel Peak, south of the Benue river. The Jos plateau, that is located close to the centre of the country rises to 1780 m at Sphere hill and 1,698 at Wadi Hill. The Plateau is also the watershed, from which streams flow to Lake Chad and the rivers Niger and Benue.  The land declines steadily northward from the plateau and this area, known as the High Plains of Hausa land, is characterized by a broad expanse of level sandy plains, interspersed by rocky dome outcrops. To the south-west, across the Niger River similar relief is represented in the Yoruba highlands, where the rocky outcrops are surrounded by forest or tall grass and form the major watershed for rivers flowing northwards to the Niger and southwards to the sea, Eleoje (2001). Elsewhere in the country, lowlands of less than 300m stretch inland from the coast for over 250 km and continue in the trough-like basins of the Niger and Benue rivers. Lowland areas also exist in the Rima and Chad basins at the extreme north-west and north-east of the country respectively. These lowlands are dissected by innumerable streams and rivers flowing in broad sandy valleys. The low-lying areas are generally below 300 m and these are found in the centre and the south (Iloeje, 2001). The Udi Plateau for instance attains a height of over 300 m, and this seems to break the monotony of the surface in the low lands. 1.8.5 Agro-ecological zones. A number of classifications of Nigerian vegetation have been published since the nineteen-fifties. The development of categories reflects changing perceptions of the significance and value of such classifications. Combined effects of temperature, humidity and rainfall, and particularly, the variations that occur in the rainfall that govern the natural vegetation zones exerts a major influence on the types of indigenous plants that grow or the exotic types that can be introduced successfully into the country. Oyenuga (1967) reported that the humid, tropical forest zone of the south that has longer rains is capable of supporting a number of plantation crops such as cocoa, oil palm, rubber, coffee, cotton and staple crops like, yam, cassava, cocoyam, sweet potatoes, melon, groundnut, rice maize and cowpeas. However, in some parts of the east and many areas near the coast, the high rainfall has led to badly leached soils and severe erosion in some places. The North with its lower rainfall and shorter rainy season consists of savanna land, and this represents 80 % of the vegetation zones of the country. The savanna land forms an excellent natural habitat for a large number of grazing livestock such as cattle, goats, sheep, horses, camels, and donkeys. The natural vegetation zones resulted from the interaction of the climate, humidity and rainfall (Oyenuga, 1967), and soils (Iloeje, 2001). These factors have been modified by human activities and man’s pattern of land use (Oyenuga, 1967; Iloeje, 2001). Based on the above, Oyenuga (1967) classified Nigeria into nine (9) agro-ecological zones viz:- (i) The mangrove forest and coastal vegetation, (ii) the freshwater swamp communities, (iii) the tropical high forest zone, (iv) the derived Guinea savanna with relict forest, (v) the Southern Guinea savanna zone, (vi) The northern Guinea savanna zone, (vii) The Jos Plateau, (viii) The Sudan savanna, and (ix) The Sahel savanna. However, Iloeje, (2001) grouped the country into (A) forests and (B) savanna zones. These two major zones were further sub-divided into three zones each such as (A) Forests that consist of (i) salt-water swamp, (ii) fresh-water swamp, (iii) high forest; and (B) Savanna zone that consist of (i) guinea savanna (ii) Sudan savanna, and (iii) Sahel savanna. 1.8.6 Soil of the study area. Soil types in Nigeria are influenced by and follow very broadly, the climatic and vegetational zones of the country. This is expected because the degree of available moisture in the soil is an important factor in soil reactions and fertility and productivity. The soils of the humid tropical forests are quite different from those of the drier forests and the savanna zone, which in turn are different from the savanna zone (Oyenuga, 1967). The major soil types in Nigeria, according to FAO soil taxonomy legends are fluvisols, regosols, gleysols, acrisols, ferrasols, alisols, lixisols, cambisols, luvisols, nitosols, arenosols and vertisols. These soil types vary in their potential for agricultural use (Table 6). Productivity potential of Nigerian soils Soil Productivity grade FAO Productivity Classes Area     km2 % of total High (1)   - - Good (2) Fluvisols, Gleysols, Regosols 50.4 5.52 Medium (3) Lixisols, Cambisols, Luvisols, Nitosols 423.6 46.45 Low (4) Acrisols, Ferrasols, Alisols, Vertisols 289.2 31.72 Low (5) Arenosols, Nitosols 148.8 16.32 Table 6: Source: originally from FAO and reported in Adegbola, S.A. (1979). An Agricultural Atlas of Nigeria, Oxford, University Press, Oxford Nigerian soils can be classified into groups made up of four (climatic) zones that are soil associations. The groups are: (i) Northern zone of sandy soils (ii) Interior zone of laterite soils; (iii) Southern belt of forest soils; and (iv) zone of alluvial soils (Oyenuga, 1967; Iloeje, 2001) and the soil types (classifications) are well distributed among the groups (Adegbola, 1979). 1.8.7 Climate Nigeria, by virtue of its location, enjoys a warm tropical climate with relatively high temperatures throughout the year and two seasons – the rainy or wet season that lasts from mid- March – November in the South and from May to October in the north; and the dry season that occupies the rest of the year (Oyenuga, 1967). However, in a country like Nigeria, where the temperatures do not fluctuates regularly, constant elements such as relative humidity and rainfall are heavily relied on to differentiate between the season and climatic zones. The climate of the country is influenced by the interaction of two air masses: The relatively warm and moist tropical marine air mass which originates over the Atlantic Ocean and is associated with Southwest winds in Nigeria, and (II) The relatively cool, dry and relatively stable tropical continental air mass that originates from the Sahara Desert and is associated with the dry, cool and dusty North-East Trades (harmattan). Rainfall varies from place to place and from season to season. In the wet season, the full effect of the tropical maritime air mass is the main reason that brings rainfall, while in the dry season the rainfall is less. The total annual rainfall decreases from the south to the north. The southern two-thirds of the country have double peak rainfall while the northern third has a single peak. (Iloeje, 2001). Seasonal distribution of rainfall in selected towns in Nigeria (North to South) Towns Lat. N April – September October – March   Amount % of rainfall Amount % of rainfall Maiduguri 11o 51’ 63.3 cm 100 0.0 cm 0 Jos 9o 52’ 135.1 cm 96 7.9 cm 4 Enugu 6o 27’ 141.2 cm 78 39.9 cm 22 Brass 4o 19’ 270.5 cm 71 108.4 cm 29 Table 7. Source: Iloeje, N.P. (2001). Temperature also varies from place to place and from season to season. It has been observed that there are considerable contrasts between the coastal areas and the interior, as well as between the high plateau and the lowlands. On the plateau, the mean annual temperature varies between 21 0C and 27 0C. In the Jos area, temperatures are between 20 0C and 250 C. On the lowlands such as the Sokoto Plains, the Chad Basin and the Niger-Benue lowlands, the mean annual temperature is 27 0C. The coastal fringes have lower means than the interior. It appears therefore that altitude and proximity to the seas determine to a large extent the distribution of temperature in Nigeria. Generally, temperatures are high throughout the year because Nigeria lies within the tropics and the mean monthly figure could go above 27 0C, while daily maximum temperatures can go between beyond 35 0C – 38 0C depending on the location (Iloeje, 2001). In general while there is hardly any dry season in the extreme southern tip of the country, the wet season hardly lasts for more than three months in the north-eastern part. Similarly annual rainfall totals range from 2,500 mm in the south to less than 400 mm in parts of the extreme north (FMEN, 2001). 1.8.8 Vegetation A number of classifications of Nigerian vegetation have been published since the nineteen-fifties. The development of categories reflects changing perceptions of the significance and value of such classifications. Combined effects of temperature, humidity and rainfall, and particularly, the variations that occur in the rainfall that govern the natural vegetation zones exerts a major influence on the types of indigenous plants that grow or the exotic types that can be introduced successfully into the country. Oyenuga (1967) reported that the humid, tropical forest zone of the south that has longer rains is capable of supporting a number of plantation crops such as cocoa, oil palm, rubber, coffee, cotton and staple crops like, yam, cassava, cocoyam, sweet potatoes, melon, groundnut, rice maize and cowpeas. However, in some parts of the east and many areas near the coast, the high rainfall has led to badly leached soils and severe erosion in some places. The North with its lower rainfall and shorter rainy season consists of savanna land, and this represents 80 % of the vegetation zones of the country. The savanna land forms an excellent natural habitat for a large number of grazing livestock such as cattle, goats, sheep, horses, camels, and donkeys. The natural vegetation zones resulted from the interaction of the climate, humidity and rainfall (Oyenuga, 1967), and soils (Iloeje, 2001). These factors have been modified by human activities and man’s pattern of land use (Oyenuga 1967; Iloeje, 2001). Based on the above, Oyenuga (1967) classified Nigeria into nine (9) agro-ecological zones viz:- (i) The mangrove forest and coastal vegetation, (ii) the freshwater swamp communities, (iii) the tropical high forest zone, (iv) the derived Guinea savanna with relict forest, (v) the Southern Guinea savanna zone, (vi) The northern Guinea savanna zone, (vii) The Jos plateau, (viii) The Sudan savanna, and (ix) The Sahel savanna. However, Iloeje, (2001) grouped the country into (A) forests and (B) savanna zones. These two major zones were further sub-divided into three zones each such as (A) Forests that consist of (i) salt-water swamp, (ii) fresh-water swamp, (iii) high forest; and (B) Savanna zone that consist of (i) guinea savanna (ii) Sudan savanna, and (iii) Sahel savanna. SECTION TWO LITERATURE REVIEW 2.0 Introduction There have been contributions from various schools of thought such as the classical, neoclassical, Keynesian etc on whether government should intervene to short-run fluctuations in economic activity. The classicalists believe that market forces bring the economy to long-run equilibrium through adjustment in the labour market. The classical and neoclassical economists deem fiscal policies as ineffective due to the well-known crowding-out effect. While the Keynesians say that government expenditure does not obstruct economic growth instead it accelerates it through full-employment, increased aggregate demand and so forth. In this section, we review the relevant literatures in order to place our argument and discussions in proper theoretical and empirical perspective to find the best theory that can be applied to the economy of Nigeria in other to boost her agricultural output, hence it is not worthy that achievement of a sustainable and inclusive growth has been the major objectives of most economist of the country hence this has generated a lot of attention among the various schools of thought ranging from the Classical to the neoclassical. 2.1 Conceptual frame work 2.2 Agriculture Conceptually, agriculture is the production of food, feed, fiber and other goods by the systematic growing and harvesting of plants and animals. It is the science of making use of the land to raise plants and animals. It is the simplification of natures food webs and the rechanneling of energy for human planting and animal consumption (Akinboyo 2008). Until the exploitation of oil reserves began in the 1980s, Nigeria’s economy was largely dependent on agriculture. Nigeria’s wide range of climate variations allows it to produce a variety of food and cash crops. The stable food crops include cassava, yams corn, coco-yams, cow-peas, beans, sweet potato, Millet, plantains, bananas, rice, sorghum, and a variety of fruits and vegetables. The leading cash crops are cocoa, citrus, cotton, groundnut, (peanuts) palm oil, palm kernel, benniseed, and rubber. They were also Nigeria’s major exports in the 1960s and early 1970s. Chief among the export destinations for Nigerian agricultural exports are Britain, the United States, Canada, France, and Germany (Emeka 2007). Prior to the attainment of independent, agriculture was identified as a potential factor, capable of catapulting Nigeria’s economic development. The colonial administration in realizing this set up marketing boards for the major cash crops. Heilleiner (1966) stressed that export production accounted for about 57 percent of Nigeria’s Gross Domestic product (GDP) in1929. The contributions of the sector to the GDP continued to increase. For example, agriculture became the leading sector of the economy in 1950s and 1960s. For these periods, agricultural output accounted for 63 and 54 percents of GDP (Aigbokhan 2001). However, with the advent of oil in the 1970s, this dropped to 33.2 percent. This marked an epoch in Nigeria’s economic history through the 1973/1974 (crude oil price shocks). It further went down to 30.2 percent for the period 1975-79. On annual average, its contribution to GDP form 1997-2006 is 4.1 percent (CBN 2006). Over the years, government has almost been the sole provider of financial and other capital resources to support agriculture. Government has attempted to increase her expenditure on agriculture through budgetary allocation and through the provision of cheap and readily available credit facilities (Nwosu 2004). Nwosu (1995) found that over the years, the government budgeting allocation has become an important determinant of agricultural output in Nigeria. FAO (2008) reported that in terms of capital allocation to agriculture in Nigeria, it was an average of 4.74 percent from 1970-1980. But, from 1980-2000, it rose to 7.00 percent and 10 percent from 2001-2007, though revealing an increase, but still falls short of Food and Agricultural organization (FAO) recommendation that 25 percent of government capital budget be assigned to the agricultural development capital budget. Nwosu (1993) in their study stressed that government allocation to agriculture is relatively low and that actual expenditure falls short of budgeting expenditure and the rate of under spending is usually higher for agriculture than for other economic sectors. Omanukwue (2005) reported that a large proportion of the funds allocated to agriculture do not go directly to farmers. DFID (2005) reported that the largest category of private investors in Nigerian agriculture consists of the multitude of small holder farmers, scattered across the country. Thus, agricultural production in Nigeria is dominated by small-scale farms characterized by small, uneconomic and often fragmented holdings, the use of simple implements (hoes and knives) and unimproved planting and storage materials. The results have been a viscous web of low productivity, low income and low capital investment. 2.3 Agriculture financing in Nigeria Agricultural finance is basically related to agricultural development. It is based on the economic belief that agricultural development is a process that involves adoption by farmers of new production practices and the acquisition of new input materials. Unfortunately, the rural capital market cannot supply the needed funds to finance such innovations. As a result, agricultural development in Nigeria as in similar developing nations is stunted. The problem of agricultural finance then becomes that of finding adequate fund for agricultural development, identifying the right farmers who could benefit from such fund, extending such fund to the right section are the Nigerian farm credit corporation and the new programmes. The Nigerian Agricultural Cooperative and Rural Development Bank (NACRDB) has been restructured and is being recapitalized for greater efficiency and to provide credits to individual farmers, cooperative societies/bodies for all classes of agricultural projects. The bank is also concentrating on the promotion of its popular “group lending scheme” whereby a much higher proportion of the active farming population is being reached by its retail outlets across its six zonal offices. The Bank Management is supporting the new policy orientation of the present administration regarding poverty alleviation by emphasizing micro credit. The bank is now strongly committed to the promotion of grass roots based, small and medium farming activities in the country. The on-going injection of N50 billion equity shares into NACRBD by the Federal Government is to empower the bank to meet the challenges of poverty alleviation and food production through timely disbursement of credits. The bank is also supporting the promotion of Animal Traction and Hand Tool Technology. It has instituted several credits and savings schemes for farmers and rural dwellers that constituted about 70% of the nation’s population. According to Akande. (2009), National budgets play a prominent role in modern economic management. They are used for allocating resources and planning as well as forecasting revenue inflow and expenditure. Increasingly, national budgets are becoming a pivot instrument of economic management.‟ The importance of National budgets is not only in its presentation to the populace but rather in the structure, patterns, inter-sectoral links as well as the allocation to sectors in accordance to national priority of the government. Basically, Agricultural allocation has a way of bringing desired effect in other sectors such as industry through inter-sectoral linkage. The underdeveloped state of many markets in developing countries like Nigeria makes government involvement in agricultural investment necessary. Spending on agriculture in Nigeria is exceedingly low. Less than 4% of total federal expenditure was allotted to agriculture during 1980 to 2011, far lower than spending in other key sectors such as education, health, and water. According to Mogues. (2008) in 2000, Nigeria’s agricultural public spending expressed as a share of total public spending was lower than that of all other African countries for which data were available, and it was also substantially lower than the regional averages for Asia and Latin America. In prior decades, Nigeria’s ranking was only somewhat better. This spending contrasts dramatically with the sector’s importance in the Nigerian economy and the policy emphasis on diversifying away from oil, and falls well below the 10% goal set by African leaders in the 2003 Maputo agreement. Nigeria also falls far behind in agricultural expenditure by international standards (FAO Percent Recommendation is 25%) even when accounting for the relationship between agricultural expenditures and national income. The expenditure on agriculture was highest in 1983 (12.6%) and lowest in 1992 (1%). Having realized the declining role of agriculture to economic development, the government over the years has put in place certain policy measures and programmes with a view of increasing the contribution of agriculture to economic development. However, a peep into the federal government capital expenditure on agriculture as a ratio of the total federal government capital expenditure, it portraits a gloomy future for the sector’s development in the country. 2.3.1 A Review of Federal Government Agricultural Expenditure and Agricultural Output Food and Agricultural organization (FAO) recommended that 25 percent of government capital budget allocation be assigned to the agricultural development capital budget. In Nigeria, this has not been achieved by the government, thereby affecting government programmes and policies for the sector. In terms of capital allocation to agriculture, it was average of 4.74 percent from 1970-1980. But, from 1980-2000, it rose to 7.00 percent and 10 percent from 2001-2007 though revealing an increase, but still falls short of FAO recommendation of 25 percent. The ratio of agricultural budget expenditure to total government expenditure from 1970- 1980 was on average of 2.66 percent (Table 8). It rose to 8.34 percent from 1981-1984; however by 2000, it nosedived to a ridiculous value of approximately 2 percent and was 2.10 percent in 2007. This fell short of the Maputo resolution that government of member states of African Union (AU) to allocate at lead 10 percent of national budgeting resources for the implementation of the comprehensive Africa Agricultural Development programme (CAADP) which Nigeria is a signatory. The result of the unstable expenditure in the agricultural sector by the government over the years was the dismal performance of the sector. The performance of agricultural output could be measured by its contribution to Gross Domestic Products (GDP), until the Nigerian civil war of 1967-70, agriculture dominated Nigerian’s economy contributing some 53 percent to GDP in 1965. By 1984 it percentage share had almost halved. Prior to independence, especially, in 1929, contribution of agriculture GDP stood at 57 percent. Oil palm products alone accounted for between 85-90 percent of the total volume exports. In the periods 1960-64 and 1965-69, agricultural output accounting for 63 and 54 percents of GDP. From Table 1, we can see this declined significantly from the 1970s from an annual average value of 58.8 percent for the period 1960-69, it dropped to 33.2 percent for the period 1970-74. It marked an epoch in Nigeria economic history through the 1973-74 (crude oil price shocks). It further went down to 30.2 percent for the period of 1975-79. On an annual average, its contributions to GDP from 1997-2008 is 41 percent. Value of agricultural output and its determinants, 1970-2008 OBS TGE GEA FIV CAG VAO CPI AAR 1980 14968.50 468.10 1437.50 30.20 340.10 42.30 260.00 1981 11413.70 809.00 1819.60 32.80 178.40 51.20 256.00 1982 11923.20 106920 1642.30 58.80 198.60 55.10 346.00 1983 9636.500 1214.50 1761.10 33.20 259.00 67.90 315.00 1984 9927.600 285.50 1349.70 35.30 208.00 94.80 372.00 1985 10041.10 1018.10 1199.00 40.30 192.10 100.00 420.00 1986 16223.70 925.40 801.90 42.70 407.40 105.40 395.00 1987 2201.700 394.30 1873.30 41.50 1588.40 105.40 294.00 1988 27749.50 650.00 1891.60 41.50 2558.20 116.10 467.00 1989 41028.30 1062.60 2108.90 40.00 2131.00 181.20 398.00 1990 60268.20 1966.60 3474.50 39.00 2429.30 272.70 442.00 1991 665864.4 672.30 3045.70 39.00 3425.00 293.20 470.00 1992 92797.40 924.50 12840.20 38.30 3054.90 330.90 352.00 1993 191228.9 2835.30 13953.40 37.80 3437.30 478.40 295.00 1994 160893.2 3719.10 13837.10 37.30 3818.80 751.90 193.00 1995 248768.1 6927.70 88349.90 34.00 15512.00 1180.70 286.00 1996 337217.6 5574.00 75392.00 39.00 17202.00 2040.40 241.00 1997 428215.2 7929.60 10078.3 39.40 19826.00 2638.10 250.00 1998 487113.4 11840.40 102165.1 40.40 16338.90 2863.30 306.00 1999 358103.2 10047.30 103489.8 41.00 18954.70 3149.23 430.00 2000 664457.7 10596.40 113630.5 41.00 17865.80 3590.50 367.00 2001 1018026. 64943.90 160209.1 40.30 17202.60 4268.00 1279.00 2002 1188735. 44803.80 144297.6 41.20 19826.10 4897.00 1282.00 2003 1225957. 16045.20 201648.3 40.30 20897.00 5493.00 1286.00 2004 1384001 49926.40 178747.4 40.90 37532.60 6347.00 1376.00 2005 17432240 76656.70 171817.1 41.100 44395.50 7454.00 1345.00 2006 1842588. 107463.9 174229.0 41.80 50498.90 7468.00 1436.00 2007 1885924. 38833.60 278561.9 40.30 50965.70 78654.0 1654.00 2008 1896578. 39457.50 324567.7 41.40 51458.80 76587.2 1687.00 Table 8. source: CBN Statistical Bulletin, 2008 Note: VOA =Value of Agric, Output (#m), GEA=Govt. Total Exp. On Agric. (#m), CPI= COMP. Cons. Price index (1985 =100), TCA = Total Comm. Bank Credit to Agric (#m). AAR= Average Annual Rainfall (vol), FIV= Food Import Value (#m), PGR = Population Growth Rate (%). 2.3.2. The National Agricultural Policy In an attempt to tackle the problems facing the Agricultural Sector in Nigeria, Government has put in place the National Agricultural Policy, which was jointly formulated by the national stakeholders and International Development Partners and approved by the Federal Government in 2002. The major components of the national Agricultural Policy, is the “National Economic Empowerment and Development Strategy (NEEDS)” document. Specifically, the National Agricultural Policy assigns supportive roles to the government, vehicle investments in the sector are left to the private sector initiative. The broad objectives of the National Agricultural Policy include; Promotion of self-sufficiency in food and raw materials for industries; recognition that agriculture is business, hence a private sector concern where the role of government is to facilitate and support private sector initiatives; promoting reliance on local resources ; diversification of the sources of foreign exchange earnings through increased agricultural exports arising from adoption of appropriate technologies in food production and distribution, which specifically responds to the needs of women, bearing in mind that they constitute over 50% of the labour force in agriculture. 2.3.3. Agricultural Credit Support Scheme (ACSS) The Federal Government and the Central Bank of Nigeria have initiated the establishment of an Agricultural Credit Support Scheme (ACSS), with the active support and participation of the Bankers’ Committee. The Scheme had a fund of N50.0 billion (Fifty Billion Naira) contributed by the following participants: i. N30 Billion (N1 Billion each) from the Universal Banks. N5 Billion additionally from the 5 big banks i.e. First Bank, Union Bank, UBA, Zenith and GTB; ii. N6 Billion from SMEEIS; iii. N% Billion from NACRDB; iv. N2.5 Billion from ACGSF; v. N0.7 Billion from debt relief (MDG); vi. N200 million each from the State Governments. (7.2 Billion). The purpose of the ACSS is to develop the agricultural sector of the Nigerian economy by providing credit facilities to famers at single digit interest rate. This is to enable farmers exploit the untapped potentials of the sector with a view to reducing the cost of agricultural production, and increase output on a sustainable basis. These efforts are expected to lead to fall in prices of agricultural produce, especially food items, thereby leading to reduction in inflation rate, generate surplus for export, diversify the revenue base and increased foreign exchange earnings for the country. The willingness of deposit money banks to dedicate part of their loan able funds to participate in indicative of their readiness to actively promote the growth and development of the real sector of the economy. As custodians of shareholders/ depositors funds, participating banks are expected to exhibit high degree of due diligence in appraising credit requests under the ACSS as is applicable in their normal course of business. Public expenditure analysis in Nigeria is complicated by the country’s federal system of government, under which responsibility for the provision of public goods and services is spread across three tiers of government. The roles and responsibilities assigned to the federal, state, and local governments regarding the provision of public goods and services in agriculture are defined principally in the 1999 constitution, the 2001 New Agricultural Policy Thrust, and 2004 National Empowerment and Economic Development Strategy. The 1999 constitution specifies, under the exclusive list, the areas in which the federal government has exclusive powers to make laws (through the National Assembly) The constitution also specifies, under the concurrent list, the areas in which the federal and state governments both can make laws (the latter through their house of assembly). In addition, the constitution identifies the activities for which local government is primarily responsible and it describes the areas in which local governments are empowered to participate alongside the state governments (Nigeria 1999). In 2001, the government of Nigeria formulated a national agricultural development policy, which was articulate in the New Agricultural Policy Thrust (NAP) document. The goals of the national agricultural development policy as stated in NAP included: (i) Improving the macroeconomic environment for private sector investment in agriculture (ii) Clarifying the roles of each tier of government in the sector (iii) Improving the institution framework for government interventions (iv) Prioritizing integrated rural development (v) Increasing public spending to agriculture (vi) Using trade policy measures to improve fiscal incentives in agriculture and (vii) Increasing the use of agricultural machinery and modern inputs (IFPRI...) 2.3.4 National Prorgammes on Agriculture. National Accelerated Food Production Programme (NAFPP), 1972. According to Eze (2010:8), this was part of the Second National Development Plan (1970-74).The plan itself has no clear statement on rural development, although N1,353 million was voted for it (FGN, 1972). It targeted self sufficiency in the production of rice, maize, sorghum, millet and wheat. It was a joint programme of Federal Government and USAID. Its objectives include accelerating and increasing food production through the adoption of improved packages of production technology, speedy up the transfer of research results to farmers, pursuing intensive and extensive cultivation of crops and linking research to production agencies through extension services. Agricultural Development Programme (ADP), 1975. It is jointly funded by the World Bank, Federal and States, in Nigeria aimed at provision of rural roads, farm service centers, agricultural extension services, credit etc towards achieving food production. Extension activities implemented by ADPs included establishing demonstration farms, identifying lead farmers, providing information to lead farmers on improved farming practices, facilitating access to improved technology and inputs and helping lead farmers teach others Eze (2010). Operation Feed the Nation (OFN), 1976. The OFN was part of the Third National Development Plan (1975-80) which was voted N2, 050.738 million (Okeke, 2001 and Eze, 2010). Like the earlier plan, there was no categorical strategy for rural development, except some N500 million for rural regrouping (Olayiwola and Adeleye, 2005). However, it had objectives to mobilize the people to embrace agriculture, eliminate the traditional disdain for agriculture by the educated, enhance food production on a large scale, create jobs and income and utilize all available land resources in the country. Green Revolution Programme- 1980. The civilian regime initiated this programme aimed at wiping away hunger through credit supply to farmers, encourage and intensify cooperative education, mobilizing the local people to actively participate in agriculture, application of research on food and fibre to enhance abundance in staple food production, processing and distribution in Nigeria. Rural Banking Programme, 1977 to 1991. Banks were encouraged to not only establish rural branches but also to extend at least 50 per cent of the deposit mobilized from the rural areas as loans and advances to rural dwellers. Defaulting banks were to be penalized. Community Banking Programme, 1991 to 2007. The programme provided for the establishment of community banks with a focus on rural banking operations. The National Board for Community Banks (NBCB) was the regulator of these banks until 2002 when this function was transferred to the CBN Eze (2010:9). It was intended to serve communities that were able to establish one based on personal recognition, character and credit worthiness of the borrower. Root and Tuber Expansion Programme-2000. It was established to commercialize root and tuber crop production and improve living conditions, income, food security and nutritional health of the poorest small holder households. National FADAMA Development Programme aimed at increasing income of beneficiaries by at least 20%. The programme was designed in 1993 to promote simple and low cost improved irrigation technology under World Bank financing Eze (2010). FADAMA is a Hausa word for low lying flood plains usually with easily accessible shallow groundwater. It is a major instrument for achieving the government’s poverty reduction objective in rural areas of Nigeria. The beneficiaries are meant to come as a group known as FADAMA Community Association to the National FADAMA Development Programme. The programme empowers the association with resources, training, and technical assistance support to properly manage and control the resources for their own development. FADAMA adopts a socially inclusive and participatory process in which all FADAMA users will collectively identify their development goals and pursue it when assisted. The programme is in its third phase currently due to its success in the states that adopted it. Family Economic Advancement Programme (FEAP), 1997 to 2001. This was established to serve the credit needs of the family in their daily economic activities through input supplies, loan in form of cash, and capacity building. National Poverty Eradication Programme (NAPEP), 1999 to date. Like FEAP, NAPEP was established by the federal government. The mode of operation is tailored towards directed (subsidized) credit to farmers. The programme consists of four schemes namely, Youth employment scheme which involves capacity acquisition, mandatory attachment, and credit delivery; Rural Infrastructures Development scheme which involves the provision of portable water, rural electrification, transportation and communication development. Social Welfare Services Scheme which is involved with qualitative education, primary health care, farmers employment and provision of social services, provision of agricultural input and credit delivery to rural farmers.; and Natural Resources Development and Conservation Scheme which contains programmes for environmental protection through conservation of land and space, development of agricultural resources, solid minerals and waters resources. Microfinance, 2005 to date. Microfinance bring financial services such as savings, deposit, payments, transfers, micro insurance and micro leasing to the active (or productive) poor and low income people, who would otherwise have no access to such services. The Microfinance Policy outlines the principles and guidelines for the practice of microfinance in Nigeria, including provision for the establishment of private sector driven microfinance banks with market-centered operations; veritable source of loan able funds for microfinance bank is the Micro Credit Fund, integration of microfinance institutions into the formal banking system. The specific objectives of the Nigerian microfinance policy are to make financial services accessible to a large segment of the potentially productive Nigerian population which otherwise would have little or no access to financial services, promote synergy and mainstreaming of the informal subsector into the national financial system, enhance service delivery by Microfinance institutions to micro, small, and medium entrepreneurs, contribute to rural transformation and promote linkage programmes between universal and development banks, specialized institutions and microfinance banks. The micro finance banks are of two types; those licensed to operate as a unit bank with capital base of # 20 million (88,890 Euros) and those licensed to operate in a state with capital base # 1 billion (444, 500 Euros) Eze (2010:10). There have been several recent presidential initiatives aimed at financing the production and export of certain commodities such as cassava, rice, cocoa and oil palm. Preferred sector allocation of credit, 1970 to 1996. Banks were mandated to extend 40 per cent of their loans and advances to agriculture which was designated a preferred sector. Banks that failed to meet this target were penalized. The funds not lent were transferred to the then Nigerian Agricultural and Cooperative Bank, NACB Eze (2010). Concessionary interest rates for agricultural loans, 1980 to 1987. Banks were further mandates to extend credit to agriculture at a regulated rate of 9 per cent annum. 2.3.5 Institutions on Agricultural Programmes Nigerian Agricultural, Cooperative and Rural Development Bank (NACRDB), 1972 to date. Formerly Nigerian and Cooperative Bank, NACB, it was jointly established by the Federal Government of Nigeria (FGN) and the Central Bank of Nigeria (at a ratio of 3:2) to dispense credit to cooperatives, agribusiness, and individual small holder farmers at a subsidized interest rate Ogen (2007) and Eze (2010) stressed that as direct investment through equity participation in projects, guarantees for agricultural ventures and rural savings services have been enhanced. Its present name came after a merged of People’s Bank in Nigeria, Family Economic Advancement Porgramme and Nigerian Agricultural and Cooperative Bank in 2002 Eze (2010). Even though it now collects deposits, it has not lived up to expectation due to poor funding. River Basin Development Authority (RBDA), 1977 to date. Nine RBDAs were established in 1977 as part of the Third National Development Plan (1975-80) to add to the existing Sokoto and Rima RBDAs. Their focus is the provision of especially rural water infrastructure but also roads; N32.8 billion was budgeted for his plan. It was the first plan to make rural development and, especially rural electrification, a priority area of government (FGN, 1975). The scheme also involved a massive development of the nation’s water resources through creation of irrigation schemes to encourage all season farming Okoli and Onah (2002). National Grains Production Company (1979) for the expansion of grain production through giving the farmers improved seeds as credit. Directorates of Foods, Roads and Rural Infrastructure (DFRRI), 1986 to 1993. This agency adopted an integrated approach to rural development. According to Ezeani (1995), the philosophy recognized that increased food production was tied to development of rural economic infrastructure. As noted from Okoli and Onah (2002) and Eze (2010) budget allocation to DFRRI was N433 million in N1986, 500 billion in 1987 and N1 billion in 1988 respectively. Nigerian Agricultural Insurance Cooperation (NAIC), 1987 to date. This provides insurance cover for all types of farming and farming related activities, including insurance for stock in transit. The premium paid on NAIC policy is heavily subsidized by the CBN to make it affordable for small holder farmers. The indemnity paid in the event of occurrence of risk insured against helps in ploughing the farmer back to business. People’s Bank of Nigeria, 1990 to date. This was an initiative that targeted self help groups with credit for micro and small business. It was merged with the FEAP and NACB to form NACRDB in 2002. National Agricultural Land Development Authority- 1991 to open up more areas for agricultural production with supporting credit. To achieve these schemes, programmes, and institutions, the government over the years made budgetary allocations to agriculture which when compared with the total budget, fall short of meeting policy intentions. For instance during the first to third (1962 to 1980) development plan periods, the federal government budgeted #3.57 billion but only #2.41 billion was actually released for the sector (Federal Department of Agriculture, National Development Plan, 1992). The record also showed that in the first plan, 11.6 percent of the budget was allocated to agriculture but only 9.8 percent was released, in the second plan 9.9 percent was budgeted but 17.7% was actually spent and in the third plan 7.2 allocation was budgeted and 7.1 of this amount was released for the period. Table 9 shows the budgetary allocation to agriculture 1990-2002. Budgetary Allocation to Agriculture (# billion) 1990-2002. Years Total budget Allocation to Agric sector. % of agriculture 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 39.76 38.66 52.03 112.10 110.20 153.49 337.21 427.21 487.11 947.69 701.05 1,018.02 1,018.15 1.96 0.67 0.92 2.83 3.71 6.92 5.71 8.66 9.04 12.15 13.60 64.94 44.80 4.95 1.74 1.78 2.53 3.37 4.51 1.69 2.07 1.86 1.28 1.94 6.38 4.40 Table 9. Source: CBN Statistical Bulletin and Annual Report (Various Issues) The picture of budgetary allocations and actual expenditures for the period covered showed that though the government put up ambitious policies their financial commitment and consideration has been inadequate. It is therefore not surprising that these policies have not achieved the food sufficiency, self reliance, reduction in poverty and rural development goal. The Nigeria Agriculture Public Expenditure Review (NAGPER), a collaborative study carried out by a research team from the International Food Policy Research Institute (IFPRI) and the World Bank (2008), showed that public spending on agriculture in Nigeria is less than 2 percent of total federal expenditure during 2001 to 2005. This spending contrasts dramatically with the sector’s importance in the Nigerian economy, which ranged from 20% to 30% of total Gross Domestic Product between 1996 to 2000 and ranged between 41 to 42.30 between 2001 t0 2007 (Tewodaj, et al 2008; CBN, 2005, 2007); and falls below the 10 per cent goals set by African leaders in the 2003 Maputo agreement. Nearly 60 percent of total capital spending goes to government purchase of fertilizer and buyer of last resort grain purchases. Public funds implementation approaches differ significantly from those described in policy documents, such very low funds are available for activities considered vital for promoting agricultural productivity gains leading to pre-poor growth, such as basic and applied agricultural research, agricultural extension and capacity building, agricultural credit, irrigation development and agribusiness development. Contribution of Agriculture to Gross Domestic Product from 2001-2007 Years Total GDP (#billions) Agricultural share Of GDP. % Share of Agriculture in total GDP 2001 2002 2003 2004 2005 2006 2007 431.78 451.71 495.07 527.58 361.83 595.82 63286 182.66 190.01 203.01 216.21 231.46 248.60 267.06 42.30 42.14 41.01 40.98 41.19 41.72 42.20 Table 10. Source: CBN (2005, 2007) GDP is at 1990 constant price. The agricultural performance is not quite in doubt based on the aggregation of the performance of the small holder farmers scattered across the nation. 2.4 Agricultural Financing Policies, Rural Development and Challenges This section gives a brief overview of the impact of the financing schemes on rural development and the reasons for failure, that is, the challenges that have been thrown up in the course of implementation of these policies. Had these policies, schemes, programmes, measures and institutions achieved their aims and objectives, Nigeria could have not only succeeded in feeling its citizens but could have been a major exporter of agricultural products with a high rate of rural development. 2.4.1 Assessing Agricultural Policies in Relation to Rural Farmers in Nigeria As earlier mentioned, some of the agricultural financing policies integrated rural infrastructure development. This stems from the realization that food production cannot be isolated from improvement in living conditions within the rural food producing areas. It is not difficult to infer that the domestic food supply situation would have been precarious if roads leading to and way from food centers were to be left unattended. Food prices would have soared uncontrollably due to damage and disrepair to vehicles conveying farm produce along these roads. This in turn, would result in inflation. According to Olayiwola and Adeleye (2005), the RBDAs constructed 11, 246 km of feeder roads, 1,319 boreholes, 29 wells and 130 dams under the integrated rural development programme in the period 1980-83. They further stated that between 1986 and 1988, the post-Fourth National Development mostly using DFRRI, of a targeted 60,000km. A recent study shows that agricultural finance impacted positively on farm income. Total average farm income generated by the government’s rural farmer’s programmes beneficiaries is larger than that generated by non-beneficiaries (CBN, 2007). This higher income may be because of the leveraging associated with borrowing which are a major form of agricultural financing and a constituent of most agricultural policies. Increased income should translate into higher demand for goods produced by other sectors of the economy. This is a boost to consumption expenditure and, ultimately, the national income. Other findings of the study are that the agricultural policies had a discernible positive impact on employment in all the states; in seven of the thirteen states studied, the technical impact on beneficiaries in terms of enterprise expansion and land use are greater than for non-beneficiaries; positive impact on institutions service delivery, etc. 2.4.2 Challenges of Agricultural Policies in Nigeria Nigerian efforts in agricultural development over the past three decades have failed to improve the country’s economy. A review of the sector depicts a gloomy picture. Performance is reflected in environmental degradation, mounting food deficits, and decline in both gross domestic product and export earnings, while retail food prices and import bills have been increasing Osemebo (1992). The effects have further impoverished the small holder’s farmers, looking them into a poverty web (Olawumi, 2009). These challenges have been the reason for failure of previous policies, and they continue to threaten existing ones. Lack of adequate skills to deliver services effectively. Most of the credit institutions undertook lending to agriculture without the use of trained agricultural credit officers vested with knowledge of agriculture and the constraints to farmer performance. Additionally, supervision of credit programmes has often been below acceptable standards. Invariably, the schemes fail due to poor repayment performance. Lack management capacity of farmer-clients. Most farmers who should benefit from the financing policies, especially the financing schemes, lack the basic skills of farm management, including record keeping. And when these are called up as requirement for accessing facilities, as is always the case, they become ineligible. Unwillingness of conventional banks to support agriculture. Even with mandatory (preferred sector) lending, guarantee of exposure and subsidized fund schemes, most banks prefer not to land for farming, citing its lower productivity and higher risk relative to the non- agricultural sector as their reason. Paucity of loanable funds. Most of the loanable funds have come from government sources and is not sufficient for any meaningful agricultural investment. The government cannot go it all alone. This creates a finance supply deficit relative to demand. Statistics show that bank credit to agriculture as a proportion of total bank credit to the economy has hardly exceeded 17 per cent since recorded history in 1970, yet the sector contributes over 35 per cent of the gross domestic product annually (CBN, 2007). Weak institutional support in the sector. Infrastructure for processing and storage, land tenure systems, legal system for registration and perfection of collateral, judicial system for the enforcement of loan contracts and foreclosure of collateral, etc, are weak. This does not encourage private sector commitment to the agricultural financing policies. Poor funding of public financing institutions. The NACRDB, for instance, has a capita base of 50 billion to be contributed to by the FGN and the CBN in 60: 40 ratios. However, as of date, about N23 billion has been paid up. DFRRI and other non bank institutions were or have been similarly starved of funds. These institutions cannot deliver effectively in the face this death in funding. Some of the policies have been criticized for being excessively skewed against the small farmer, given the eligibility requirements and documentation e.g. Agriculture Credit Support Scheme, etc. Those schemes that are within the reach of these farmers often have cumbersome procedures which soon prove insurmountable. Save for the RRF, most policies does not favour long gestation farm enterprises. This leaves much to be desired as the implication is that the major agricultural exports which are long gestation crops such as oil palm cocoa may not be rehabilitated soon. Undue political interference in lending operations. Any time Government initiates a credit policy; most beneficiaries are those close to corridors of power. The result is diversion of the fund and default in repayment. Government belief that the appropriate interest rates for agricultural loans be kept low to promote agricultural development and to assist small farmers ends up in the hands of big farmers who now invest this fund in their business leaving their own funds free for investment outside farming thereby negating the intention of government to increase agricultural output and encourage adoption of new technologies as well as develop the rural areas. Credit flowing into unproductive areas leads to policy dislocation or distortion. Example, River Basin Development Authority building an irrigation facility in an irregular flowing river which is not likely to produce the necessary water for irrigation. Or the same scheme engaging in food production with unnecessary high over head costs. The most challenging is the issue of inconsistency and lack of continuity as well as insider abuse in the implementation of policies. Feasibility Studies not conducted before Policy Formulation. Sometimes policy formulation in agricultural sector in Nigeria fails to conduct adequate feasibility studies through its field agencies such as ministries, parastatals, commissions and other bodies alike. Therefore, a major problem in policy making is the concentration of efforts on the design and formulation of public policy Ikelegbe (1996). The problem in policy activity often tends to be seen as policy formulation. The task of policy activity ends in policy making. The task of implementation design in terms of consideration of the practicality, suitability and feasibility, or how implementation the policy is, in the real life situation are either neglected or given little considerations by the policy makers. The contextual variables of culture, capability and political configuration sometimes get ignored in the search for optimal or best policy choices. However, the issues of whether a policy would be received, accepted, supported, resisted, opposed or sabotaged is important for policy success. Thus a major consideration in policy and implementation design is the search for the alternative that would work, thrive and be sustained in the real life situation. Such a consideration involves the search for variables that constrain or facilitate the policy, in terms of the technical, legal, administrative, economic and particularly political dimensions. A policy that would be practicable is that could overwhelm its constraints, socio-political costs and obstacles and accumulates resources, assets, benefits and positive dispositions. Two issues are important in the consideration of feasibility. First is the configuration of support and the second is that of constrains. The configuration of support and acceptance, particularly the level of public support, its stability and sustenance in respect of a policy is vital to policy feasibility. Such support may guarantee the co-operation of the citizenry, rather than apathy, resistance, opposition, sabotage and other attempts to frustrate the programme. The critical importance of support and acceptance of a policy, by the important groups, individuals and the public success was succinctly put by Yehezkel Droro. According to him, a reasonable probability of political acceptance within a defined time period should constitute a threshold which must be passed by every implementation oriented policy alternative before it becomes a subject of serious consideration. Political support from legislative bodies, political executives, the clientele and the general public is particularly vital to policy and implementation success. How much interest, commitment and support political leaders lend to a policy determine the level of resources, efforts, energy, time and seriousness that the policy would attract. Where such support is sustained, it could enhance implementation and performance by a steady flow of resources. The focus of political leaders on a programme could hasten implementation, motivate and enhance commitment of programme staff, strengthen implementation propriety and compliance and enhance operation, service delivery and outcomes. The problem of most public policies is that many do not attract and sustain intense interest, commitment and support of political leaders. Certain characteristics of public policies tend to affect the level of support. Policies of short term benefits tend to orchestrate more support. Policies requiring behavioral changes and reorientations tend to be less accepted. Opposition is garnered, when certain group or individual interests are threatened, neglected or ignored. Those whose portion of policy allocations are cost rather than benefits tend to be less supportive and may in fact be resistant. The question of the level and type of socio-economic impediments a policy change may orchestrate is also important. Policy administrators may not take into their implementation analysis the effect of policy changes on varying interest and the importance and leverage of those whose interest are affected. There may be negative impacts on groups and persons whose influence and probable action could be vital to implementation success. The level of resistance and opposition, particularly when importantly located, could thwart implementation or mar the image, motivation and outcomes of implementation. Thus policy making and implementation do not address many times, the issue of feasibility. Policy and implementation conception and design do not sufficiently address the issue of socio-political resources, constraints and limitations. As a result, there may be the absence of the critical mass of support and positive attitude or the quantum of political resources that could enhance implementation. Policy implementation may therefore meet with resistance and opposition. Furthermore, the socio-political costs of implementing or containing the implementation may be too high, that the programme may be abandoned. Thus the constraints and obstacles, politically and socially situated in the governmental structure and environment, hitherto not considered and accommodated, may ultimately destroy the policy effort and decimate its results. Inadequate Preparations before Implementation. The need for planning and preparation before programme commencement cannot be over-emphasized. Adequate preparations provide a basis for effective commencement. Preparations could be in three ways. There could be the design of the outlines and frameworks of implementation, in terms of the choice of project units, goods, services, mode of delivery and the instruments for implementation. Two, the administrative and other structural arrangements could be set up. Three, preparations could be in the form of funds mobilization and procurement of critical inputs. Most time, the executive arms of the government do not properly things done before embarking on policy formulation and implementation. Ake (1986) and Nnoli (1987) have attributed part of policy problems in the underdeveloped countries as inadequate preparations. The state of preparedness for programme implementation should determine implementation commencement of the executive. But sometimes, implementation commences without adequate provision and preparation. Political leaders especially those in the executive arm tend to rely on prediction, rather than wait for adequate preparation before commencing policy implementation, depend on political opportunities, political support, political climate and public mood. Such implementation are often characterized by several problems such as sluggish implementation, slowed and poor output, poor results, implementation gaps and gaps between societal expectations and actual outcomes. Implementing Organizations as a Factor in the Deviation: The ministry, department or agency which is entrusted with implementing agricultural policies may possess several characteristics that might dissipate implementation favour, and clog, delay, distort and mar implementation Okpanachi (2004). The agency or ministry may not possess the abilities, experience and expertise to implement the policy. It may not possess the vigor, enthusiasm and dynamism to execute to policy effectively. It possesses established procedures, routines, traditions and disposition that may not enhance implementation. Many departments and ministries and their staff acquire behaviours, momentum and inertia that is slow and inefficient. The staff may not regard the policy with positive disposition and sympathy. They may resist the changes introduced by the policy and thus may not approach implementation with enthusiasm. The implementing ministry’s staff may also possess low morale, motivation and productivity. This may result from poor organizational set up. The agency may be overloaded and excessively burdened by implementation responsibilities and programmes that it finds additional responsibilities difficult to manage. The agency may also possess interests and motivations that are different and in fact contradicting to the policy’s implementation. A policy’s location in a department possessing the above characteristics may spell implementation failure. Sometimes downward and upward communication, in the form of information exchanges, directives, orders and circulars in the implementing organization and progarmmes are not received and comprehended, at both higher levels and lower levels of the agency’s hierarchy. Thus, directives and orders from the top do not get received on time, may not contain clear direction, may not be understood, may become clogged in the mass of downward communication and may not have been properly channeled. As a result, there may not be action or compliance or sometimes there may be delays and confused reaction because subordinates do not make clear meanings out of the instructions. The situation of delays and confusion may persist where top hierarchy do not monitor to ensure correct interpretations and compliance or do not get feedback on the past directives. Poor top down communication may therefore generate implementation problems particularly in respect of delays, confused actions and non-compliance. Poor upward communication also leads to implementation failures. In the first peace, bottom up communication is vital to top management, for it enables information on the state of activities and problems. Poor communication incapacitates top management in guiding activities and taking corrective actions. Furthermore, it provides top management information on subordinate behaviour and compliance with rules, directives and regulation in carrying out implementation duties. Information gaps again prevent top managements form taking corrective action to ensure propriety in implementation activity. Sometimes the nature of a programme conception and implementation generate a need to set up new structures or agencies for their implementation outside existing government departments or ministries. The enthusiasm, inspiration, momentum, capacities and quick substantive results which are required in the policy’s implementation may not be obtainable in the existing government agencies. Thus, special units or departments may be established within existing governmental structures, or entire new structures may be set up. While this jurisdictional restructuring may possess advantages, in terms of the momentum of implementation and may denote governmental seriousness, it further generates problems in implementation. First, it tends to enlarge unnecessarily the governmental apparatus. The dictum in many countries implementing new programmes is establishing new structures. But such makes the governmental machinery more unwieldy and complicates co-ordination and control. Replications and overlapping are increased. Furthermore, the new agencies becomes too attractive because of governmental attention and favoours in fund allocation and career progression that the best staff of existing structures get pooled up. Such programme staff become the object of envy, with its attendant problems for the civil service morale. More importantly, such new structures may later become bogged by inertia, red tape, routines and poor momentum, just as other agencies the structures may also become redundant and irrelevant when there is a shift of governmental priorities to other policy areas. Programme Leadership and Management. Programme leaders in the executive arm could be quite facultative of implementation. They steer, direct and motivate programme efforts. An able, committed and enthusiastic leadership could build and strengthen the commitment, devotion, loyalty, support and enthusiasm of staff in programme implementation. Such leadership could effectively mobilize staff for programme success. However, good leaderships are always rare. Many programme leaders are selfish, incompetent and corrupt. Appointments of programme directors and managers are often motivated by political patronage and other subjective considerations, rather than proven ability, experience, competence and expertise. As a result, many programme leaders do not possess the technical expertise, managerial ability and moral integrity to motivate and mobilize staff effectively for programme success. Frequent leadership turnover further depreciates the leadership influence on programme success. Frequent leadership changes affect the programme development and stability and negatively affect the morale, commitment and loyalty of staff. The issue of poor management is major particularly in the developing countries. In these countries, executive capacity to manage programmes is usually poor. Management problems reflect in poor capabilities in managing programme resources, controlling implementation activity and in evaluating problems. Poor management also reflects in the poor organizational structuring for 66 implementation, in respect of administrative set up and arrangements. The poor project supervision, poor compliance to programme directives, the poor determination of and slow response to implementation problems, poor staff utilization arising from inappropriate positions, poor allocation of responsibilities and none strengthening of staff competence are also reflections of poor management of programmes. Programmes are also characterized by inappropriate implementation decisions in relation to equipment, utilization of inputs, allocation of resources, selection of contractors and contractual agreements. There is, generally, poor capacity to implement programmes in many developing countries, particularly the large scale and highly technical programme. The management problems may be traceable to poor quality management, staffing, inadequacy of specialized skills and expertise in certain areas. Resources Control: A major problem in these programmes is inadequacy of resource to effectively effect programmes. Oftentimes, programmes resource commitments or promises do not come near what it takes to execute at the level of operation, delivery of goods and services and targets, anticipated or directed. Many programmes do not have the means and resources for effective execution because resource commitments are not increased, strengthened or reinforced. Because of other priorities, the government may be unwilling to spend adequately to attain success. Sometimes programme responsibilities are increased or public expectations generated, without commensurate increase in allocated programme resources. There are often gaps between resources on the one hand and responsibilities and directed accomplishment levels and expectations on the other hand. Thus resources may be insufficient to obtain implementation success. The implications of inadequate resources are numerous and often negative. There may be frustration on the part of programme staff, delays in implementation, reduced operations, problems of procurement of critical inputs, problem of nonpayment of contractors, consultant and other clients and higher costs of purchases of postponed inputs, arising from inflation. Some programmes too, lack adequate staff either in terms of overall numbers or in terms of specific areas of professional, technical or managerial competence and expertise. Such programmes tend to be ineffective because the staff are either overworked, cannot possibly attend to some responsibilities and do not have existing expertise to properly manage some roles. The inadequacy or lack of staff therefore inhibits performance. The problem of inadequate technical, managerial and professional skills, or poor executive capacity, is a major plague in the development efforts of developing countries. Such low capacities underlie the failure of many development plans and policy programmes. Overlapping Jurisdiction and Level of Inter-Agency and Inter-Governmental Involvement. Some policy programmes involve more than one agency and government. Programme may be located in one agency and undertaken by one government, but they may require co-operation, the performance of certain functions and provision of assistance from other agencies or governments. Thus programmes may be dependent on other agencies, governments and even the private sector for critical inputs and activities. Such a situation requires considerable inter-agency and inter-government communication, co-ordination and co-operation. Several problems may arise, which may jeopardize such programme implementation. The level of communication, information exchange and co-operation between the agencies and governments may be poor. Differences in values, beliefs and commitment among the agencies and governments may also affect the programme. Differences of interests and partisan configuration may make the relationships asymmetrical and consequently conflictual. Some programmes are overlapping in terms of agency jurisdiction. Thus, they are implemented by more than one agency. Sometimes, there may not be clear demarcations of responsibilities. The modalities for co-operation and exchanges may not also exist. There may not also be a unit or body, which integrates, streamline and co-ordinates efforts and activities. In these situations, the relationship between the agencies with overlapping jurisdiction may not be streamlined and thus may be characterized with competition, rivalry, hostility and conflicts. Rather than mutually re-defining and differentiating roles and sharing them, based on technical capacities available to each, the agencies may waste resources in the duplication of programme projects and activities. The overlapping also creates an air caution and inaction in implementation. Duality of Policy Making Sometimes a policy is similar in some ways to others, such as in the problem addressed, objectives and clientele served Obi (2008). The duality may be reinforced by their location in different implementing agencies, thereby creating a situation where different agencies apply policies with some similarities and address the same problems. Such duality, without strong co-ordination and co-operation dissipates government energies and resources, because of inherent duplications of projects and activities. Duality may negatively affect implementation in several ways. It may generate competition and rivalry among staff of the programmes. This is because each programme would strive for more visibility and attention. The programmes would also compete for government resources. The programmes may seek to undermine the other or outpace the other’s capacity, competence and support. The motivations and interests of the programmes implementing agencies may not be the furtherance of programme objectives. There may be conflicts over jurisdictional areas, projects and activities. The contestation and competition between the programmes implementing agencies may be unhealthy for stable and successful implementation. Corruption on the Side of the Implementing Agencies Actors in the implementation process posses varying motivations and interest. The motivations determine their focus, and underlie their activities. The interests may be self centered. Thus individuals and groups who support a policy may do so because of anticipated favoured allocations of services and contracts. The implementing officials may be motivated by self aggrandizement. The implementing organization may not have other interests than increased funds allocation and accompanying incentives or benefits. The political leadership motivation may be opportunities for political patronage and funds accumulation for the next elections. Thus the activities, actions and behaviouir of policy and implementation officials, tend to be directed at satisfying interest that may not be central to programme objectives. As a result, deviant practices could emerge in the process of implementation. There could be various corrupt practices, perversions, diversion of goods and services and personal aggrandizement. For example, the procurement of programme inputs could be ridden with such problems as dubious invoices, exaggerated contracts and deals with contractors and consultants. These corrupt practices raise implementation costs, distort and pervert implementation, misdirect implementation goods and services and depreciate efficient allocation and utilization of scare resources. They also create problems of indiscipline, non compliance, disloyalty, poor morale and inefficiency. Contractual Problems Many programmes depend on private contracts for critical inputs for activity and operations, such as supplies and procurement, construction, production of goods and services, research, training of personnel, and sometimes even operation. The performance of these programmes, therefore largely depend on the performance of contractors. However, sometimes the programme contractors may not be the most facilitative of programme objectives and targets. Political patronage, rather than capability, expertise, experience and proven efficiency, tend to be the criteria sometimes for awarding contracts, poor performance and abandonment. Many programmes implementation are bogged and problem ridden because of contractors’ indiscipline, corruption and non performance. 2.5. Development Challenges in Nigerian Agriculture Identification of the development constraints in the agricultural sector is a necessary step to unlock the factors inhibiting performance of the sector toward designing policy strategies that would create conducive climate for promoting accelerated commercialization and growth of the sector. In this connection, the following factors are very important 2.5.1. Marketing constraints According to Oyejide (1998). Marketing involves getting the agricultural products from the farmers to the consumers. It helps to enlarge production by stimulating consumption, expanding the agro-industry and facilitating industrial growth. For the marketing to play an essential role in increasing agricultural production, the following five basic elements are necessary. i. Transportation for moving the products from where they are produced to where they are consumed. An efficient network of road is imperative. The majority of Nigerian rural roads are in very deplorable conditions. ii. Safe and efficient storage system to ensure continuous supply of agricultural commodities in the market. This is very inadequate and ineffective. iii. Financing for the marketing to ensure prompt payment to the farmers as they deliver goods for sale. iv. Processing system that stimulates production by furnishing a continuous outlet for the farmers to produce over a long period of time. v. The marketing system also requires a functioning and dynamic information system in which both the buyers and sellers are linked together. Regrettably, the state of development of market information in the country is still primitive. Improved storage techniques that have been developed by relevant research institute have remained unadopted and sometimes unknown to farmers. Heavy post harvest losses occur due to inadequate storage facilities, especially in tines of bumper harvests. 2.5.2. Storage and Processing constraints The lack of adequate storage and processing facilities accounts for divergence between national food security and household food security. Even if the total production of food seems adequate at the aggregate level, it will not lead to significant improvement in food security unless the food is available for consumption at the right time and in the right form Ekpo, and Egwaikhide (1994). Whereas food must be consumed on a daily basis, production has a different specific time profile. Storage and processing are critical in ensuring that the commodities produced at a particular period are available for consumption whenever and wherever they are required. A significant quantity of products harvested in Nigeria perishes due to lack of storage and processing facilities. Simple, efficient, and cost effective technologies for perishables, such as roots, tubers, fruits and vegetables, are not as highly developed in the country compared to the storage technologies for cereal grains and legumes. Consequently, post-harvest food storage losses are very high, approximately 40 per cent for perishables, compared to cereal grains and pulses at about 15 percent Akande, (2006). Traditional storage facilities have certain deficiencies, including a low elevated base giving easy access to rodents, wooden floors that termites could attack, weak supporting structures that are not moisture-proof, and inadequate loading and unloading facilities. Across geo-ecological zones, most farmers store only a portion of their crops for consumption. They sell part of their crop early to get cash to pay for their immediate financial obligations, including, in some instances, repaying the production loan to the middlemen. 2.5.3. Infrastructural Inadequacies According to (Chemonics, 2003), Infrastructure in this instance is construed to include physical infrastructure, such as roads and railway system, educational and health facilities, social services such as potable water and electricity and communication system. Agricultural performance in Nigeria is greatly impaired by the low level of development of infrastructure. In the rural areas where majority of the smallholders operate, inadequate infrastructure constitutes a major constraint to agricultural investment, production and trade. In many parts of the country physical and marketing infrastructure is poorly developed, storage facilities are rudimentary and access to information and markets is highly restricted. The situation represents the urban bias in the pattern of development in the country. Infrastructure inadequacy is mirrored by restricted access to the markets, which limit the availability of agricultural products in many areas, and reduces farmers’ income. The Infrastructure constraint has persisted due to government neglect, poor governance, poor political leadership, poor maintenance culture and poor funding. In terms of road facilities, the efforts of the Agricultural Development Programmes, the Directorate of Foods, Roads and Rural Infrastructure, the National Agricultural Land Development Authority and the Petroleum Trust Fund have not been sustained to ensure good road networks in the rural areas where the bulk of agricultural activities take place (Chemonics, 2003). In addition, the railway system that is expected to provide relief has been comatose for years thereby restricting the movement of agricultural inputs and outputs to the road transport system. The constructed roads do not often last for more than three to five years before they start to crumble due partly to poor maintenance culture. As regards educational and health facilities, these are largely urban-biased. Supply of potable water has not been adequate for a majority of rural dwellers. Electricity supply is often epileptic and communication system is still poor. Although recent expansion of the Global System of Mobile Communication (GSM) infrastructure and Internet services has improved the communication situation somewhat, the services are urban-biased and too expensive for the average people. 2.5.4. Unstable Input and Output Prices Generally, a major problem inhibiting investment in agriculture is the escalating cost of major farm inputs. Average prices of major farm inputs such as hoe, matched, sprayer, tractor, and agrochemicals have been rising over the years. The rising prices of inputs are the results of instability in the factor markets arising from instability in macroeconomic policy actions leading to inflationary pressures, high interest rates, and volatile exchange rate. Invariably, the deficiency in macroeconomic policy environment constituted a major constraint to the growth of investment in production of agricultural products. This has a tendency to cause high factor cost to the farmers cultivating agricultural crops (Chemonics, 2003). Moreover, the rising prices of fuel have led to rising cost of transportation of farm inputs thus aggravating the rising cost of production. The rising costs of farm inputs combined with dearth of investible funds pose a serious constraint to investment in agriculture. This could lead to reduction in production and domestic supplies of agricultural products. The high interest charges on loans for agricultural production have resulted in escalation of production costs. Most of agrochemicals are imported; the situation not only made procurement difficult but again resulted in cost escalation arising from the depreciated naira exchange rate. The prices of many commodities also increased although due to wide fluctuations it has not resulted in persistent rise in profitability of farm enterprises. The cassava experience provides an illustration of the possible effect of price fluctuations on output of commodities. When the Presidential initiatives commenced in 2002, farmers were encouraged to expand the production of cassava. Initially, the farmers received remunerative prices. As further campaigns continued and support for the production of the commodity increased, output was further increased. However, today there seems to be a glut in the cassava market due to marketing bottlenecks. Prices are now falling and farmers are likely to reduce the area under cassava production. Urban consumers will support falling prices of food staples, but net producers are unlikely to derive adequate income to guarantee profitability of production of the commodities. (Chemonics, 2003). 2.5.5. Agricultural Labour Availability Lack of labour affects the use of farmland in the traditional farming system. Since agriculture in Nigeria is virtually un mechanised, human labour becomes vital in all production systems, accounting for about 90 per cent of all farm operations. Under semi-mechanized systems, including animal traction use, human labour use is as high as 70 per cent of all operations (NISER, 2001). Although farming is largely labour-intensive, farmers, generally often experience seasonal labour shortages. The supply of labour is affected by unending migration of able-bodied youths from the rural to urban areas creating labour shortages especially at peak periods when labour is required for land preparation, weeding and harvesting. Hired labour shortages have driven up the cost of labour making such labour unprofitable to the average smallholder. Exacerbating the migration problem has been the poor agricultural productivity of smallholder farmers and the perception among young adults in farm families that the farm cannot support them and their livelihood (Chemonics, 2003). 2.5.6. Technical Constraint Technical constraint in Nigeria affects both the upstream and the downstream segments of agriculture. The constraint manifests in poor technology, poor quality of raw materials and inadequate supply of modern inputs, Oyejide, (1998). The main causes of the constraint include low support from government, poor government policy, poverty, low level of awareness, lack of adequate research and increases in the prices of inputs. Poor government support and poor government policy prevent the emergence of innovations from research institutes, thereby curtailing the level of available technically feasible and efficient agricultural practices. Even when they are available, there seem to be communication gaps between farmers (end-users of research efforts) and the researchers. The existence of unified agricultural extension system notwithstanding, there is still poor coordination between researchers, extension agents and farmers. This situation is worsened by the low extension-farmer ratio, which hovers around 1 to 1000. The poverty incidence among farmers, which is the highest in the economy, also contributes to the persistence of technical constraint in Nigeria. Thus, farmers are unable to take up new innovations aimed at boosting their productivity and, by extension, their output. The low level of productivity translates to a vicious cycle of poverty, thereby leading to low level of production. The technical constraint is further sustained by high input prices, which is a consequence of inflation in the economy as well as the dependence of the agricultural economy on foreign inputs. (Chemonics, 2003). 2.5.7 Inadequacies in Past Policies and Programmes Earlier attempts at improving agricultural production in Nigeria such as the operation feed the nation, the green revolution programme and other laudable interventions in the agricultural sector emphasized increased production without commensurate efforts at post harvest management and industrial utilization. Most of them handled the various aspects of the post harvest system such as processing, packaging, marketing, storage, distribution and transportation in isolation from one another. There was no effort to make the system comprehensive and holistic in its management. Also, industrial utilization of agricultural commodities is constrained by inadequate linkage of agriculture to industrial sector. Each programme followed haphazard implementation that creates more problems without achieving anticipated goals. Although, most of the programmes yielded seasonal increases in agricultural output, inefficient and ineffective post-harvest management and generally low level of industrial utilizations have always resulted in substantial agricultural wastages, food losses, reduction in available food, restriction in its spread over the year, and also reduction in employment and rural income Oyejide, (1998). The difficulty confronting the local industrial utilization of agricultural commodities is how to initiate and sustain the momentum for diversification of raw agricultural commodities into agro-industry for transformation into high value added products in order to realize and optimize high growth potential that undoubtedly exists in agricultural commodities. This remained worrisome by the dilapidating state of rural infrastructures that hampered effective linkage of agriculture to the industry. This undoubtedly makes investment unattractive to the private sector and thus limiting agricultural development in the country. (Chemonics, 2003). Excessive dependence on a narrow range of products as sources of income and foreign exchange earnings bring about a number of unfavorable consequences on the economy. Firstly, it exposes farmers unduly to the vagaries of climate, pests and diseases and to price fluctuations. Secondly it leads to fluctuations in farm income and government revenue. Thirdly, it contributes to environmental degradation. Fourthly, it may result in failure to take advantage of complementarities (e.g. between livestock and crops) and has negative effects on diet, food security and welfare of Nigerians. In addition, an adverse international term of trade facing the primary agricultural commodity sector is a further constraint to growth of the sector. There is a clear need to diversify production and export base, both horizontally and vertically, from low value added to high value added products. High growth potentials and opportunities available in diversifying agricultural commodities to agro-industry for generation of high value added products had been limited and thus underexploited in Nigeria due to irregular supply of raw materials from the agricultural sector to the agro-industrial firms. Available evidence depicts that there had been poor linkage of agricultural sector to the industrial sector. This had aggravated the low domestic utilization of agricultural commodities by the agro-allied firms, which is being reflected by a general decline in the average capacity utilization rates by the firms. For instance, average capacity utilization rates had declined from 54.3per cent in 1980 to 19.0 percent in 2005 in cocoa confectionary industry. In the vegetable and grain milling industry, average capacity utilization rate had declined from 84.5per cent in 1980 to 45.8per cent in 2003. Thereafter, it rose to 90per cent in 2005 and declined again to 76.97per cent in 2010. The general decline in average capacity utilization rates in the agro-industry could partially be attributed to inadequate and irregular supply of raw materials and a combination of other factors like aging plants, deficient equipments and poor performance of utilities (Oni, 2005). The inadequacy and irregularity of supply of raw materials to agro-industry can be more formidable because majority of the domestic supply of the commodities are being exported from Nigeria to foreign trading partners in their raw forms. 2.5.8. Prospects of Attracting Investments Investors Investors are always willing to put their money in attractive enterprises. In Nigeria, the new policy on agriculture has indeed identified seven areas of investment. These are agricultural production (crops, livestock, fisheries, and agroforestry), provision of enterprise specific infrastructure, agricultural produce storage, processing and marketing, agricultural input supply and distribution, support for agricultural research, provision of agricultural implements hiring service and collaboration with state and local government as well as farmers in implementation of the research-extension-farmer-input/marketing-linkage system (REFILS) in the states. Osuntogun, (1997). Manyong (2003) also identified thirteen investment options including input production and supply enterprises, staple food crops production enterprise, industrial crops production enterprises, livestock production enterprises, fisheries, forestry, commodity processing and storage enterprises. Others are agricultural commodity marketing, agro-industry/manufacturing, agricultural commodity export and agricultural support services. Perceptions of different stakeholders revealed that foreign investors would be attracted to activities/enterprises that are capital intensive and that add value to primary products (Manyong 2003). In this connection, downstream activities are relatively more attractive to foreign investors. On the other hand, primary upstream enterprises and agro-services are relatively more attractive to local investors. Across the six geopolitical zones in the country and enterprises, three main reasons stand out for the attractiveness of the enterprises to foreign investors. These are high level of demand, availability of raw materials/inputs and high rate of returns. All of these indicate economic viability of the different enterprises. There are, however, specific reasons for the attractiveness of the enterprises across the zones. For instance, lack of competing local investors is identified in the northeast as one of the reasons for the attractiveness of commodity processing to foreign investors Olomola, (1998). Similarly, poor infrastructure and high perish ability of agricultural commodities are considered to be incentives for foreign investment in agricultural commodity storage. The three main incentives for domestic investment are high demand, high rate of return and availability of raw materials. However, huge capital requirement is a disincentive for domestic investors’ involvement in input production/supply enterprises and agricultural commodity processing enterprises. Similarly, land fragmentation is a major disincentive for domestic investors’ participation in forestry enterprises in both the southeast and the south-south. 2.5.9. Crop Production It is pertinent to note that the massive importation of particularly rice and the seasonal scarcity of maize sorghum and millet are indications that the production of cereals is inadequate. It has also become necessary to increase the production of other crops as underscored by the presidential initiatives on the production and export of cassava, vegetable oil, tree crops and cotton. (Oni, 2005). Crop production still provides ample opportunities for private sector initiatives. 2.5.10. Livestock Production Private sector initiatives in poultry production and the breeding and rearing of small and large ruminants are common although most establishments may be described as small-scale farms. Poultry production can easily be described as the leading private sector driven agricultural enterprise Olomola, (1998). The enterprises were sustained on cheap poultry feed predicated on cheap maize imports from the United States of America. The ban imposed on the importation of maize in the 1980's and the attendant escalation of feed prices dealt death blows to most "backyard" poultry enterprises. At a point, only those producers who formulated their own feed were able to stay in business. Poultry production has since revived but the demand for poultry products has remained far above supply necessitating the importation of frozen chicken and beef. The current ban imposed on the importation of frozen chicken and beef should therefore, create even greater investment opportunities for the private sector in the poultry industry. The poultry industry nevertheless depends almost entirely on the importation of exotic breeds of parent stock of birds - a situation that can hardly be sustained by the farmers and by the economy. The need for the private sector to support research to develop truly Nigerian breeds that are comparable in attributes to the foreign imported stock creates important opportunity to invest. Another aspect of the livestock industry that appears to have been ignored is dairy production, Osuntogun, (1997). It is evident that herdsmen for lack of market pour large quantities of milk away each day. Yet, the market for dairy products appears vast in Nigeria. Milk collection and processing is thus an area yearning for private sector attention. The establishment of feedlots especially close to the major urban centers where incomes have risen and the demand for high quality beef should provide opportunities for viable private sector initiatives. 2.5.11. Fish Production: The demand for fish far outstrips the supply and thus fish is relatively scarce and expensive. Investment in culture and capture fisheries by the organized private sector is the only hope for rapid expansion of fish production to meet increasing demand, Oyejide (1998). The need for private sector participation becomes quite pressing in view of the fact that culture and capture fisheries are both capital intensive. Identified investment opportunities for the private sector include the following: Large-scale aquaculture and industrial fisheries development, including the acquisition of industrial fishing trawlers; Development of fishing infrastructure such as fish hatcheries, construction of fishing terminals and fish landing jetties in major fishing settlements; Local production of fishing inputs such as nets, fishing crafts, boats, hooks and lines, floats and sinkers; Fishing processing, marketing and distribution facilities; and Development of fish feed mills. 2.5.12. Input Supply The production, distribution and supply of agricultural inputs provide opportunities for viable private sector initiatives. Opportunities are increasing for agro-industries that service and sustain farm operations through the production, distribution and supply of various categories of production inputs such as: Fertilizers and other agro-chemicals (pesticides, insecticides, herbicides, and fungicides). About 95 per cent of the agrochemicals used in Nigeria is imported since the withdrawal of multi-national companies from Nigeria during the Abacha regime (Nwosu, 2004). The demand for agrochemicals is rising and provides viable opportunities for the local manufacture of agro-chemicals. Improved seeds and seedlings: The time is ripe for the emergence of seed companies to provide improved seeds for the emerging large-scale, commercial growers. The market for improved seeds has remained largely untapped. Day old chicks: The demand for day-old-chicks has remained largely unsatisfied especially in the eastern parts of the country. Poultry farmers in the East go as far as Lagos and Ibadan to procure day old-chicks. Fish fingerlings Seed lings: oil palm, cocoa, horticultural crops. 2.5.13. Production of Farm Machinery and Equipment A vast proportion of the agricultural machinery used in Nigeria is still imported. According to Nwosu (2004), there are only two tractor-assembly plants in Nigeria - Steyer in Bauchi and Fiat in Kano. The two companies have a combined annual output of less than 2000 tractors. There are nevertheless, some private establishments, which fabricate some agricultural equipment. A major problem faced by such establishments is inadequate funding. Private sector investment in the development and commercialization of appropriate agricultural machinery and equipment for processing and storage and other farm operations is desired. In this connection, the private sector should also invest in the commercialization of prototypes of improved mechanical and other technologies developed in various research institutes, which are wasting away on the shelves of researchers. The pioneering role of Holt Engineering in the manufacture and distribution of farm tools such as disc harrows, riggers and plows is acknowledged, (Oyejide 1998). The production and marketing of farm machinery, tools and equipment is capital intensive and provides gainful opportunities for private sector initiatives. 2.5.15. Processing of Farm Produce for Domestic and Export Markets Processing facilities are inadequate for the export commodities such as cocoa, rubber, palm kernels, cotton, groundnuts, tobacco and timber. There is also very few processing facilities for the highly perishable fruits and vegetables. The Chi Group in Lagos, which manufactures fruit juices, seems to have successfully integrated own farming, and contract out-grower system with processing. The subsisting ban on the importation of fruit juices should enhance the investment opportunities for the private sector. Besides, there is a large and increasing demand for processed farm products in the Nigerian market and the ECOWAS sub-region Oyejide, (1998). 2.6 Output Output in economics is the "quantity of goods or services produced in a given time period, by a firm, industry, or country," whether consumed or used for further production. The concept of national output is essential in the field of macroeconomics. It is national output that makes a country rich, not large amounts of money Output in economics is the "quantity of goods or services produced in a given time period, by a firm, industry, or country," whether consumed or used for further production. The concept of national output is essential in the field of macroeconomics. Agricultural productivity is measured as the ratio of agricultural outputs to agricultural inputs. While individual products are usually measured by weight, their varying densities make measuring overall agricultural output difficult. 2.7. Public Expenditure on Agriculture Public expenditure on agriculture includes spending by local/municipal, regional and national governments on agriculture from annual budgetary allocation. It is the expenditure on crop development, seed production and distribution, fertilizer procurement, agricultural mechanization, extension services, control of pests and diseases, soil conservation, irrigation, research (Loto, 2012). Nearly all the sectors in the national economies of developing countries demand more budgetary allocations every year. For instance, the agricultural sector under the Maputo Declaration of 2003 requires African Governments to increase expenditure on agricultural sector to at least 10 percent of the national budgetary resources (New Partnership for Africa’s Development (NEPAD 2011). 2.8 Empirical Review Ewubare and Eyitope (2015) examined the effects of government spending on the agricultural sector in Nigeria. The ordinary least square of multiple regressions, the Johansson co-integration techniques, and the error correction model were used for the analysis. The results showed that the coefficient of determination is 0.9468 and the coefficient of the ECM appeared with negative sign and statistically significant. The lag two and three forms of the explanatory variable, GEA were positive and statistically significant. Based on the above findings, the study recommends for an increase funding of the agricultural sector in Nigeria. FAO (2008) reported that in terms of capital allocation to agriculture in Nigeria, it was an average of 4.74 percent from 1970-1980. But, from 1980-2000, it rose to 7.00 percent and 10 percent from 2001-2001, though revealing an increase, but still falls short of Food and Agricultural Organization (FAO) recommendation that 25 percent of government capital budget be assigned to the agricultural development capital budget. Francis (2013) examined the impact of Federal Government’s expenditure on agricultural sector. He used a Simple regression with the view of analyzing the data which indicated the impact of agricultural expenditure on its output from 1991 to 2010. The R2 was 1% indicating a weak relationship between the variables as a result of inadequate funding. He recommended that government should reinforce its budgetary allocations to the agricultural sector, ensure proper release of funds, monitor agricultural inputs distribution to farmers and create commodity markets. The study carried out by Yusuf, Adesope and Okoruwa (2013) on the effectiveness of government annual budgetary allocation to agriculture and the role of monetary policy instruments in the growth of agricultural GDP in Nigeria using the OLS technique shows that Agricultural Credit Guarantee Scheme Fund, previous year GDP and Consumer Price Index contributed positively to the growth of agricultural GDP, other variables of interest like the interest rate, exchange rate, and government expenditure on agriculture contributed negatively to agricultural GDP growth. The study therefore recommended that government should increase her spending to agricultural sector, monitor the fund allocated, and provide the necessary infrastructural facilities like good road network, electricity health and water for the rural populace. Analyzing the relationship between Nigeria government expenditure on the agricultural sector and its contribution to economic growth, Okezie, Nwosu and Njoku (2013) employed the Engle-Granger two step modelling (EGM) procedure to co-integration based on unrestricted Error Correction Model and Pair wise Granger Causality tests. They found that agricultural contribution to GDP (Gross Domestic Product) and total government expenditure on agriculture are co-integrated. The speed of adjustment to equilibrium was 88% within a year when the variables wander away from their equilibrium values. Based on the result of granger causality, the paper concludes that a very weak causality exists between the two variables used in this study and that any reduction in government expenditure on agriculture would have a negative repercussion on economic growth in Nigeria. Using time series data, Lawal (2011) attempted to verify the amount of federal government expenditure on Agriculture in the thirty-year period 1979 – 2007. Significant statistical evidence obtained from the analysis showed that government spending does not follow a regular pattern and that the contribution of the agricultural sector to the GDP is in direct relationship with government funding to the sector. Oboh (2008) used error correction model to investigate Farmers’ allocative behavior in credit utilization in Benue State. The study reveals that the usefulness of any agricultural credit programme does not only depend on its availability, accessibility and affordability, but also on its proper and efficient allocation and utilization for intended uses by beneficiaries. Iganiga and Unemhilin. (2011) examined the impact of federal government agricultural expenditure on agricultural output in Nigeria. The study covers the period 1970 to 2008 employing the ECM technique. Their findings show that the federal government capital expenditure was positively related to agricultural output. However, with one year lag period, it showed that the impact of government expenditure on agriculture is not instantaneous. Though the study observed that the investment in agricultural sector is imperative and that it should be complemented with monitored credit facilities, and food importation should be banned to encourage local producers. Adekanye (2005) used panel data threshold to examine the role of banks on the growth of Nigerian economy. The study observed that in making credit available, banks are rendering a great social service, because through their actions, production is increased, capital investment are expanded and a higher standard of living is realized. Gregorious and Ghosh (2007) made use of the heterogeneous panel data to study the impact of government expenditure on economic growth. Their results suggest that countries with large government expenditure tend to experience higher economic growth. This study is unique from other study in the area of the choice of explanatory variables. Udoh (2011) examined the relationship between public expenditure, private investment and agricultural output growth in Nigeria over the period 1970-2008. The bounds test and Autoregressive distributed lag (ARDL) modeling approach was used to analyze both short-run and long-run impacts of public expenditure, private investment (both domestic investment and foreign direct investment) on agricultural output growth in Nigeria. Results of the error correction model showed that public expenditure has a positive influence on the growth of agricultural output. However, foreign investment has insignificant impact in the short run. Hence, it is recommended that policymakers should combine both private and public investment in a complementary manner to ensure that both short-run and long-run productivity of the agricultural sector is not undermined. FAO (2008) reported that in terms of capital allocation to agriculture in Nigeria, it was an average of 4.74 percent from 1970-1980. But, from 1980-2000, it rose to 7.00 percent and 10 per cent from 2001-2007, though revealing an increase, but still falls short of Food and Agricultural organization (FAO) recommendation that 25 percent of government capital budget be assigned to the agricultural development capital budget. Okene (2001) in his work on the impact of government budgetary expenditure on agricultural output in Nigeria adopted a single equation regression model to verify the relationship between agricultural output and policy instrument in Nigeria and he concluded that government expenditure on agricultural output is statistically significant. Thought funds allocated to the agricultural sector in the budget do not commensurate with the trend of expenditure in the economy. Oboh and Ekpebu (2010) used ordinary least square to examine the determinants of formal agricultural credit allocation to the farm sector in Nigeria. The study found out that there is the need to critically assess factors affecting the rate of credit allocation by beneficiaries of NACRDB. Akintola (2004) used autocorrelation to carry out a study on the role of banking industry in financing agriculture. He identified banks’ traditional roles to include financing of agriculture sectors of the economy. Credit of banks to the Nigerian economy has been increasing over the years. Unlike other study, this study intends to employ a combination of explanatory variables to check the impact of both core and checked variables on the dependent variable. 2.9. Theoretical Framework There have been contributions from various schools of thought such as the classical, neoclassical, Keynesian etc on whether government should intervene to short-run fluctuations in economic activity. The classicalists believe that market forces bring the economy to long-run equilibrium through adjustment in the labour market. The classical and neoclassical economists deem fiscal policies as ineffective due to the well-known crowding-out effect. While the Keynesians say that government expenditure does not obstruct economic growth instead it accelerates it through full-employment, increased aggregate demand and so forth. 2.9.1 Musgrave Theory of Public Expenditure Growth (1997) Musgrave (1997) argued that what matters most for government spending is how effective it is. If the so called “productive” category of government spending is not effective, it can have a negative impact on growth. This theory was propounded by Musgrave as he found changes in the income elasticity of demand for public services in three ranges of per capita income. He posits that at low levels of per capita income, demand for public services tends to be very low, this is so because according to him such income is devoted to satisfying primary needs and that when per capita income starts to rise above these levels of low income, the demand for services supplied by the public sector such as health, education, transport and agriculture starts to rise, thereby forcing government to increase expenditure on them. He observes that at the high levels of per capita income, typical of developed economics, the rate of public sector growth tends to fall as the more basic wants are being satisfied 2.9.2 The Wagner’s Law/ Theory of Increasing State Activities (1885-1917) Wagner’s law (1885-1917) postulates that: (i) the extension of the functions of the states leads to an increase in public expenditure on administration and regulation of the economy; (ii) the development of modern industrial society would give rise to increasing political pressure for social progress and call for increased allowance for social consideration in the conduct of industry (iii) the rise in public expenditure will be more than proportional increase in the national income and will thus result in a relative expansion of the public sector. 2.9.3 The Neoclassical Growth Theory The neoclassical that based their research on Solow (1956) growth model were of the view that government expenditure is detrimental to economic growth in the long-run. It is as such because of the argument they brought forward. To them, government expenditure engenders the crowding out effect and in times of budget deficit, taxes are raised which increases production costs and leads to increased price and low demand or the government results to borrowing. Also, government spending discourages private investments. Robert Solow and T.W. Swan introduced the Solow’s model in 1956. Their model is also known as Solow-Swan model or simply Solow model. In Solows model, other things being equal, saving/investment and population growth rates are important determinants of economic growth. Higher saving/investment rates lead to accumulation of more. capital per worker and hence more output per worker. In the absence of technological change & innovation, an increase in capital per worker would not be matched by a proportional increase in output per worker because of diminishing returns. Hence capital deepening would lower the rate of return on capital. 2.9.4 The Endogenous Growth Theory The basic improvement of endogenous growth theory over the previous models is that it explicitly tries to model technology (that is, looks into the determinants of technology) rather than assuming it to be exogenous. Mostly, economic growth comes from technological progress, which is essentially the ability of an economic organization to utilize its productive resources more effectively over time. Much of this ability comes from the process of learning to operate newly created production facilities in a more productive way or more generally from learning to cope with rapid changes in the structure of production which industrial progress must imply 2.9.5 The Keynesian Theory The Keynesian theory is adopted as the framework of this study. Keynes regards public expenditures as an exogenous factor which can be utilized as a policy instruments to enhance output. According to the Keynesian school of thought, increase in government spending leads to a multiple increase in total output of an economy (Jhingan, 2010). This according to Keynes is the multiplier effect of government expenditure. Y = C + I + G (X-M) ----------------------------2.1 Where; Y = Output, C = Consumption, I = Investment, G = Government Expenditure, X-M = Net Export (export minus Import). The change in output will be equal to the multiplier times the change in government expenditure. ΔY = 1 (ΔG) --------------------------------------2.2 1-b Where = 1 = K 1-b ΔY = KΔG Therefore, change in output all over change in government expenditure is equal to the multiplier. ΔY = K--------------------------------------------2.3 ΔG Hence, expansionary fiscal policy can be used to influence macroeconomic performance and hence increase output growth. This theory suggests that government spending can contribute positively to sectorial growth (like the agricultural sector) in an economy. In this theory we assume that the agricultural sector output comprising of the output of the four subsectors of the sector (crops, fisheries, forestry, and livestock) is a function of consumption of agricultural output, investment in agriculture, government expenditure on agriculture and net export of agricultural output. YA = CA + IA + GA + (XA – MA) --------------------------------------------2.4 Where; CA = Consumption of Agricultural Output, IA = Investment in Agriculture, GA = Government Expenditure on Agriculture and XA – MA = Net Export of Agricultural Output. Thus, an increase in government expenditure on agriculture is likely to lead to a multiple increase in agricultural output. The relevance of this theory to the Nigerian economy is that it describes how the government of the country can help bring about growth in the agricultural sector through its expenditure on the sector. 2.10. Empirical Studies on Macroeconomic Policies and Agricultural Output Several authors like Jose (2008); Lachaal (2000); Yaqub (2002); Sunday (2004); Enoma (2010) have reported the influence of macroeconomic variables fluctuations on agricultural productivity. Jose [2008] investigating food security and agricultural spending in Bolivia adopted a supply-side approach that analyzes the role of agricultural spending on vulnerability to food insecurity. Econometric analysis indicates that levels of public agricultural spending are positively associated with high or very high vulnerability, especially investments in infrastructure, research and extension. The authors interpret this to indicate that agricultural spending allocation is driven by high or very high vulnerability levels, but has small effects on reducing high vulnerability. Zepda (2003), examining agricultural investment and productivity in the context of developing countries using econometrics models to measure the changes in output and relative contribution of various outputs. His study reveals that there is a strong relationship between investment in technology and human capital compared to that of physical capital and growth that was found to be weak. Other factors that were found to have positive relationship with growth in agricultural output were good policy environment and political stability. Using econometric approach to estimate total factor productivity for the United States dairy industry between (1972-1992), Lachaal (2000) examines how protectionist policies in the form of direct subsidies to agriculture reduced productivity growth in the United States dairy industry. He found that government subsidies encouraged using materials at the expense of feed and raised the cost of production by 1.8% for each 10% increase in subsidy. In a related study on the impact of trade restrictions on agricultural productivity, Fan (2012) found that import restrictions result into inefficient use of limited resources. They further opine that oil export in Nigeria has led to increased inflow of foreign currency. This does not only have depreciating effects on the value of Naira but also reduced the competitiveness of the country’s domestic produced agricultural goods in comparison with low-priced imported goods, leading to a reduction in agricultural output and exposing the teeming population to food insecurity. In Nigeria, a study by Yaqub (2002) on the sectoral analysis of the impact of exchange rate on output in Nigeria, using seemingly unrelated regression estimation technique found that exchange rate had a significant contractionary effect on Agricultural output, hence existing structures do not support an expansionary depreciation argument. In a related study by Adetoun (2002), using the descriptive statistical analysis, his result reveals that change in monetary policy instruments cause changes in agricultural output with a long-run equilibrium relationship between the monetary policy variables and growth in output. The study further recommended that enlightening the farmers on how monetary policy changes affect agricultural output is the first step in making farmers and agro-businesses become active players in the policy making process. Looking at the impact of agricultural finance on output in Nigeria, using a cross sectional data, Egbuwalo (2008) observes that agricultural finance remained a thing of interest in the effort to raise agricultural output. The above is in line with Enoma (2010) who examines the impact of agricultural credit on the growth of GDP in Nigeria. In his study, measures aimed at increasing agricultural production were discussed and the relationship between agricultural development and economic growth were highlighted. The author concludes that agricultural credit, interest rate and exchange rates were all important in affecting aggregate output in Nigeria. In the same measure, Sunday (2014) investigating the short-run and long-run elasticity of agricultural productivity with respect to some key macro-economic variables, using the techniques of co-integration and error correction models. Their result revealed that in the short and long-run periods, the coefficients of real total exports, external reserves, inflation rate and external debt have significant negative relationship with agricultural productivity in the country, whereas industry’s capacity utilization rate and nominal exchange rate have positive association with agricultural productivity in both periods. It is important to point out that some authors have been able to establish a direct relationship between macroeconomic policy and Agricultural output. Ojede (2008) employs a two-stage procedure to investigate the impact of macroeconomic policy reforms on the agricultural productivity growth of 33 African countries from 1981 to 2001. Their results indicate a strong positive correlation between the extent of SAP intensity and agricultural productivity, suggesting that the macroeconomic policy reforms improved agricultural productivity growth in the sample countries. Omojimite (1988) on an investigation of the impact of macroeconomic variables on agricultural growth using fully modified ordinary least squares approach. The results indicate that the volume of credit to the agricultural sector, deficit financing income and institutional reform were positively and significantly accounted for innovations in agricultural output for the period studied thus confirming a direct relationship between growth in output and macroeconomic variables. The above result is supported by an earlier study on the impacts of macro-economic and government expenditure policies on Nigeria's agriculture sector by Obasi (2002). Applying the ordinary least squares multiple regression analysis technique to an agricultural output function, aggregate agricultural output was found to be directly related to the public expenditures elasticity, labour, capital and weather index. A handful of other researchers have also attempted to investigate the relationship between agricultural growth and. macroeconomics policies through the test of causality albeit with mixed results. Looking at the causality between exports and Agricultural output in Pakistan using ARDL. Memon (2004) found bi-directional Granger-causality relationship between total exports and agricultural GDP while Salih (2007), present empirical evidence showing a significant long run relationship between agricultural output growth and economic growth (income) that assumes bidirectional causation. In the case of Nigeria Memon (2004) investigate the relationship between value of agricultural GDP as the ratio of total GDP and some key macroeconomic variables. Estimating the chain of causality using F-statistic for both short and long run period the test result reveal that there exists a unidirectional relationship running from macroeconomic variables to agricultural productivity. He concludes, total variation in agricultural productivity is induced by changes in macroeconomic variables. From the above, one can conclude that the role of agriculture as a source of achieving sustainable food supply, eradication of poverty and improved welfare in the country is largely hinged on the stability of some key macroeconomic fundamentals. 2.11 Review of Nigeria’s Agricultural Macroeconomic Policies In an attempt to tackle the problems facing the Agricultural Sector in Nigeria, Government has put in place the National Agricultural Policy, which was jointly formulated by the national stakeholders and International Development Partners and approved by the Federal Government in 2002. The major components of the national Agricultural Policy, the “National Economic Empowerment and Development Strategy (NEEDS)” document. Specifically, the National Agricultural Policy assigns supportive roles to the government, vehicle investments in the sector are left to the private sector initiative. The broad objectives of the National Agricultural Policy include; Promotion of self-sufficiency in food and raw materials for industries; recognition that agriculture is business, hence a private sector concern where the role of government is to facilitate and support private sector initiatives; promoting reliance on local resources; diversification of the sources of foreign exchange earnings through increased agricultural exports arising from adoption of appropriate technologies in food production and distribution, which specifically responds to the needs of women, bearing in mind that they constitute over 50% of the labour force in agriculture. The food crisis in the 70’s forced the Nigerian government to play a more dynamic role in agricultural production by adopting different strategies and policies in order to ensure food security. A review of these policies reveals weaknesses and policy misalignment, which can be grouped into financial policy, pricing and marketing policy and institutional reform. 2.11.1 Financial Policy This aims at ensuring stability of the financial system as well as guaranteed the sources of credit to the farmers through manipulation of interest rate and exchange rate. To achieve this objective, credit finance to the sector were given at a concessionary interest rate between 1970 and 1985. In order to safeguard the biasness in the allocation of credit to the agricultural sector, financial institutions were compelled to support agricultural sector through credit quotas Obasi (2002). With the inception of the Structural Adjustment Programme (SAP) in 1986, there was financial market reform, which led to the total deregulation of the economy. Thus in 1990, interest rates were deregulated and indirect monetary policy control was put in place hence agricultural sector had to compete for funding with the other sectors of the economy and this marked the cancellation of sectoral credit allocation policy. The consequences of this were increased food import bills and hike in prices, hence declining welfare of citizens. For example, the food import figure of 6.36% in 1991 increased to 27.02% and further to 30.56% in 1999 and 2011 respectively. Due to the above negative impact of SAP and to safe-guard the sector from competition as well as enhance flow of credit, the share capital of the Agricultural Credit Guaranteed Scheme (ACGS) fund established in 1977 was increased from ₦199 million to ₦3.0 billion in 2001. It is worth mentioning that to complement the funding capacity through ACGS fund, other financial development institutions were formed with the objectives of making more credit available to the real sector. Hence in 2000, Nigerian Agricultural and Commerce Bank (NACB), Peoples Bank and Family Economic Advancement Programme (FEAP) were merged and recapitalized to form the new Nigerian Agricultural Commerce and Rural Development Bank (NACRDB), thus between 2000 – 2007 about ₦234.3billion were granted to the Agricultural sector as credit. As part of the comprehensive reform in the financial system and in line with its developmental role, the Central Bank of Nigeria (CBN) launched the National Micro Finance Policy in 2006. The main objectives of the policy includes: to make credit facilities accessible to a large segment of the potentially productive Nigerian population which otherwise would have little or no access to financial services e.g. rural farmers; to promote synergy and mainstreaming of the informal sub-sector into the national financial system. Also Agricultural Credit Support Scheme (ACSS) was established through the initiative of the Federal Government and the Central Bank of Nigeria with the active support and participation of the Bankers Committee. The purpose of the ACSS is to develop the agricultural sector of the Nigerian economy by providing credit facilities to farmers at single digit interest rate. This is to enable farmers exploit the untapped potentials of the sector with a view to reducing the cost of agricultural production and increase output on a sustainable basis. These efforts are expected to lead to fall in the prices of agricultural products, especially food items, thereby leading to reduction in inflation rate, generate surplus for export and diversify the revenue base of the economy. The above notwithstanding, the effectiveness of these policies remained questionable as the interest rate remained high as well as inflation rate throughout the period. The average interest rate stood at 19.9%, experienced a marginal reduction in 2006 and escalated to 17.59% in 2010. The food inflation showed indiscernible pattern of movement as well as it rose from 3.9 % in 2006 to 8.2 % in 2007 rising to a peak of 18.0 % in 2008. It fell again to 15.5% in 2009 and to 12.7% in 2010.s 2.11.2 Pricing Policy The objectives behind government’s pricing policy are to ensure that farmers receive profitable prices for their products, stabilises prices and ensure parity in agricultural prices in comparison to non- Agricultural prices in Nigeria. To achieve these objectives, Commodity Boards were formed with the responsibility of marketing and fixing prices. In 1986, marking the beginning of deregulation strategy (SAP era), the Board was abolished and market-based pricing of agriculture export commodities was introduced and subsidies on some agricultural inputs were reduced. This resulted into reduction in utilization of fertilizers and consequently in the output of food crops. With respect to marketing, different policies were introduced such as trade liberalization, export promotion, backward integration, agricultural investment promotion, etc. These were aimed at diversifying the country’s export to boost growth as well as improved crop outputs thereby discouraging export. Also, during the period, the exchange rate policy adopted was aimed at re-aligning exchange rate of the Naira vis- a-vis the world currencies through promotion of competitive market where foreign currencies are fully traded under a free market mechanism. To achieve the above objectives, Abuja Stock Exchange was established in 1998. This was later changed to Abuja Securities and Commodity Exchange in 2003 with the responsibility of trading in agricultural products and solid minerals among others. 2.11.3 Institutional Reform The post SAP era (1994-date) includes the New Agricultural Policy established in 2001which is an attempt to overcome the pitfalls of the past policies. It has the overall goal of attaining self-sustaining growth in all the sub-sectors of agriculture, the structural transformation necessary for the overall socioeconomic development of the country, and the improvement of the quality of life of Nigerians. These policies are being pursued within the framework of National Economic Empowerment and Development Strategy (NEEDS). NEEDS was formulated with the objective of reducing poverty, generating employment and creating wealth. Recently, an attempt to put an end to institutional problems militating against sustainable growth in the Agricultural sector led to introduction Agricultural Transformation Agenda (ATA). ATA is the largest ever government-enabled private sector-led effort to grow agriculture in Nigeria. This comprehensive effort aims to increase domestic food production, reduce dependence on food imports and expand value addition to locally produced agricultural products. Through de-regulation, attractive financing, concentrated infrastructure investments, and competitive policies, the sector will be more productive, efficient and competitive. Specifically, the plan aims at adding about 20 million tons of food to domestic supply and creates 3.5 million jobs by 2015. Part of the instruments through which ATA is to achieve its objective is a micro programme tagged e-Wallet. The programme aims at having a direct contact with the farmers as well as making available agricultural inputs at a subsidized rate. This is believed will eliminate the bottleneck problems caused by middlemen associated with earlier programmes and rent seeking behaviour hence, encourage large scale farming that brings along with it economies of scale and consequently food security. 2.12. Government efforts on agricultural development in Nigeria Beginning from the era of Commodity Board in the 1960s, the country has witnessed a myriad of policies and programmes ostensibly introduced to address perceived problems in the agricultural sector. Such policies and schemes have focused on enhancing agricultural output, improving the expected linkages (backward and forward) with the manufacturing sector, increasing earnings and employment opportunities, increasing food security, etc. They have therefore basically touched on availability of supplies and equipment production, incentives to farmers, transportation, agricultural credit, land reform, food preservation, extension services, infrastructural facilities, etc. Government involvement in agriculture not only goes beyond providing supportive services, it also includes direct participation in the production of agricultural products (Rogers, 1999). One of the first steps by government was the launching, in 1972, of the National Accelerated Food Production Programme, a campaign to grow more food. In 1973, the Federal Government established the Nigerian Agricultural Credit Bank (NACB) with an initial paid up capital of N20 million. In further recognition of the need to make credit available for the development of agriculture, the Agricultural Credit Guarantee Scheme Fund was set up under Decree 20 of 1977 with an authorized capital of N100 million. This programme brought financial institutions into the financing of agriculture in the country. Since then, and up till 1996 when sectorial allocation of credit was abolished, it became compulsory for a specified proportion of bank's credit to be made available for agricultural activities. As at 1996, a minimum of 18 per cent of the total loans and advances of a bank should go to agriculture and agro-allied activities. In 1976, the Operation Feed the Nation (OFN) programme was launched with objectives of increasing food production, attaining self-sufficiency in food supply encouraging all sections of the Nigerian population to grow food, encouraging balanced nutrition and by exten-sion a healthy nation. The scheme encouraged mass participation. During the same period, the government announced guaranteed minimum prices for agricultural outputs and also reformed the marketing board system to generate adequate returns to farmers thereby ensuring that customers are charged reasonable prices. Various other incentive schemes were offered in the areas of tax relief, subsidy of prices of agricultural inputs, and machinery and equipment. A major policy that was designed to improve agricultural production was the promulgation of the Land Use Decree in 1978. The Central focus of government policies in the 1980s was the objective of changing agricultural production to large-scale production. It was identified that the bulk of food production in Nigeria was being undertaken by small holder farmers who rely on muscles rather than equip-ment, thereby resulting in low output. Emphasis therefore shifted into provision of credit and skilled manpower, and expansion of agro-allied businesses to mention a few. From 1986 when the Structural Adjustment Programme (SAP) was introduced, the focus had been on returning Nigeria to self-sufficiency and enhancing the contribution of agriculture to foreign exchange earnings. Part of the programmes over the years had been the establishment of relevant institutions. Thus there were agricultural research institutes like the National Cereal Research Institute, the National Agricultural Extension and Research Liaison Service, Nigeria Institute for Oceanography and Marine Research, Veterinary Research Institute, the Cocoa Research Institute of Nigeria, Forestry Research Institute of Nigeria, Rubber Research Institute of Nigeria, National Agricultural Extension Research and Liaison Services (AERLS) Ahmadu Bello University, Zaria: with 5 Zonal Offices, one in each of the 5 agro-ecological zones of the country Umudike (South-east), Ibadan (South-west), Maiduguri (North-east), Badeggi (North-central), Zaria (North-west) etc. In the 1980s the Federal Government also established Universities of Agriculture, apart from various schools of Agriculture in Nigeria and the faculties of Agriculture in the conventional Universities and the Polytechnics. More-over, there was also established the National Agricultural Land Development Authority (NALDA), the River Basin Development Authorities and the Agricultural Development programmes (ADP). There are also international institutions complementing these institutes like the International Institute for Tropical Agriculture (IITA). But it is disheartening to note that these efforts have not yielded appreciable successes. The reasons for the low successes were not because the projects and programmes were mere paper and pencil solutions, but the methodology of their implementation seems to have missed some vital links, such as effective youth and local community participation and free from politicians interference. However, there are also problems at the micro (individual) level that borders on management of farm, sources of finance, supervision, etc. In Nigeria, farmers are the most impoverished and backward amongst all types of businesses and professions. This is not the case in developed countries of the world, where farmers are among the richest and most successful entrepreneurs. 2.13. Agriculture and the Nigeria economy Nigeria is an agrarian economy and as such it has often been referred to as the background of the country's economy. Agriculture as a key sector in most developing counties, Nigeria in pare-thesis has been playing a key role in enabling them to accomplish developmental goals, including self-reliance, growth and equity. The export sector of the agricultural economy providing the original impetus for Nigeria's encouraging growth and it remained the most significant sector in the growth of the economy until the expansion of the late 1970's. With reference to the post world economic growth, not only did exports provide a major component of the economic growth through exportation and statutory marketing. They also provided a significant proportion of the resources available to government for the purpose of economic development. In the post war period and until the use of oil exports, agricultural products constituted over 80% of Nigeria total exports. The contribution of agriculture to the national economy continued to be very significant. The areas which contained an agricultural population are most widespread in the southern Nigeria is usually viewed as and surplus economy. In the past, surplus land was considered to have played a significant role in export crops expansion. The wide variety of climatologically, soil and ethnic conditions provide an impressive confusing away if producing ties into which agricultural sector may, be 20 divided, for example regional sector may be divided. Regional variations in soil types are often related to the prospect of growing particular crops in different parts of the country. Helleiner (1968), breaks into series of sub-economics characteristic by producing patterns is perhaps the most useful means of categorizing this diversity. He distinguished four major sub-economics. The cocoa economy of the west The oil palm economy of the south The rubber economy of the mid west; The cotton economy of the north Nigeria agriculture economy witness rapid and significant changes between 1900 to the present day. It went through the period of peak and followed be period of depression. Helleiner (1968) gave a compact picture of happenings between 1900 and 1960. He reported that Nigeria's development during stipulated years may be divided into three periods. 1900-1930 period of rapid growth dominated by rapid expansion of export crops by peasant farmers. 1930-1945: Stipulation of the Nigerian economy. 1945-1960; Rapid growth of the Nigerian economy dominated by deliberate policy imitated by the colonial development and welfare act of April 1945. Helleiner went further that during the last stated period, the economy was based on the export of agricultural commodities, growing annually 55% according to him before independence, production of food crops was not considered a series problem and little support provided by the government directed at export crops i.e. Cocoas, palm produce, rubber etc. Agriculture witnessed slight deterioration in the economy of the country between the periods of 1970-1980. During the era, the gap between food demand and food supply continue to raise food import still rose and government revenues from cash crop-dropped and labour remained for agricultural production systematically disappeared. It' was a sad thing m Nigeria's agriculture and indeed in the Nigerian economy. Today, agriculture has not been able to regain its amicable position of pre-independence status. SECTION THREE RESEARCH DESIGN AND METHODOLOGY 3.0 Introduction This section covers the study area, research design and methodology, including sampling, population, establishing rigor during and after data collection, ethical considerations and data analysis. Research design Burns and Grove (2003:195) define research design as “a blueprint for conducting a study with maximum control over factors that may interfere with the validity of the findings”. Parahoo (1997:142) describes a research design as “a plan that describes how, when and where data are to be collected and analyzed”. Polit (2001:167) define a research design as “the researcher’s overall for answering the research question or testing the research hypothesis”. This research will adopt exploratory research design. Therefore, this research intends measuring the degree of the relationship between public agriculture expenditure and agricultural output hence we chose the secondary data in its analysis. The variable include in this model will be base on the available data that will be collected from the period of 1980 to 2014 through which the impact of public expenditure on agricultural output will be examined. 3.2. Population of the study: The study intents to study Nigeria agricultural output as a whole ranging from the year 1984-2014. The variable that will be included will be base on their availability. 3.3 Type of Data and source The type of data needed for this study will be gotten principally in secondary form, from the Central Bank of Nigeria statistical bulletin and the Nigeria national Planning Commission which shall include data from the variables of Agricultural output (AGP), Total Government Expenditure on Agricultural Output (GEA), and Deposit Money Loan to Agriculture (DBA) and Gross Capital Formation (GCF) respectively which should be used to ascertain the money spend on agriculture sector by the government from 1980- 2014. 3.4 Data collection method We intend to collect data in secondary form from the Central Bank of Nigeria statistical bulletin which shall include the variable as follows, Total agriculture output (AGP), Total Government Expenditure on Agriculture (GEA), Deposit Money Loan to Agriculture (DBA) and Gross Capital Formation (GCF) respectively Existing literature indicate that prices, government expenditure in agriculture, volume of credit to the agricultural sector, nominal interest rate and exchange rate which are indicators of monetary, exchange rate and price policies determine activities in the agricultural sector Consequently, in this study, data on credit to the agricultural sector and government expenditure on the agricultural sector, gross capital formation in agriculture will be obtained between 1980 and 2014 and used as indicators of the macroeconomic environment. 3.5 Model Specification Engle-Granger two step modeling (EGM) procedure (Engle and Granger, 1987) will be used to test for long-run relationship. That is if there two variables Xt and Yt are individually I (1) processes and there exist a linear combination of this variables that is I(0) process, then Xt and Yt are cointegrated. In other words, a long run equilibrium relationship exists among these variables. Based on the Granger Representation Theorem (GRT), if two variables are cointegrated, there exists an Error Correction Model (ECM) which relates these variables in the short-run while maintaining the consistency of the OLS estimated long-run parameter obtained in the cointegratin regression. In this instance, ECM indicates the periodic change in the time series variables and how it eventually returns to its long run equilibrium value. Since the ECM equation contains only stationary variables which preclude spurious regression, granger causality test can be applied. This is because co integration analyses will shows that there is causality amongst these two variables. 3.6 Techniques of Data Analysis In analyzing the raw collected data, the researcher will be guided by the objectives of the study and the research question as such we intend to employ the descriptive statistical techniques in our analysis to this study, since the statistical tool will involve table and simple percentages. The analytical techniques that will be use to analyze the data will include; The Granger Causality Test, Unit Root Test, Integration Model, Error Correction Model, And Economic Apriori Expectation statistical method will enable us test the variables in our research hypothetical statements. 3.6.1 Unit Root Tests A preliminary investigation into the analysis commenced with confirmation of the order of integration of the series, where the series is confirmed to be order 1, then, co-integration can then be performed. Dickey - Fuller and Philip Perron unit root tests will be calculated for individual series to provide evidence as to whether the variables are integrated. This will followed by a multivariate co-integration analysis. Augmented Dickey-Fuller (ADF) and Philip Peron (PP) tests involved the estimation of one of the following equations respectively. Integration Model This study adopted the Johansen (1988) procedure in co-integration. The concept of co-integration creates the link between integrated process and the concept of steady equilibrium. The first step in co-integration analysis shall be to test the order integration of the variables. According to Ajetomobi (2006), a series is said to be integrated if it accumulated some past effects, so that following any disturbance, the series will rarely return to any particular mean value, hence is non-stationary. Non-stationary time series has always been regarded as a problem in econometric analysis. The Granger representation theorem states that if set variables are co-integrated (1, 1); implying that the residual is co-integrated of 1(0), then there exists an error correction model describing the relationship. 3.6.3 The Error Correction Model The error correction model (ECMs) estimates presents the short run behaviour and the long run static equations. The parameter λ, which shall be negative, in general shall measures the speed of adjustment towards the long run equilibrium relationship between the variables. The optimum lag lengths to be included in the model shall be determined based on Akaike Information Criterion (AIC). 3.6.4 Economic Apriori Expectation The economic apriori expectation of this study will involve an examination of the sign and magnitude of the estimated parameters to determine the conformity with theoretical expectation. REFERENCES Adesope A. A. A., V. O. 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