Empirical Analysis Of Federal Government Expenditure Policy On Agriculture In Nigeria

ABSTRACT

The study assessed the trend, structure, composition, determinants and effectiveness of Federal

Government agricultural expenditure policies and the implications of these policies from 1960-

98.The study covered the Nigerian nation and used federal level time series data to achieve the

set down objectives. The primary analytical method consisted of descriptive analysis, appropriate

pictorial diagrams, line and pie charts. Stationarity, co – integration /error correction model

(ecm) and granger causality approaches were also employed to verify the characteristics of the

data, ascertain the existence of causality/determinants of agricultural expenditure and long run

relationship, while the Tin Bergen Model was employed to determine the effectiveness of

Federal Government agricultural expenditure policies. The study revealed that the real Federal

Government expenditures on agriculture increased enormously since 1970, from N152.0 m to a

peak of N 2,473.0m in 1980 due to the oil boom. The proportion of the Federal Government

expenditure on GDP fluctuated during the study period, rising from 0.1 per cent in 1960 to a

peak of 3.4 per cent in 1987, followed by gradual decline to 0.4 per cent in 1998, implying a

decline in agricultural growth. The recurrent capital expenditure ratio stood at 33: 67 in the last

decade of the study period, compared to a ratio of 88:11 obtained from 1960-67. The dwindling

proportion of recurrent expenditure, particularly overheads, had grave consequences for the

sustenance of the numerous agricultural projects on board. The structure of expenditure was

generally weakened, with undue emphasis on investments in inefficient parastatals, which prior

to SAP engaged in direct production. The crop sub-sector was observed to have crowded other

sub sectors such as livestock, fisheries and forestry. The mean civilian total expenditure put at

N664.90m was about 1.5 times the average under the military regimes, even though the t-test of

significance carried out on these means revealed that they were not significantly different from

each other. Expenditure volume during the 1970-85 was about twenty three and two times those

of the immediate preceding and proceeding periods, respectively. The Coefficient of Variation

(COV) analysis showed that expenditures were more stable and less volatile during the first era

(1960-69). The review of expenditure relative to selected sectors of the economy showed that the

mean defence and administration expenditures were four times and two times those of

agricultural expenditures. The share of agricultural expenditure in total expenditure was an

average of three per cent compared to ten per cent, nine per cent, six per cent and two per cent

for defence, administration, education and health respectively. The Product Moment Correlation

analysis indicated a positive correlation, implying that these expenditures tended to move in the

same direction and went to confirm the use of the “across – the – board addition/cut expenditure

technique” which had been a disincentive to sectoral peculiar expenditure needs. The causality

tests indicated that the real government agricultural expenditure in Nigeria had been largely

determined by the level of public financial resources in the Country, while the ecm revealed that

there was no long term neutrality of change between agricultural expenditures and the tested

determinants. The policy effectiveness elasticity further showed that public expenditure policy

on agriculture was generally ineffective, contributing a marginal increase of 0.03 per cent to

agricultural output from every 10 per cent increase in agricultural expenditure.