An Assessment of the Contribution of the Agricultural Sector to the GDP of Kaduna State

Cite this article as: Wali Adam W., Nuhu A., & Mahmud B. M. (2023). An Assessment of the Contribution of the Agricultural Sector to the GDP of Kaduna State. Zamfara International Journal of Humanities, (2)2, 65-72. www.doi.org/10.36349/zamijoh.2023.v02i02.007.

An Assessment of the Contribution of the Agricultural Sector to the GDP of Kaduna State

Wali Adam W.¹, Nuhu A.², Mahmud B. M.³

¹Ministry of Education, Kaduna State, Nigeria
²Department of Environmental Management and Toxicology, Federal University of Petroleum Resources, Effurun, Warri Delta State, Nigeria
³Department of Science Education (Geography), Kaduna State University, Kaduna Nigeria

Corresponding Author: adamwalee21@gmail.com
GSM: 08031317470

Abstract

The performance of agriculture in every economy cannot be overemphasized. This is especially true as it forms part of the macroeconomic variables or growth indicators –the GDP. This paper assessed the performance of the agricultural sector on the growth or otherwise of the GDP of Kaduna state. The Secondary type of data was used for the assessment, where data from the outcome of the report of the Kaduna State Bureau of Statistics in collaboration with the National Accounts was collected and used. The data is a time series (2013-2015). The report covers major aggregates of State GDP under forty-two (42) activities at current 2013 to 2014 prices; but with more emphasis on the agricultural sector. KDGDP was computed as gross output minus intermediate consumption. Therefore, the study found out that the agricultural sector’s performance was significant, playing a vital role in the GDP of Kaduna state. Despite that in some quarters of 2014, some subsectors of agriculture recorded a decline, yet, the figures rose with some subsectors such as crop production and fishing in 2015. This concludes that the agricultural sector’s performance on the GDP of Kaduna state is an economic key player therein. And therefore remains the major contributing sector in Kaduna State over the three years.

Keywords: agricultural sector, assessment, contribution, economy, gross domestic product (GDP)

Introduction

Agriculture is one of the key sectors of every economy, for it contributes a substantial part of the growth indicators therein. Particularly in Nigeria, agriculture is described as the sector with an output of not less than 70% of the GDP, especially before the discovery and commercial activities of petroleum products. It is the bedrock of economic growth, development and poverty eradication in the developing countries. It has also been regarded as the engine and panacea of economic prosperity (Kamil, 2017). Gunner Myrdal (1984), stated that the battle for long-term economic growth will be won or lost in the agricultural sector. However, how this path leads to economic prosperity is still subject to debate among development specialists and economists. Agriculture has several multiplier effects on the Nigerian economy through what it contributes. This ranges from the provision of food (for local consumption and export), employment generation and foreign exchange activities, as well as serving as a linkage to other sectors such as industry. Generally, the agricultural sector is expected to be one of the determinants of the growth of a nation’s economy.

Particularly, agriculture stimulates the growth of Nigeria’s GDP in several facets. For instance, with agricultural products, many manufacturing industries function such as the textiles industry (for cotton), the food and beverages industries, the biochemical industries and so forth. However, agriculture in Nigeria is faced with a series of challenges such as problems with the land tenure system, livestock diseases such as tsetse fly, lack of credit facilities and so forth (Galadanci, 2010).

Statement of the problem

Nigeria’s Agricultural sector is handled by the Ministry of Agriculture and Rural Development with the same mandate of ensuring the sustainability of agricultural activities. Meanwhile, the state agricultural sector is under the watchdog of the state Ministry of Agriculture and Rural Development with the same mandate as at the national level. The performance of the agricultural sector is going to be assessed in this paper, specifically on the GDP of Kaduna state. The choice of the study area follows the fact that Kaduna state is one of the states in Nigeria where fertile land for agriculture is embedded. Therefore, the study assesses whether the agricultural sector performs positively or negatively in stimulating the GDP growth of Kaduna State. Data from the report of the Kaduna State Bureau of Statistics in collaboration with the national accounts was used.

Objectives of the study

The study aims to assess the performance of the agricultural sector to the GDP of Kaduna state. Therefore, the study has the following objectives:

To assess the agricultural subsector’s contribution to the GDP, to assess the agricultural sector’s percentage distribution at the current basic price, to compare the contribution of three sectors of the economy of Kaduna state, to compare agriculture’s percentage share to the GDP of Kaduna state and to show the agricultural sector’s growth rate.

Literature Review/Theoretical Framework

In 2009, OECD Ministers adopted a declaration on green growth. In the declaration, they observed that “economic recovery and environmentally and socially sustainable economic growth are the key challenges that all countries are facing today” (OECD, 2009). The past decade has been one of agro-pessimism. The promises that agricultural development seemed to hold did not materialize. This pessimism seemed to coincide with pessimism about Sub-Saharan Africa. Especially for Sub-Saharan Africa, the hope was that economic development would be brought about by agricultural development. After the success of the green revolution in Asia, the hope was that a similar agricultural miracle would transform African economies. But this hope never materialized, agricultural productivity did not increase much in SSA (figure 1), and worse, the negative effects of the green revolution in Asia became more apparent, such as pesticide overuse and subsequent pollution. Also in Asia, the yield increases tapered off (Gerdien, 2007).

The Nigerian economy in past decades has strived in the agricultural sector. The sector is reputed as the mainstay of the economy in the early 1960’s. It is seen as the key driver for growth and development. To further buttress the pivotal role the sector plays in the Nigerian economy, the agricultural sector is part of the Millennium Development Goals program of poverty reduction in Nigeria. In most developing countries (low and middle-income countries), the agricultural sector remains the largest contributor providing inputs, food, employment opportunities, raw materials for other industries, provision of foreign earnings from exportation of the surpluses, and more importantly the enormous advantage of the value added in the various production processes (Izuchukwu, 2011). Besides, some researchers (Gardner, 2005; Chebbi, 2010) have raised a lot of questions regarding the impact of the agricultural sector on economic growth. Lavorel et al. (2013) addressed the question raised by Gardner (2005) for 85 countries “Is agriculture an engine of growth” by investigating the causality relationship between agricultural value added per worker and gross domestic product (GDP) per capita.

However, their findings revealed enormous claims. According to them, they found a causality relationship between agricultural value added and growth for the developing countries while that of developed countries remained unclear. This fact buttresses the assumption stated earlier, that the agricultural sector has been a backbone of developing economies. Moreover, Matahir (2012) took a different stand in his study on the role of agriculture in economic growth and how it interplays with other sectors of the economy. Time series Johansen integration techniques were employed to investigate the non-causality relationship between agriculture and other economic sectors of Sertoğlu, et al.: The Contribution of Agricultural Sector on Economic Growth of Nigeria 548 International Journal of Economics and Financial Issues | Vol 7 • Issue 1 • 2017 Tunis. From their findings, it was posited that policymakers should see agricultural sectors as vital tools in their analysis of inter-sectoral growth policies. Though, the agricultural sectors have not benefited immensely from the growth of the service and commerce sector of Tunisia its contributions to economic growth of the economy can never be overemphasized. This lends support to the study carried out on Thailand’s economy by Jatuporn et al. (2011). They are also of the opinion that policymakers should embrace agriculture and see it as a major contributor to Thailand's economy.

Furthermore, despite the political issues in the small island of Northern Cyprus, Katircioglu (2006) in his analysis of the impact of the agricultural sector on the economy of Cyprus posited the importance of the agricultural sector on the economy of Northern Cyprus. According to his findings, the agricultural sector has a crucial role to play in the development of any economy, especially that of the tiny island of Northern Cyprus. His study revealed that there exist bidirectional and long-run dynamic causality relationships between the macroeconomic variables. That is, the feedback from the agricultural sector has a huge role to play in the development of the economy. However, studies revealed that (Katircioglu, 2006; Dim and Ezenekwe, 2013; Jatuporn et al, 2011; Tiffin et al., 2013) most developing countries of the world are predominantly agrarian and rural. A substantial proportion of the Nigerian population dwells in remote areas, and this brought the countryside to the attention of policymakers and decision-makers. After the discovery of oil in the 1970s, a decline in the agricultural sector’s productivity/output was recorded, in terms of its contribution to real GDP (RGDP).

Empirical research shows that the share of the agricultural sector in GDP increased from 29.2% to 33.3% between 1970 and 1980. According to Aigbokhan (2001) before the oil boom in the 1950s and 1960s, the agricultural sector accounted for over 63% and 54% of RGDP respectively. There has been no consensus in the literature on the subject of agricultural sectors' contribution to economic growth. Izuchukwu (2011) found a positive causality i.e. a positive relationship between the agricultural sector and the Nigerian economy while Dim and Ezenekwe (2013) found contrary results. Several scholars found positive causality using varying econometric techniques ranging from cross-sectional to panel approach (Oluwatoyese, 2013; Ahungwa et al., 2014; Olajide et al., 2012; Ebere, 2014) while (Dim, 2013; Aggrey, 2009; Oluwatoyese & Applanaidu 2013) found a negative relationship between agriculture and economic growth. According to Alene et al. (2005), Nigeria is endowed with a large deposit of agricultural resources, arable land for the cultivation of crops and the rearing of animals. In the 1960s and 1970s, the agricultural sector constituted over 65% of total exports.

The Nigerian agricultural sector was renowned for the export of cash crops (crops and produce with export value) namely cocoa, rubber, hides and skin, and groundnut palm among a host of many others. The agricultural sector holds enormous potential for the growth and economic development of the country. In a similar study carried out by Bekun (2011) titled “Economics of Yam Marketing in Minna, Nigeria.” The study revealed that over 31.5 million metric tons of yams were produced in the study areas. This is overwhelmingly huge, enough to engage more than half of the population in the coverage area. Regardless of the vast potential the agricultural sector possesses, the industry endowment has not been fully harnessed.

There has been a downturn in the late 1970s and figures have dropped significantly to 20% at the end of the 1990s. The decline in the agricultural sector’s contribution is explained by the oil discovery in the 1970s. The 1970s outlined the period when oil was discovered in commercial quantity. This discovery has led to the neglect of the agricultural sector and more focus on the petroleum sector (oil sector). This one way or another turned Nigeria into an oil-dependent and monoculture economy. With the agricultural sector being so productive with arguably massive potential, why then has it been neglected? The answer to this question prompts the motivation for this study. Recent literature is attempting to estimate the relationship between the agricultural sector and economic growth, doing so using cross-sectional data. We argued that this methodology is flawed in the sense that the relationship between the agricultural sector and economic growth is best captured over time. Given the so few studies done using time-series data, there is a gap in explaining the real effect of the agricultural sector on economic growth in Nigeria. This study aims to fill this gap. This study seeks to estimate the effect of the agricultural sector on economic growth under the time series framework, using the vector error correction model (VECM) approach. We seek to investigate the existence of a long-run relationship between the agricultural sector and economic growth using the Johansen co-integration test. By extension, we would evaluate the possible reasons for the neglect of this sector beyond the oil boom in the 1970s and the impediments to the growth of the sector in Nigeria

Gross domestic product (GDP) is a monetary measure of the market value of all the final goods and services produced and sold (not resold) in a specific period by countries. Due to its complex and subjective nature, this measure is often revised before being considered a reliable indicator. GDP (nominal) per capita does not, however, reflect differences in the cost of living and the inflation rates of the countries; therefore, using a basis of GDP per capita at purchasing power parity (PPP) may be more useful when comparing living standards between nations, while nominal GDP is more useful comparing national economies on the international market. Total GDP can also be broken down into the contribution of each industry or sector of the economy. The ratio of GDP to the total population of the region is the per capita GDP (also called the Mean Standard of Living). GDP definitions are maintained by several national and international economic organizations.

The Organization for Economic Co-operation and Development (OECD) defines GDP as "an aggregate measure of production equal to the sum of the gross values added of all resident and institutional units engaged in production and services (plus any taxes, and minus any subsidies, on products not included in the value of their outputs)". An IMF publication states that, "GDP measures the monetary value of final goods and services—that are bought by the final user—produced in a country in a given period (say a quarter or a year)." GDP is often used as a metric for international comparisons as well as a broad measure of economic progress. It is often considered to be the "world's most powerful statistical indicator of national development and progress".

However, critics of the growth imperative often argue that GDP measures were never intended to measure progress and leave out key other externalities, such as resource extraction, environmental impact and unpaid domestic work. Critics frequently propose alternative economic models such as doughnut economics which uses other measures of success or alternative indicators such as the OECD's Better Life Index as better approaches to measuring the effect of the economy on human development and wellbeing.

Brief Description of the Study Area

The study area of the paper is Kaduna, which is the capital city of Kaduna State. It is the former political capital of northern Nigeria. It is located in northwestern Nigeria, on the Kaduna River. It is a trade centre, and a major transportation hub as the gateway to northern Nigeria, with its rail and important road network. The population of Kaduna was put at 760,084 as of the 2006 Nigerian census (NPC, 2006). Rapid urbanization since 2005 has created an increasingly large population, now estimated to be around 1.3 million. In terms of industrial makeup, agriculture is one of the major industrial key players in Kaduna, and as such, the Bank of Agriculture has its headquarters in the city. Some of the main agricultural exports include cotton, peanuts, sorghum and ginger to mention but few.

Overview of GDP of Kaduna State in 2015

In 2015, the Gross Domestic Product for Kaduna State at the basic price was ₦2.25 trillion, compared to ₦2.02 trillion in 2014 and ₦1.92 trillion in 2013. The GDP grew by 11.18% in 2015, compared to 4.99% growth recorded in 2014 (year on year) in real terms. The economy of the State can better be understood when viewed sector by sector. The results clearly show the sectors that contributed more and those that grew over three (3) years. The structure and quantum of the economy of Kaduna State have been estimated over the years using UN reliable parameters, which have not indicated the g growth pattern of the state economy thereby leading to faulty policy formulation and implementation. To better understand the productive sectors of the state economy, this administration deemed it necessary to conduct a State Gross Domestic Product (SGDP) survey, which is the first of its kind in the State. GDP is a key parameter for measuring the performance of any economy as it p provides a measure of the quantum of economic activities within a defined locality. The results of the GDP survey have been Insightful. We now know that Kaduna State.

Methodology

As mentioned earlier, a secondary type of data was used for the assessment, where data from the outcome of the report of the Kaduna State Bureau of Statistics in collaboration with the National accounts was collected and used. The data is a time series (2013-2015). The report covers major aggregates of State GDP under forty-two (42) activities at current 2013 to 2014 prices but with more emphasis on the agricultural sector. KDGDP was computed as gross output minus intermediate consumption. Both gross output and intermediate consumption are detailed below for each activity:

1. AGRICULTURE: Under Section A, Division 01-03 of ISIC rev 4, Agriculture is divided into four main activities. BOTTOM UP Approach method was used

1.1 CROP PRODUCTION: Section A, Division 01 of ISIC Rev 4 Gross Output: Quantities produced multiplied by farm gate price, less losses (wastages). Intermediate consumption: Seeds, fertilizer, pesticides, hire of farm implements and simple farm tools that are used up in one farming season.

1.2 LIVESTOCK PRODUCTION: Section A, Division 01 of ISIC Rev 4 Gross Output is calculated using the following Live animals and their produce + imports = animals slaughtered and their produce – animals which died of natural causes + exports + change in animal stock. Intermediate Consumption: Value of animal feeds as input in the production of livestock and livestock products (such as broiler starter concentrate, breeder concentrate, ground cake, guinea corn etc.)

1.3 FORESTRY: Section a, Division 02 of ISIC Rev 4 Gross Output: Value and quantity of timbers of various types (firewood, charcoal, uncultivated materials gathered). Other forest products are obtained using the expenditure approach. Sawn-logs and other wood products categories are obtained using the production method, whereby; the quantity of logs produced is multiplied by the price per cubic of log. Intermediate consumption: Expenditure on seeds and sapling, fuel oils, lubricants, feed, hand tools and spare parts, payments for contract work and other services.

1.4 FISHING: Section a, Division 03 of ISIC Rev 4 Gross Output: Measured by multiplying quantity in kilogram by the average price to obtain the value of production. Intermediate consumption: Intermediate consumption here is captured according to expenditure on fingerlings, nets, feeds and other operating expenses.

Data presentation, analysis and discussion of findings

Fig. 1: AGRICULTURE SECTOR YEAR ON YEAR CONTRIBUTION (%)