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Effect of State Government Expenditure on Crop Production
Chapter One
Introduction
1.1 Background to the Study
Agriculture plays a prominent role in improving the lives of the people
and also ensuring food sufficiency in a country. Agriculture serves as source
of revenue to the country and also creates employment opportunities especially
for people in the rural areas. This is more prominent in African continent
where some of the countries depend on agriculture for survival. Chauvin, Porto
and Mulangu (2017) noted that, in Africa, international market conditions
combine with domestic market configurations in shaping agriculture growth and
poverty reduction. Prior to the discovery of oil in commercial quantities in
1970s, agricultural sector has been the mainstay of Nigerian economy. This
sector has the potential of creating employment opportunities and reducing poverty
level in the country. The role of agriculture in economic growth and
development in any nation is crucial and it is a sign of prosperity and
development. These roles include but not limited to ensuring food security to
the ever growing population, sources of raw materials for the industries,
earner of foreign exchange, source of income, savings and investment for the
farmers, improvement in their living standards, provide market for their
produce (Mohammed, 2018). According to International Fund for Agricultural
Development, (IFAD, 2017) report, Nigeria is predominantly a rural economy with
over 60 percent of the population living in rural areas, 90 percent of whom are
engaged in subsistence farming and in addition, rural poverty was estimated at
44.9 percent in 2013 against an urban poverty incidence of 12.6 percent. It is
in this light that Madu and Yusof (2015) stated that, in most of the
underdeveloped and developing countries (Nigeria inclusive) development remain
one of the major challenges and have been described as the major bottleneck to
their socio-economic growth, and sustainable development; most especially at
the rural level. It is important to state that funding remains a crucial factor
in ensuring food sufficiency in the country. The importance of funding was
stretched by African leaders in 2003 when they met in Maputo, Mozambique to
declare that African leaders should spend at least 10% of their budget on
agriculture to boost food production and generate employment opportunities
(Daily Trust, 2018). Public expenditure is a veritable instrument used by
government at federal, state and local levels in order to achieve
macro-economic policy objectives. This instrument has become a prominent tool
of fiscal policy especially in developing countries where taxable income is
very low. It is not out of place to say that fiscal policy helps to achieve
full employment and also maintain high rate of economic growth (Bhatia, 2012).
This explains why government sees fiscal policy such as spending and taxation
as effective instruments of correcting market failure. Prior to economic
depression of 1929, classical economists like Smith, Ricardo, Malthus and Mill
argued for a smaller role of government. Smith (1776) noted that government
function should be reduced to that of protecting the society from violence and
invasion; duty of establishing administration of justice; and erection of the
public works which facilitate the commerce of any country, such as good roads
and bridges. This argument of the classical economists was threatened by the
economic depression of 1930s that hit the industrialized nations of the World;
the economic crisis was resolved through the Keynesian solution. Keynes (1936)
advocated for increased government expenditures and lower taxes to stimulate
demand and pull the global economy out of the depression. Since then, public
expenditure has become an indispensable tool especially in developing countries
like Nigeria. Public expenditure either recurrent or capital expenditure can
influence economic growth and agricultural growth (Jumare and Yero, 2017;
Olukayode, 2009; Thompson and Rita, 2016). In addition to this position,
empirical studies have shown that both capital and recurrent expenditure has
impact on agricultural growth (Mbanya, Onwumere, Eze, Nwokenekwu & Igwe,
2018; Tobechi, 2018; Uremadu, Ariwa, & Uremadu, 2018). Yusuf and Mohammed
(2017) noted that the pattern of spending in Nigeria has always tilted more
towards recurrent expenditure than capital expenditure as 2016 budget showed
that social sector, economic sector, security sector and administrative sector
take over 70 percent of the budget while meagre percentage of less than 30
percent goes for capital expenditure. In acknowledging the relationship between
public expenditure and growth, (Bhatia, 2012) stated that: In a developed
country, through economic stabilization, stimulation of investment activity and
so on, public expenditure can be expected to sustain a long term growth rate.
In an underdeveloped country, public expenditure has an additional task of
helping in reducing regional disparities, developing social overheads, and
creation of infrastructure of economic growth in the form of transport and
communication facilities, education and training, growth of capital goods
industries, basic and key industries, research and development and so on (p.
216). Nigeria economy greatly depends on crude oil production and the price of
crude oil in the international market over the years has dropped and the
production capacity has not also been spared (Abdulmalik, 2018). There have
been gradual decline in the contribution of agriculture to the country‘s
economy in spite its rich agricultural resource endowment. It is worthy to note
that Nigeria is Africa‘s largest economy with an estimated Gross Domestic
Product (GDP) of $400 billion in 2017 and South Africa, the continent‘s next
largest economy, has a GDP of $317 billion; in addition, Nigeria constitutes 71
per cent of West Africa‘s GDP and 27 per cent of the continent‘s GDP (Iweala,
2018). With these huge resources, Nigeria is expected to have developed her
agricultural sector and make it more viable.
NB: The Complete Thesis is well written and ready to use.
