CHAPTER TWO

REVIEW OF RELATED LITERATURE

2.1 Conceptual Framework

Akinboyo (2008) defines Agriculture as the science of making use of the
land to raise plants and animals. It is the simplification of nature’s food
webs and the rechanneling of energy for human planting and animal
consumption. 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. Ikala (2010) described agriculture as the profession of
majority of humans. Oji-Okoro (2011) stated that agricultural sector is
the largest sector in the Nigerian economy with its dominant share of the
GDP, employment of more than 70% of the active labour force and the
generation of about 88% of non-oil foreign exchange earnings.
Agriculture constitutes the main source of employment of the majority
of the world’s poor (Cervantes and Dewbre, 2010). They assert that in
total, the share of agriculture in total employment in developing
countries constitutes 53% of the total workforce in 2004. In Sub-Saharan
Africa 60% of the economically active population works in the
agricultural sector. Much effort has been put into trying to raise
productivity in agriculture, and calls have been made for more
investment in agricultural science and technology, especially for Africa.
They explained that the reasons for this seem evident when one
considers the productivity growth in developing countries. In many
regions (much) progress has been made in raising land and/or labour
productivity measured in output quantity units (for cereal productivity).
When productivity is measured as value added per hectare arable land or
labour, Sub-Saharan Africa has not made much progress. East Asia and
the Pacific, as well as South Asia experienced productivity growth in
terms of value added per unit of land, but not much in terms of value
added per unit of labour. Thus although progress has been made in some
regions in raising productivity, many other regions have lagged behind.
Development is the process whereby the inhabitants of a geographic unit
consciously or systematically exploit the resources in that geographic
unit for the satisfaction of their needs, Cervantes and Dewbre (2010)
concluded.
It is that increase in agricultural productivity is a vital prerequisite for
rapid economic growth and development. Among the role
conventionally ascribed to the agricultural sector in a growing and
developing the economy are those of:
i) Providing adequate food for an increasing population,
ii) Supplying raw materials to a growing industrial sector,
iii) Constituting the major source of employment
iv) Earning foreign exchange through commodity export and
v) Providing a market for the products of the industrial sector.
In Nigeria, agriculture has traditionally been described as a “mainstay”
of the economy. Since the 1940s, agricultural productivity has increased
dramatically, due largely to the increased use of energy-intensive
mechanization, fertilizers and pesticides. The vast majority of this
energy input comes from fossil fuel sources (The independent, 2007).
Between 1950 and 1984, the Green Revolution transformed agriculture
around the globe, with world grain production increasing by 250% as
world population doubled.

Nigeria, one of Africa's most populous countries, has a highly

diversified agro-ecological condition, which makes the production of a
wide range of agricultural products possible (Enete and Taofeeq 2010).
Agriculture is one of the most potentially viable sectors of the Nigerian
economy, particularly in terms of its employment generation potentials
employing over 63% of the Nigerian labor force as at 2011 (Solomon,
2011) as well as its contribution to Nation's Gross Domestic Product
(GDP) estimated at 34% as at 2011 and export revenue earnings. In
Nigeria, the traditional and predominant method of clearing farm land is
through bush burning. In addition, the use of firewood as cooking energy
source has recently gained prominence, because of the high cost and
non-availability of other cleaner sources such as natural gas. These
activities increase the concentrations of greenhouse gases (GHGs) in the
atmosphere trapping heat and causing global warming, climate change
and sea level rise (Medugu, 2009).
Further, there is the problem of deforestation. Currently, forest covers
approximately 400 million ha (almost 17 percent of land area). The
current annual deforestation rate is, however, 0.7 percent and the decline
in forest area is expected to continue. Garba, (2006) noted that one of the
major causes of poverty is destruction of natural resources, leading to
environmental degradation, high temperature, drought and consequently
reduced productivity. Nigeria’s forest is being depleted because of rising
population, migration, land hunger, poverty and starvation.

According to Enete and Taofeeq (2010), the Nigerian agriculture is

almost entirely rain-fed and hence inherently susceptible to the vagaries
of weather. Three main categories of irrigation development exist in
Nigeria today, namely public irrigation schemes, which are systems
under government control (formal irrigation); the farmer-owned and
operated irrigation schemes (informal irrigation) and residual flood
plains fadama irrigated scheme. Even with the present irrigation efforts,
Madu, et al (2010) noted that Nigeria has not developed irrigation to the
same extent as other developing nations, particularly in Asia. Only about
a million hectare is currently irrigated in Nigeria. In contrast, India,
which has about 3.5 times the land mass of Nigeria, irrigates nearly
forty-five (45) times as much land. As global warming accelerates, it is
expected that agricultural adaptation to climate change can only be
meaningful, if irrigated agriculture gains prominence. Unfortunately
agricultural practice in Nigeria is still predominantly rain-fed and
therefore particularly vulnerable to the impacts of climate change as
noted before (FAO, 2008; IFAD, 2007; and Medugu, 2008). The
consequences are that the increasing frequency and severity of droughts
are likely to cause crop failure; high and rising food prices; distress sale
of animals; de-capitalization, impoverishment, hunger, and eventually
famine. Households will probably try to cope with their cash and food
shortage by cutting and selling more firewood thereby exacerbating land
degradation and accelerating the onset of desertification, and by moving
temporarily or permanently to more favoured areas. In line with this
projection, Medugu (2008) stated that Nigeria is one of the countries
expected to be most affected by the impacts of climate change through
sea level rise along her coast line, intensified desertification, erosion and
flooding disasters and general land degradation.

Land tenure and fragmentation systems could also limit the capacity of
farmers to adapt to climate change. Among most African peoples,
farmland is not owned but held in trust by the present generation on
behalf of their future descendants. It could be held by individual
families, extended families or entire village communities and then
fragmented to individual farmers, who only enjoy user rights. Outright
purchase of farmland is not common, but rental for a period of time
could be possible (Nweke and Enete, 1999). This limits the level of
individual farmer’s investment in the development of a farmland, since
the user right could be withdrawn anytime. In addition, the fragmented
nature of farmland could hamper the farmers’ capacity to adopt
innovative farming practices that may be necessary for climate change
adaptation. IFAD (2010) reported that about 90% of Nigeria’s food is
produced by smallholder farmers who cultivate small plots of land,
usually less than 1 hectare of land per household.

In spite of Nigeria's rich agricultural resource endowment, there has

been a gradual decline in agriculture's contributions to the nation's
economy: In the 1960s, agriculture accounted for 65-70% of total
exports; it fell to about 40% in the 1970s, and crashed to less than 2% in
the late 1990s. The decline in the agricultural sector was largely due to
rise in crude oil revenue in the early 1970s. However, by 2007 the
decline in crude oil revenue had become evident and the government
(state and federal) recognized the need to diversify the nation's economy
by taking steps to promote the development of the agricultural sector.

Small-scale farmers constitute 80 percent of all farm holdings in the

country. They thus form an important foundation on which to rest
Nigeria’s agriculture. The current emphasis on private sector activities
as the strategy for achieving agricultural development is in line with the
world-wide approach. However it poses some problems for Nigeria’s
poverty stricken small-scale farmers who appear to have more difficulty
now in securing production assistance. Nigeria’s agriculture needs to be
supported. Without major support aimed at raising production of
desirable food materials and increasing income to eradicate poverty,
existing mal- and under-nutrition problems will escalate. Among the
problems caused by the latter are fatigue and reduced work capacity;
both in turn affect agricultural output and productivity. According to
Okolo (2006), a major setback to fish farming and aquaculture
development in Nigeria is the acute shortage of high quality fish
fingerlings of culturable local species. It is estimated that while the total
fingerlings supply from all sources is 27.3 million, the average annual
demand is 297.5 million.

According to IITA (2007, 2009), Nigeria’s low maize productivity was

attributed to poor seed supply system, little or no use of improved seeds,
herbicides and fertilizers, increased levels of biotic and abiotic
constraints, low investment in research for development, inefficient
marketing systems, the fact that prices of inputs have tripled in the last
ten years and also global warming and its associated effects which have
contributed to this by changing the rainfall pattern leading to erratic and
unreliable rainfall, in some cases resulting in drought.

2.1.1 Manufacturing Sector

The manufacturing sector of any economy is seen as critical in the
development process. This was aptly summed up by Libanio (2006) who
define the manufacturing sector as an engine of growth through the use
of Kaldor’s first law. According to Adebayo (2010) the manufacturing
sector refers to those industries which are involved in the manufacturing
and processing of items and indulge or give free rein in either the
creation of new commodities or in value addition. To Dickson (2010),
manufacturing sector accounts for a significant share of the industrial
sector in developed countries. The final products can either serve as
finished goods for sale to customers or as intermediate goods used in the
production process. Loto, (2012) refers to manufacturing sector as an
avenue for increasing productivity in relation to import replacement and
export expansion, creating foreign exchange earning capacity, raising
employment and per capita income which causes unrepeatable
consumption pattern. Mbelede (2012) opined that manufacturing sector
is involved in the process of adding value to raw materials by turning
them into products. Thus, manufacturing industries is the key variable in
an economy and motivates conversion of raw material into finished
goods.

2.1.2 Agriculture Sector Development in Nigeria

The role of agriculture in economic growth of most countries can hardly
be overemphasised (Timmer, 2003). The contribution of agricultural
growth to overall poverty reduction has been documented (Sarris, 2004).
In view of the importance of agricultural growth to economic growth,
(Abayomi, 1992) observed that rising agricultural productivity has been
most important concomitant of successful industrialization.
A retrospective look into the Nigerian economy and its development
reveals that agriculture was both the main stay of the Nigerian economy
and the chief foreign exchange earner (Chigbu, 2005). In the 1960s,
agriculture accounted for well over 80 percent of the export earnings
and employment; about 65 percent of the GDP (Gross Domestic
Product) and about 50 percent of the government revenue (FGN, 2000).
This contribution to the Nigerian economic growth has however
declined over the years. The contribution of agriculture to the GDP was
about 50% in 1970 and 34% in 2009 (Solomon, 2011). At present,
agriculture accounts for only 41 percent of the real sector, while crude
oil accounts for 13 percent (Ukeje, 2005). Although agriculture no
longer serves as the leading contributor to Nigeria’s Gross National
Product and leading foreign exchange earner due to phenomenal growth
in the petroleum sector of the economy, agriculture is still the dominant
economic activity in terms of employment and linkages with the rest of
the economy. While accounting for one-third of the GDP, it remains the
leading employment sector of the vast majority of the Nigerian
population as it employs two-third of the labour force (Chigbu, 2005).
Agriculture contributes significantly to national food self –sufficiency
by accounting for over 90% of total food consumption requirements, its
helps to maintain a healthy and peaceful population and also a source of
 food and nutrition for households. Furthermore, the ultimate objective
of interest of economists in productivity should be to find ways of
increasing output per unit of input and attaining desirable inter-firm,
intra-firm and inter sector transfers of population resources thereby
providing the means of raising the standard of living.
The setting up of the Nigerian Agricultural and Cooperative Bank
(NACB) in 1973 was a project set up by the Government to boost food
production for our growing population. Its main objective was to
enhance the level and quality of agricultural production including
horticulture, poultry farming, pig feeding, fisheries, forestry and timber
production, animal husbandry and other types of farming as well as
storage, distribution and marketing connected with such production in
the country (Lawal, 2011). The bank was restructured in 2000. It was
merged with the Peoples Bank of Nigeria and the Family Economic
Advancement Programme (FEAP) and renamed the Nigerian
Agricultural, Cooperative and Rural Development Bank (NACRDB)
(Manyong, 2003). The capital base was increased from N2.0 million to
N10.0 million to reposition the bank to effectively meet the increasing
demand for agricultural credit (Evbuomwan, 2003). The Operation Feed
the Nation, (OFN) was a programme which was in the form of creating
awareness in the general populace of the need to be self-sufficient in
food production. It was a special food production drive launched in 1976
by the then Federal Military Government. The programme was launched
to involve a much wider section of the Nigerian populace in food
production and as such increase local food supply. The programme was
backed by massive publicity and a sizeable injection of funds to procure
and distribute agricultural inputs.
The Agricultural Development Projects launched in 1975 were to be
used to increase food production in the states where they operated. The
programme initiated the introduction of hybrid maize seeds to Nigerian
Farmers by making funds available to International Institute for Tropical
Agriculture, (Ibadan), to develop hybrids suitable for various ecologies
in Nigeria. The programme also made the supply of farm inputs such as
seeds, fertilizers, agro-chemicals and even farm tractors to farmers a top
priority (Evbuomwan, 2003).
The establishment of Agricultural Credit Guarantee Scheme (ACGS)
Fund Act in 1977 was an attempt by the Government to encourage
Banks to channel more of their funds to agricultural production. The
Scheme was set up as a result of Commercial and Merchant Banks’ lack
of interest in agricultural financing. The Scheme commenced operation
in 1988 by the approval of an authorised share capital of N100 million
subscribed to by the Federal Government and the Central Bank of
Nigeria in the ratio of 60% and 40% respectively. The share capital was
increased to N1.0 billion and N3.0 billion in 1999 and 2001 respectively
(Evbuomwan, 2003). The aim of the scheme is to minimise the risks
banks are exposed to, as a result of their lending activities to the
agricultural sector (Lawal, 2011).
According to Lawal (2011), the Green Revolution Programme which
was launched by the Civilian Administration between 1980 and 1983
was yet another scheme to boost agricultural production in the country.
The aim of the programme was to take Nigeria to self-sufficiency in the
basic food needs within five years which led the Government to prepare
a “Food Production Plan for Nigeria” (Perspective Plan for Agric.
Development- 1990- 2005).
In 1986, The Directorate for Foods, Roads, and Rural Infrastructure
(DFRRI) scheme launched in 1986 was a programme set up for the
acceleration of rural development to aid agricultural production. Good
road networks are needed for the evacuation of food items to the
markets. Lawal (2011) argued that the need for good road networks for
the evacuation of food items from the point of production to the markets
in the urban areas resulted in the reason why the Directorate for Foods,
Roads and Rural Infrastructure was set up (Perspective Plan for
Agricultural Development- 1990-2005). With respect to the agricultural
sector under SAP, the tariff structure was adjusted to encourage local
production and to protect agricultural and local industries from unfair
international competition. The marketing boards for scheduled crops
were abolished. Bans were placed on the importation of a number of
food items including most livestock products, rice, maize, wheat and
vegetable oils. Subsidies for agricultural input subsidies were
substantially cut (CBN, 1992). According to FMARD (2001), these SAP
measures to some extent had positive impact on the agricultural sector
due mainly to price increase as a result of devaluation of the currency
and ban on importation of wheat, rice and maize. The ban placed on the
importation of some food items increased the output of local production,
especially rice. However poultry and fishery production became less
profitable because of the resultant exorbitant costs of imported inputs
attendant on SAP. Sharp rises in imported inputs such as fertilizer, agro-
chemicals etc. were also witnessed while the cost of providing large
scale irrigation rose because of the high cost of foreign components. The
increase in the cost of the import component of equipment for research
and technology development reduced their further growth. Although
SAP substantially addressed problems of price distortions to the farmers,
new problems were created by the effects of the changes in macro-
economic policies.
Another Scheme which was set up to promote Agricultural production is
the Nigerian Agricultural Insurance Scheme. The aim of the scheme was
to provide financial support to farmers in the event of losses arising from
natural disasters. Agriculture is exposed to a number of risks and
uncertainties. It is in an attempt to reduce these risks and uncertainties to
the barest minimum and to boost agricultural production that the
National Agricultural Insurance Company (NAIC) was established by
the then Federal Military Government on 15th December 1987 to
operate and administer the Nigerian Agricultural Insurance Scheme
(Manyong, 2003)
The establishment of the Federal Universities of Agriculture in 1988 in
Abeokuta, Umuahia and Makurdi to offer degree programmes in all
disciplines of agriculture was part of the effort to build human capacity
to boost agriculture production and solve the problem of inadequate
human resources at all levels of the agricultural sector (Evbuomwan,
2003). In 1988, the first national policy on agriculture was adopted and
was expected to remain valid up to the year 2000. The document,
Agricultural Policy for Nigeria, released by FMARD (1988), itemized
seven broad agricultural policy objectives along with their
accompanying strategies for realization. The seven broad policy
objectives include: (i) attainment of self-sufficiency in basic food
commodities with particular reference to those which consume
considerable shares of Nigeria’s foreign exchange and for which the
country has comparative advantage in local production; (ii) increase in
production of agricultural raw materials to meet the growth of an
expanding industrial sector; (iii) increase in production and processing
of exportable commodities with a view to increasing their foreign
exchange earning capacity and further diversifying the country’s export
base and sources of foreign exchange earnings; (iv) modernization of
agricultural production, processing, storage and distribution through the
infusion of improved technologies and management so that agriculture
can be more responsive to the demands of other sectors of the Nigerian
economy; (v) creation of more agricultural and rural employment
opportunities to increase the income of farmers and rural dwellers and to
productively absorb an increasing labour force in the nation; (vi)
protection and improvement of agricultural land resources and
preservation of the environment for sustainable agricultural production;
(vii) establishment of appropriate institutions and creation of
administrative organs to facilitate the integrated development and
realization of the country’s agricultural potentials.
In view of the fact that agricultural and rural development is critical for
generating economic growth, institutional arrangements were also
adopted for realising sector objectives (FMARD, 2001). These include
the relocation of the Department of Cooperatives of the Ministry of
Labour and its merger with the Agricultural Cooperatives Division of
the Ministry of Agriculture, the transfer of the Department of Rural
Development from the Ministry of Water Resources to the Ministry of
Agriculture; the scrapping of the erstwhile National Agricultural Land
Development Authority (NALDA) and, the merging of its functions with
the Rural Development Department; scrapping of the Federal
Agricultural Coordinating Unit (FACU) and the Agricultural Projects
Monitoring and Evaluation Unit (APMEU) and the setting up of Projects
Coordinating Unit (PCU) and streamlining of institutions for agricultural
credit delivery with the emergence of the Nigerian Agricultural,
Cooperative and Rural Development Bank (NACRDB) from the
erstwhile Nigerian Agricultural and Cooperative Bank (NACB) and the
Peoples Bank and the assets of the Family Economic Advancement
Programme (FEAP).
The government in 1995 embarked on the reformation of the lending
policies of the Agricultural Credit Guarantee Scheme (ACGS) for easier
access to agricultural credit schemes (Ogen, 2007). In fact, the National
Rolling Plan for 1996-1998 assumed that by year 2000, Nigeria would
have been able to feed its population, develop the capacity to process
agricultural raw materials both for local industries and for export and
significantly increase the contributions of the agricultural sector to the
GDP (Lawal, 1997). These lofty objectives have turned out to be a
mirage mainly because of official corruption and lack of commitment on
the part of those saddled with the responsibility of implementing the
government’s agricultural policies. In order to get out of this doldrums,
Nigerian policy makers need to be wary of development economists who
assign a relatively minor role to agriculture in economic development
and fervently believe that industrialisation is synonymous with
economic development (Ogen, 2002).
In 1999, the federal government under the leadership of President
Olusegun Obasanjo critically evaluated the 1988 agricultural policy in
2001; an evaluation which led to the approval of its latest policy entitled
‘‘The New Policy Thrust for Agriculture’’ in 2002 (FMARD, 2001;
FRN, 2002). The new policy document share very similar features to
that of 1988. However, this new policy thrust provided greater support
for the underlying philosophy of allowing the private sector and market
forces to dictate the pace of development in the agriculture sector, while
governments at all levels are restricted to facilitating roles, support
services, and providing the enabling environments for agricultural
growth. In a broad sense, the objectives of the new agricultural policy
are very similar to those of the old one. They include:(i) The
achievement of self-sufficiency in basic food supply and the attainment
of food security;(ii) increased production of agricultural raw materials
for industries;(iii) Increased production and processing of export crops,
using improved production and processing technologies; (iv) generating
gainful employment; (v) rational utilization of agricultural resources,
improved protection of agricultural land resources from drought, desert
encroachment, soil erosion and flood, and the general preservation of the
environment for the sustainability of agricultural production; (vi)
promotion of the increased application of modern technology to
agricultural production; and, (vii) improvement in the quality of life of
rural dwellers.
By 2008, in a bid to fast-track the transformation of the agricultural
sector, the federal government in collaboration with the World Bank, has
established the Commercial Agriculture Development Programme
(CADP). The Programme, which has five states (Cross River, Enugu,
Kaduna, Kano and Lagos) participating in the first phase, aims at
strengthening agricultural production systems for targeted value chains
and facilitate access to markets. The project is estimated to cost US$185
million, with the World Bank providing US$150 million, while the
federal and the participating state governments would provide the
balance of US$35 million (CBN, 2008). Moreover, in 2009 Large Scale
Agricultural Credit Scheme (LASACS) was established by the Federal
Government in the wake of the current global economic crisis to finance
large integrated commercial farm projects. The terms of borrowing are
favourable, including a long tenor and single digit lending rate
(Solomon, 2011).
Many institutionalized programs expected to positively impact food
security for the nation and agricultural financing exist. Among these is
River Basins Development Authority (RBDA) that function in the areas
of development and maintenance of underground water, control of
floods and the like in different areas of the country. It has acted more in
the areas of providing and irrigation schemes to support FADAMA
projects and all-year-round farming for staples and vegetables.
Agricultural Development Projects (ADP) and Agricultural Project
Monitoring and Evaluation Unit (APMEU), instituted much earlier could
not continue due to lack of counterpart funding from state governments
who were not forthcoming, which led to the resources available from the
World Bank to become overstretched (Adetiloye, 2012). Furthermore,
the resuscitation and development of the critically ailing Nigerian sugar
industry and its bye-product especially ethyl alcohol (ethanol) which
comes from molasses (a by-product of sugarcane) is of an urgent and
critical necessity. Given the intractable and embarrassing problem of
fuel queues in Nigeria, ethanol could be used to produce a brand of
automobile fuel known as alcogas or green petrol. Apart from being a
renewable source of energy, and unlike fossil fuels, alcogas has little or
no adverse effect on the environment. In fact, with alcogas Nigeria will
be able to reduce her dependence on imported fuel and save additional
foreign exchange for capital projects (Ogen, 2004).
The principal constraint to the growth of the agricultural sector is the
fact that the structure and method of production have remained the same
since independence more than four decades ago (National planning
Commission, 2005). The United Nations Food and Agriculture
Organization rate the productivity of Nigeria’s farmland as low to
medium— but with medium to good productivity if properly managed
(Ukeje, 2005). Interestingly, the Nigerian economy like that of Brazil,
during the first decade after independence could reasonably be described
as an agricultural economy because agriculture served as the engine of
growth of the overall economy (Ogen, 2003).
From the standpoint of occupational distribution and contribution to the
GDP, agriculture was the leading sector. During this period Nigeria was
the world’s second largest producer of cocoa, largest exporter of palm
kernel and largest producer and exporter of palm oil. Nigeria was also a
leading exporter of other major commodities such as cotton, groundnut,
rubber and hides and skins (Alkali, 1997). The agricultural sector
contributed over 60% of the GDP in the 1960s and despite the reliance
of Nigerian peasant farmers on traditional tools and indigenous farming
methods, these farmers produced 70% of Nigeria's exports and 95% of
its food needs (Lawal, 1997).
2.1.3 Manufacturing Sector Development in Nigeria
The earliest attempt at manufacturing saw the establishment of agro-
based industrial concerns such as vegetable-oil extracting plants,
tanneries and tobacco processing units. Textiles, breweries and cement
manufacturing concerns soon followed (Chete and Adenikinju, 2002).
Prior to Nigerian Independence, the business climate was almost totally
dominated by the Colonial and other European Multinational companies
like United African Company (UAR), GB Olivant, Unilever Plc,
Patterson Zechonics, Leventis, etc. These companies primarily engaged
in bringing into Nigeria finished goods from their parent companies
overseas. These companies have vast business experience and strong
capital base, and dominated the Nigerian economy. The government of
those days encouraged them to become stronger by giving incentives as
favourable traffis and tax concessions. Towards the tail end of the 1950s,
the Nigerian Industrial Development Bank (NIDB) was founded to assist
potential entrepreneurs to get involved in Agriculture exploration of
national resources, Commerce and Industrial production. This time and
the early 1960s saw the massive increase in Nigeria import market,
while the Nigerian economy became largely dominated by very few
large foreign firms (Ayozie, 2011).
Despite two decades of growth boosted by import substituting policies,
Nigeria's manufacturing sector remains heavily import dependent. This
has been the inevitable outcome of a perverse incentive structure that
accelerated the growth of import intensive consumer goods and light
assembly industries contributing relatively little value-added under high
protective walls while decelerating growth of local resource-based
industries (Chete and Adenikinju, 2002). For example, the share of food
and textile products in manufacturing output fell from 51% in 1973/74 to
36% in 1977/78, while the share of durable goods with low value added
rose from 7% to 19% during the period. Within the durable goods
subsector itself, the share of transport equipment, which has low value
added, rose from about one-tenth of one percent to 11% during 1971/72–
1977/78. The net effect of this is that import dependency was fostered in
the manufacturing sector in the 1970s.
The manufacturing sector encapsulates a wide range of industrial
activities, from informal sector enterprises using simple technology to
heavy capital goods industries in the automotive and electrical
equipment sector. Out of this, a wide spectrum of light consumer goods
dominates the manufacturing profile. These have been nurtured and
reinforced by regimes of “easy” import substitution, localization of
assembly and final processing of relatively simple products. The earliest
attempt at manufacturing saw the establishment of agro-based industrial
concerns such as vegetable-oil extracting plants, tanneries and tobacco
processing units. Textiles, breweries and cement manufacturing
concerns soon followed (Chete and Adenikinju, 2002).
The structure of manufacturing production has been a derivative of the
various developments plans. The First National Development Plan
(1962–1968) emphasized light industry and assembling activities. The
second plan (1970–1975) had a somewhat similar thrust and focus, but
the emphasis shifted in the third plan (1975–1980) towards heavy
industries. Major projects were initiated in the steel and petroleum
refinery sector. For the fourth plan (1980–1985), the broad direction was
in consonance with the third: it retained the stress on heavy industries.
But several of the grandiose plans were short changed with the onset of
profound economic crisis in the early 1980s. The ensuing balance of
payments difficulties forced the authorities to reschedule or outright
jettison some projects. The iron and steel subsector was particularly
seriously hit by these developments.
CBN Statistical Bulletin details of the manufacturing structure shows
that consumer goods industries dominate the sector in terms of both
value added and employment. These industries accounted for as much as
75% and 70% of the sector’s total value added and employment,
respectively, in 1984. The leader in the subsector is food, beverages and
tobacco, contributing 32 and 20% of value added and employment in
1984. It is followed by textiles and wearing apparel, paper products and
printing, plastic and rubber products, etc. In the food subsector, the key
activities include baking, grain milling, processing of dairy products and
sugar, and confectionery processing. Beverages inclusive of beer and
soft drinks contribute as much as 20% of the manufacturing sector’s
value added. The textile industry also contributes significantly to value
added and employment (Chete and Adenikinju, 2002).
Metalworking, and chemicals and paints were the most important in
intermediate goods subsectors in this category in terms of their relative
contribution to value added, while metalworking, sawmill and wood
products, and building materials are the leading subsectors in terms of
employment. Cement processing constituted a very important activity
within the building materials category; cement plants were expanded and
new ones established in an effort to meet the housing and infrastructure
development programme. Today, many of the cement plants face the
problem of low capacity utilization despite the presence of considerable
excess demand, which has induced high retail prices and windfall profits
for middlemen. Other features of the manufacturing sector include low
value added, high production costs deriving from the exorbitant cost of
plant and equipment, high cost of construction and of expatriate skilled
labour, the fact that firms provide infrastructure investment themselves,
and the high geographical concentration of public investment around
highly capital-intensive sectors by international standards (steel,
fertilizer, pulp and paper, cement, petrochemicals, etc.). The problem of
the Nigerian Manufacturing sector started in 1970s which corresponded
with sharp increase in the international oil price. The government
responded with the import substitution strategy aimed at increasing
domestic production. There was huge investment in state owned
enterprises. The contribution of manufacturing to GDP rose from 2% in
1957 to 7% in 1967. Like in most countries in Africa, the import
substitution strategy failed to generate income and employment growth
(Soderbom and Teal, 2002).
Following the fall in oil prices in late 1970s and early 1980s the
economy went into rapid decline. To avert catastrophic collapse of the
economy, the government introduced tough budgetary and fiscal
measures, involving deregulation of foreign exchange market, abolition
of import licenses, and devaluation of the naira. The effect of these
policy measures were nothing to cheer about as the economy took
further steps backward, with its attendant miseries on the populace.
According to Ayozie (2011), most Nigerian small manufacturer, in a
higher degree, depend on imported equipment and raw materials for
their operations. With the over-devaluation of naira, vis-à-vis other
foreign currencies, they are not finding it easier to secure these items
abroad. They therefore resort to poor locally produced alternatives. The
result is usually poor quality products. This may be one of the factors
responsible for Nigerian consumers’ unquenching appetite for imported
goods, even though many of these foreign goods are equally of poor
quality especially those coming from Asian and Far East countries. High
quality raw materials are important to producing high quality product.
With the increasing demand for imported goods in Nigeria, dubious
local and foreign importers are dumping fake products which go further
to frustrate small scale manufacturers and seriously affect our hard
earned foreign exchange.
Besides, small-scale producers lack good quality control in their
operations. In this respect, they rely mainly on replacing faulty products
instead of developing good quality control system (Onwuchuruba,
2001). Only very few Nigerian small manufacturers are aware of the
nature of competition facing them. They estimate their success only
through sales revenue without considering also their market share. Even,
some do not know their market segments on which to focus their
operations. To stimulate domestic production Mojekwu and Iwuji
(2012), argued that the structural adjustment programme (SAP) was
initiated in 1986. SAP brought with it escalation in exchange rate
resulting in high cost of raw materials and spare parts. The SAP
programme ended up being a failure. The harsh economic situation
triggered a chain reaction, such as high cost of production, scarcity of
raw materials and spare parts and huge inventory of unsold goods due to
low purchasing power. All these factors impacted negatively on capacity
utilisation (Banjoko, 2002). Current governmental programmes aimed at
reversing the economic trend are National economic empowerment and
development (NEEDS) and vision 2020, which according to the
proponents will put Nigeria among the first twenty (20) developed
economies by the year 2020.

2.1.4 Agriculture Manufacturing and Economic Performance in

Nigeria
Agbanike, Onwuka, &Eyoghasim (2016) identified six main economic
sectors in Nigeria namely; agriculture, manufacturing, mining and
quarrying, real estate and construction, wholesale and retail trade
(general commerce) and service sectors. To these authors, the six sectors
interact with one another using the stock of capital and other factors of
production within the economy to produce the desired goods and
services.
Manufacturing of agriculture sectors has also formed part of the
manufacturing and agricultural sectors. Most of these companies found
are usually found under the name of agroallied companies. According to
NgCareers (2009), agro-allied industries are established companies with
activities in the business of large-scale farming and livestock production.
They also acquire relevant equipment for processing, packaging and
storing food and beverages to generate revenue and improve per capita
food intake Similarly, they are involved in agricultural consulting,
fertilizer manufacture and sales, fish import and export, livestock feeds
and feed millers, ocean trawling, shrimping and fishing, poultry farms,
hatcheries and veterinary clinics (Adesiyan, 2015). Furthermore, Agro-
allied industries are important in stimulating agricultural development,
raising the degree of self-reliance of the developing countries, of which
Nigeria is a part, and accelerating their economic growth and sustained
progress towards elimination of disparities(FAO, 1975).
However, in spite of their large size, diversified structure and their roles,
there is growing concern about the low level of performance of such
industries, especially in the developing world of which Nigeria is a part.
According to Igwenazor (2008), cited in Adesiyan (2015), agro-Allied
Industries are not performing up to average. Their dismal performance
has been attributed to deficient pricing policies, inappropriate investment
decisions, capacity underutilization, inability to generate adequate
working capital and maintain existing investments, and high level of
indebtedness (Olomola, 2001). These has led to sale of shares by some
of the firms in order to meet up with its financial demands or fold up
which has gross implications on the food security in Nigeria. From the
submission of Ukeje (2000), one of the factors causing food insecurity in
Nigeria is the massive post- harvest losses which has been estimated to
be as high as 20 percent and the state of the agro-allied industry in the
country has not helped matters.
UNDP (2012) had pointed out that the agro-processing sector is by far
the most significant component in the agro-food industry and covers a
broad area of postharvest activities, packaged agricultural raw materials,
industrial and technology intensive processing of intermediate goods and
the fabrication of final products derived from agriculture. To this end,
the Agro-foods industry plays a fundamental role in the creation of
income and employment opportunities in developing countries.
Supporting this view, Cervantes-Godoy and Dewbre (2010) opined that
proactive utilisation of agricultural resources of any nation could help
promote her economy. It could enhance increase in the GDP, provide
food and employment for the populace and reduce poverty
In line with the above assertion, Olaoye (2014) argued that strong
synergies exist between Agrobusiness, agricultural performance and
poverty reduction for Africa. Efficient Agribusiness may stimulate
agricultural growth and strong linkages between agribusiness and
smallholders can reduce rural poverty thereby promoting food security.
A focus on value addition in agribusiness is therefore central to existing
strategies for economic diversification, structural transformation and
technological upgrading of African economies. Such a focus can initiate
faster progress towards prosperity, by affecting the bulk of the
continent’s economic activities and by harnessing critical linkages
between the major economic sectors.

Table 2.1 Agricultural commodities produced in various

Geopolitical zones of Nigeria
Zone Unprocessed Processed
Northcentral Soybean, yam, Soya oil and meal,
cassava, beniseed, canned fruit, orange
groundnut, neem juice, vegetable oil,
fruit, honey, mango, Yam flour, cassava
cashew, palm kernel, flour, maize flour.
maize, sorghum,
cowpea, citrus.
Northeast Vegetable production Vegetable processing
(tomato, pepper, (tomato, pepper,
onion, etc.), oil seeds onion etc.), cotton
production lint, gum Arabic
(groundnut), gum products, cereals
Arabic production, flour, canned fruits.
cereals and cotton.
Northwest Ginger, tomato, Textiles, malt, beer,
cotton, sorghum, groundnut oil, soya
groundnut, garlic, oil, tomato paste,
gum Arabic, soybean, resin, leather,
melon, sesame, biscuits, bread,
maize, cowpea and smoked fish, dried
wheat. vegetables (pepper,
tomatoes, okra).
Southeast Oil Palm, cassava, Palm oil, cassava
yam, poultry, chips, cassava toasted
cocoyam, plantain, granules (gari), yam
banana, vegetables, flour, fruit juice,
ginger, timber, canned fish, cocoyam
cashew nut, cocoa, chips, plantain chips,
maize, melon, rubber vegetable oil, cassava
and copra. flour, honey, plantain
flour, rubber
products, cashew
products, and kola
nut.
South-south Cocoa, palm fruit, Cassava chips, palm
rubber, timber, oil, latex, cassava
cassava, crayfish and toasted granules
shrimps, non-timber (gari), cocoa powder
forest products and chocolate and
palm kernel oil and
cake.
Southwest Cassava, yam, Cassava toasted
poultry, palm granules (gari),
produce, plantain, cassava chips,
cocoa, kola, timber, plantain chips, fish
oil palm, fish and and shrimps, yam,
shrimps. timber, and chocolate.
Source: Ado (2017)
The table 2.1 shows that most of the commodities can be produced with
comparative advantage in more than one zone, while there are also some
commodities that are specific to only one or two zones, e.g. crayfish and
shrimps in the south-south zone and shrimps in the south west.
Processed products are derived from the unprocessed commodities. In
the Northcentral, there are orange juice, vegetable oil, soy oil and meal
and so on. In the Northeast and Northwest, processed commodities
include processed vegetables, cotton lint, textile, grain flour, and leather,
among others. The National Industrial Revolution Plan (NIRP)
recognizes textiles and garment sector as one of the critical sectors.
Comparative advantages in northcentral zone include relatively low cost
of production and large central production base while the northwest has
availability of irrigation facilities and cheap labour. Maize, cassava, yam
and rice rank high across the zones. Commodities specific to northern
zones include maize, cowpea, millet and sorghum. Industrial crops
include soybean, groundnut, cotton and beniseed (sesame), ginger, gum
Arabic, cashew, citrus.
Meanwhile, the major staple crops produced in Nigeria are cassava,
yam, maize, millet, rice, beans, groundnut, plantain, cocoyam and palm
oil. As long as the ugly situation of malnutrition, under-nutrition and
poverty persists in Nigeria, the problems of inadequate nutrition will
always exist. The solution therefore lies more in expanding domestic
food production than in looking outside to other nations to provide the
short-fall. Incidentally, the population has been growing faster than food
production for a long time. It expanded at an average annual rate of 2.71
percent in the last 10 years, while food production grew at the average
rate of 1.7 percent over the same period (CBN, 2015).
Nwajiuba (2000) had earlier noted that poor processing and storage of
food products in Nigeria has resulted in substantial on-farm and off-farm
post-harvest food losses estimated at 20-40 percent of most harvested
products which has led to a fall in food consumption in the country
except where food import fills the gap. In his contribution, Okolo (2006)
posit that food wastage was basically caused by poor-harvesting
techniques, poor-harvest handling, lack of adequate storage facilities,
poor packaging and transportation problem. The percentage of the food
product that is annually lost is quite high and is a pointer to the fact that
the objective of stability of food supply has not been achieved in
Nigeria.
Poor agricultural technology and service delivery environment hampers
agricultural productivity in Nigeria (Ofana, Efefiom and Omini, 2016).
Technology diffusion in farming is low. Whereas Igwe (2008)
establishes the positive link of technology diffusion in the cultivation of
rice and yam in Nigeria, the low use of appropriate farming technology
and poor agricultural service delivery environment combined with lack
of incentives for private sector led input chain development severely
hampers the development of competitive farming and agribusiness. This
also severely impedes the growth of local input and equipment
manufacturing as well as efficient and cost-effective procurement and
distribution system. The immediate outcome is that the sector is a low
input and output technology enterprise and thus, reducing agriculture to
become labour-driven, farmers having poor skills and lacking processing
and value-added content, leading annually to heavy post-harvest losses.
According to CBN report (2012), analysis of the National Accounts of
Nigeria showed that value-added in the agricultural sector comprising
crops production, livestock, forestry and fishing continued to dominate
output in the economy during 2009 and 2010. The sector accounted for
N10.31 trillion in nominal terms of total value-added in 2010, compared
with N9.18 trillion achieved in 2009 and N7.98 trillion in 2008. This
represents a real growth rate of 5.82% for 2010, compared to 5.88% for
2009 and 6.27% in 2008. The structure of agricultural production during
the period showed dominance of crops production which accounted for
over 89% of the total agricultural value-added during the period under
review. This is followed distantly by livestock with a share of a little
over 6.0% of agricultural production.
In terms of contribution to GDP, the agricultural sector’s share of GDP
registered 40.87% in 2010 down from 42.13% in 2008 and 41.70% in
2009. This makes agriculture the most dominant sector of the Nigeria
economy. Crop production sub-sector constituted the most important
component of the agricultural sector of Nigerian economy in terms of
contribution to output growth and as a source of employment and
livelihood to most rural dwellers. The sub-sector’s output growth in
2010 stood at 5.77% as against 5.83% in 2009 and 6.22% in 2008. In
terms of contribution to growth, crop production accounted for 26.89%
of total GDP growth in 2010 compared to 31.45% in 2009 and 38.96%
in 2008. The sub-sector’s share of real GDP was 37.16% and 36.40% in
2009 and 2010 respectively.
The output in nominal terms of livestock, forestry and fishing sub-
sectors totaled N1, 114.65 billion in 2010, from N985.38 billion in 2009
and N866.60 billion in 2008. As share of GDP, it contributed 4.47% in
2010; 4.54% in 2009 and 4.57% in 2008. Livestock production grew by
6.45% in 2010 down from 6.48% in 2009 and 6.80% in 2008. Similarly,
fishing output quickened from 5.96% in 2008 to 6.17% and 6.57% in
2009 and 2010 respectively. In the same vein, forestry production,
decelerated to 5.77% in 2010 from 5.85% in 2009 and 6.10% in 2008.
In order to improve quality of food crops such as rice produced in
Nigeria Awotide, Fashogbon and Awoyemi (2015) made an astonishing
revelation that lately, Nigerian government have ensured modern large
scale processing machines were imported into the country by notable
companies such as Olam, Veetee and Ebony rice mill. This large scale
rice processing plants will require continuous supply of large quantity of
paddy rice all the year round. The authors stressed further that the
growth and development of Nigeria agro-allied industries especially
those that are into rice processing is very important to the nation’s
overall development agenda. Many foreign direct investments have been
attracted into Nigeria, especially to boost rice production and processing
in order to make the nation self-sufficient in rice production and for
export. The adoption of contract farming to ensure adequate supply of
raw materials to agro-industries in Nigeria especially rice processing
plants is still relatively a new idea. However, it is believed that this is a
good step in the right direction, if one examined it from the point of
view of industrial growth and development. However, deep quantitative
empirical analysis would be required to actually pin down its effect
(positive or negative) on the welfare of the participating farmers.
2.5 Empirical Review

Muhammad-Lawal and Atte (2006) in their study focused on the growth

of the agricultural sector of the Nigerian economy. Efforts were made to
highlight factors affecting domestic agricultural production. Descriptive
statistics and regression analysis were the major tools of analyses in this
study. The study showed that the overall agricultural production average
growth rate was 5.4% and that GDP growth rate, population growth rate,
and the Consumer Price Index were the main factors affecting domestic
agricultural production. This study recommended the need to increase
per-capita productivity through the introduction of improved technology
in agricultural production.

Oji-Okoro (2011) examined the impact of the agricultural sector on the

Nigerian economy. The panel of data used was sourced from the
statistical bulletin of the Central Bank of Nigeria and World Bank’s
development indicators, multiple regression was used to analyze the
data, the result indicated a positive relationship between Gross Domestic
Product (GDP) vis a vis domestic saving, government expenditure on
agriculture and foreign direct investment between the period of 1986-
2007. It was also revealed in the study that 81% of the variation in GDP
could be explained by Domestic Savings, Government Expenditure and
Foreign Direct Investment. In order to improve the agricultural sector it
is recommended that government provides more funding for agricultural
universities in Nigeria to carry out researches on all areas of agricultural
production this will lead to more exports and improvement in the
competitiveness of Nigeria agriculture production in international
markets. The Central bank of Nigeria should also come up with a stable
policy for loan disbursement to farmers at a reasonable interest payback.

Okereke and Onyeabor (2011) assessment of capacity utilization of

agro-allied industry in the country. Time series data were collected from
the statistical bulletin of the Central Bank of Nigeria on annual capacity
utilization of agro-allied industry and some macro-economic and
institutional factors thought to be associated with level of capacity
utilization. The data covered a period of 30 years spanning 1976 – 2005.
Analysis of data were done using both descriptive statistics (average,
standard deviation and coefficient of variation), and inferential statistics
(regression analysis). Also graph was used to assess the pictorial trend in
average capacity utilization of agro-allied industry in Nigeria within the
period under review. Result showed a general decreasing trend in
capacity utilization of the industry within this period. The trend line
fitted with regression analysis yielded a coefficient of –1.34 which tested
highly significant at 1% indicating that capacity utilization has been
witnessing downward trend over the years. Furthermore, the result of
regression analysis showed that interest rate, exchange rate and inflation
rate yielded negative coefficients while capacity utilization of power
sub-sector had a positive coefficient. Based on the overall result, it was
recommended among other things that the federal government should
formulate and implement policies that will check the volatility of these
factors as a way of ensuring sustained growth in capacity utilization of
agro-allied industries in Nigeria.

In another study by Ugwu and Kanu (2011), the effects of economic

reforms on the agricultural sector was examined alongside its
fundamental roles of food security, supply of raw materials to
industries ,provision of market, employment and foreign exchange as
well as generation of savings for investment in agriculture and other
sectors. It revealed that Agriculture contributed minimally during the
period in terms of output, market, foreign exchange and capital
formation or transfer as a result of policy instability, poor coordination
of policies, poor implementation and mismanagement of policy
instruments and lack of transparency. It recommended that an enduring
genuine democracy and good governance should be allowed to thrive in
Nigeria in order to achieve poverty reduction, sustainable livelihood and
food security which will guarantee comprehensive economic
development and attainment of the Millennium Development Goals
(MDGs
Oyebamiji, Ayinde, and Akinsola (2013) analysed the impact of staple
food imports and export on Nigeria economic growth. It uses time series
data of 40 years to examine the effect of agricultural import and export
on Nigeria economic growth. The main objective of this study is to
examine the linkage, dimension and contribution of agricultural import
and export to Nigerian economic growth. Time series data were
employed for the studies which were sourced from World Bank African
indicator and Central bank of Nigeria Trend analysis, Granger causality
test were the analytical tools employed. This study used the granger
causality multivariate and based on the pair wise Granger procedures to
analyze the relationship between agricultural import and export
economic growth in Nigeria from 1970 to 2010. Results show that there
is variation in trend pattern of agricultural import, export and growth,
but there exists unidirectional causality.

Ofana, Efefiom and Omini (2016) investigated the constraints to

agricultural development in Nigeria using time series data spanning the
period 1970 – 2010 and contemporary econometric methods of unit root
test, co-integration and error-correction mechanism. Empirical findings
reveal that rainfall, exchange rate and food export (lag one) are the most
significant positive determinants of agricultural output in Nigeria.
However, food imports, diversion of funds meant for agricultural
purposes and low technology diffusion in agriculture are among the
factors identified as constraints to agricultural development in Nigeria.
The study recommends among others, maintenance of stable and
favourable exchange rate regime, and the pursuance of programmes that
will bolster partnerships between research institutions and other stake
holders in agriculture as a route to facilitating agricultural development
and hence, economic development in Nigeria.

Oraka and Ocholi (2016) analyzed the economic impact of agro-allied

industries on rural dwellers in Benue State, Nigeria. A total of 366
respondents were used for the study. Data were collected through well
structured questionnaire and were analyzed using descriptive statistics
and inferential statistics. The result of Mann-Whitney (u) statistics
showed that the average total revenue for respondents that had agro-
allied industries (N38,084.27) was higher than those who do not have
agro-allied industries (N37,234.04) which implied that the respondents
in areas where there were agro-allied industries, made more profits from
their economic activities than those in areas where there were no agro-
allied industries. The study recommended that managers of agro-allied
industries should improve on their employment rate and increase the
wages of their workers so as to attract the rural dwellers and improve
their living condition.

In a more recent study, Ado (2017) sought to examine the role of

agriculture in cushioning the effect of economic recession in Nigeria.
The researcher argued that agriculture creates wealth along the entire
value chain through production, value addition and industrialization.
Import substitution and export of commodities or processed goods
conserve foreign exchange and enhance balance of trade. Agricultural
enterprises include: input production and supply (fertilizers, improved
seeds, farm implements, agrochemicals, day old chicks/fingerlings
production and animal feed production), staple food crop and animal
production, forestry and commodity processing and storage. Others are
agricultural commodity marketing, agro-industry/manufacturing,
agricultural commodity export and agricultural support services.
Livestock (cattle, sheep, goat, rabbitry and poultry), fish catch and
aquaculture are other areas of investment. Apiculture (bee keeping) is
another primary commodity for investment. Key downstream
commodity activities include processing into intermediate or final
(finished) products, and marketing/distribution through domestic and/or
export trade. Some of the available value added products for cereals
include cornflakes, sphagetti (taliya), gruel (kunun tsamiya), porridge
(fate), Masavita (tsaki), corn flour (kamu), confectioneries (bread, cake,
chin-chin, doughnuts), etc. Other areas for value addition for cereals
include couscous (Burabisko), fura, etc. Possible value addition for
pulses include baked beans (canned snack), pudding (alala), pasta
noodles, weaning foods, fritters (kosai), dumplings (danwake), soy milk,
etc. For soft drinks, zobo, tamarind, marula, etc drinks are possible.
 CHAPTER THREE
RESEARCH METHODOLOGY
3.0 Preamble
This chapter deals with the logical steps taken in carrying out the
research, which enables the research to answer some questions raised in
the problem statement. In this chapter subtopics like research design,
sources of data, techniques (both analytical and quantitative) used for
data analysis are considered.

3.1 Research Design

The research design used in this study is the quasi-experimental design
also referred to as empirical review. Quasi-experimental is defined as the
systematic process of collecting accounted information or documented
events which is converted to data in order to ascertain the level of
economic relationship between the investigated variables. This is used
because the study intends to investigate the strength of relationship
between two or more economic factors on which empirical survey is
based.

3.2 Sources of Data

The secondary data was mainly used in this study. Secondary source
refers to those types of data obtained from materials that contain an
account of an event or phenomenon. It is also information that has been
documented or from an already published or unpublished work.
Secondary source used includes journal, newspapers, textbooks, CBN
Journals, and statement of account of 1980-2016, magazines,
unpublished materials etc.

3.3 Technique for Data Analysis

This study will make use of regression analysis to test the stated
hypothesis. Regression analysis includes any techniques for modeling
and analyzing several variables when the focus is on the relationship
between a dependant variable and one or more independent variables.
More specifically, regression analysis helps to understand how the
typical value of the dependent variable changes when any one of the
independent variables is varied, while the other independent variables
are held fixed (Freedman, 2005).

Reasons for the Use of Regression

I. It is widely used for prediction and forecasting, where its use has
substantial overlap with the field of machine learning.
II. It is also used to understand which among the independent
variables are related to the dependent variable and to explore the
forms of these relationships.
III. In restricted circumstance, regression analysis can be used to infer
causal relationships between the independent and dependent
variables (Wikipedia.org).

3.5 Specification of Model

The regression analysis makes use of a major tool which is the linear
regression. In linear regression, the model specification is that the
dependent variable(y) is a linear combination of the parameters of
independent variables (x, x1) (Freedman, 2005).
That is Y= F(x)
In linear regression for modeling “n” data points there is an independent
variable "x" and parameters, b0, b1, bn
Straight line: y= bo+ b1x1+Ei,i=1,…………,n.
For the purpose of this study the model specification are as
follows:
H01: There is no significant relationship between agriculture sector
output and Nigeria's economic growth.
H02: There is no significant relationship between food and beverage
sector output and Nigeria's economic growth
H03: There is no significant relationship between wood and wood
products sector output and Nigeria's economic growth.
H04: There is no significant relationship between pulp, paper and paper
products sector output and Nigeria's economic growth
The model for this hypothesis is constructed as follows:
 Gross domestic product = f (agriculture sector output, food and
beverage sector output, wood and wood products sector output,
pulp, paper and paper products sector output)
Mathematically, it can be restated as
GDP= b0 + b1AGR +FBS+WWP+ PPPS+µ
Where:
b0, b1 , b2, b3, b4 are parameter estimates (I = 1, 2, 3, 4)
U1t = Error terms
b0 = intercept of GDPt model
b1= estimate of agriculture sector output
b2= estimate of food and beverage sector output
b3= estimate of wood and wood products sector output
b4= estimate of pulp, paper and paper products sector output
t = number of years
µ=stochastic (error) term

APRIORI EXPECTATION
The output of the agriculture and other agricultural manufactured
based sectors are expected to have positive and significant impact
on GDP since agriculture is one of the main stay of Nigeria
economy after oil sector. Therefore an increase in agricultural
production as indicated by Adu (2017), Muhammad-Lawal and
Atte (2006) and Oji-Okoro (2011), will lead to increase in GDP.

3.5 Model Evaluation

To evaluate the relationship between the model estimates, the use of
correlation coefficient, coefficient of determination and adjusted are
considered.

3.5.1 The Correlation Coefficient (r)

The correlation coefficient denoted by r, is defined as the measure of the
degree of or extent of linear relationship between two coefficients takes
value ranging from -1 to +1. Point closer to -1 mans absence of
correlation between the variables, while point tending towards +1 shows
the presence of correlation between the variables.

3.5.2 Coefficient of Determination

This evaluates the goodness of fit with respect to the sample observation
X and Y. This is measured to determined the proportion of the variation
in "y" which is explained by variation in "x".

3.6 Test of Significance of Parameter Estimates

In order to confirm the validity of the results obtained using the
formulated methods of analysis discussed so far, the results will be
subjected to the following tests of significance:
i. The standard error test
ii. The student t-test
iii. The F-test
(i) The Standard Error Test: this test enables us to determine
whether or not of parameter estimates the econometric model is
significantly different from zero, whether the sample from which
they are estimated height have come from a population where
parameters are zero (such that b0 = 0, b1 = 0).
Decision Rule: If the standard error of the parameter estimates is
smaller than half the numerical value of the parameter estimate (ie) if
S(b1) < b1½ it is statistically significant.

Student’s T-Test
This t-test’s function is to test the reliability of parameter estimate. This
is done by comparing the theoretical value of i.e. t 0.025 n-k with the
calculated value of t*. The test is calculated as:

b1: t* =  b1
S (b1)
While
t0.025 (n-k) = n (sample size) – k (number of variable)
Decision Rule: If the t* < t0.025 (n-k), we accept the null hypothesis that
b1 is statistically insignificant. But if t* > t 0.025 (n-k), then we reject the
null hypothesis that b1 is significantly different from zero.
F-Test
The Fisher’s ratio of F-ratio is used to test for joint or overall significant
of the parameter estimates. In other words, the f-test tries to ascertain
the level of change in the dependent variables that can be explained by
the joint change in the independent variables. The calculated value of F
(Fc) is compared with the theoretical F (as the chosen level of
significant) with V1 = K – and V2 = n – k degree of freedom (Fisher,
1954).
Decision Rule: If FC > F-tabulated, reject null hypothesis. If F C < F-
tabulated, accept null hypothesis.
A 95 percent confidence interval i.e. 0.05 for a two-tailed test will be
used.