Impact of Government Agricultural Expenditure on Agricultural Productivity in Nigeria

The study examined effect of government agricultural expenditure on agricultural output in Nigeria using time series data from 1981 to 2014. Having analyzed data using unit root test, co-integration test and vector error correction model, results of unit root test showed that all the variables were integrated at the first order difference. On the other hand, the Johansen co-integration tests revealed that a long-run relationship existed between agricultural output and government agricultural expenditure. Going through the vector error correction model results indicated that agricultural output adjusted rapidly to changes in total government agricultural expenditure, real exchange rate, banking system credit to agriculture, average annual rainfall and population growth rate. With respect to individual variables, average annual rainfall and domestic population growth rate were significant at 1 percent levels in affecting agricultural output in Nigeria. While domestic population growth rate lead agricultural output in Nigeria, average annual rainfall followed and then government expenditure, and finally, real exchange rate in their descending order of magnitude. As such, it was recommended that government should not only adequately fund agriculture via maintaining a healthy population but to also encourage a mechanized agricultural system by use of modern technology and inputs to boost yields in local rice production and other farm produce so as to reduce the rate of rice importation in the country. Moreover, government should ensure that meteorological agencies which forecast annual rainfalls are well funded and catered for and that their recommendations be implemented towards achieving high farm yields annually and food self-sufficiency thereby minimizing agricultural losses due to vagaries of weather in our agricultural climate.


Introduction
Economic history shows that agricultural revolution is basic precondition for economic growth, especially in developing countries [1]. Agriculture is the life blood of industrialization in the world. According to Akintunde [2], every industrialized country passed through the agrarian era. The maxim that agriculture is the hub of the Nigerian economy underscores the importance placed on agriculture as the engine for growth. Prior to the discovery of oil, the Nigerian economy was predominantly agriculture with abundance of arable land and water resources to foster agricultural development [3]. As it were, the agricultural sector contributed immensely to the Nigerian economy in provision of food for the increasing population, supply of raw materials to industries, major source of employment and generation of foreign exchange earnings [4,5]. As such, literature abound that stagnation in agricultural production accounts for the economic failure facing Nigeria, while the acceleration in agricultural productivity is the key explanation to industrialization in the developed countries [6,7]. Consequently, the development of agriculture in every country in the world (both developed and underdeveloped) requires government assistance [8]. In recent years, agricultural output in other regions have been doubling, while Nigeria has experienced a significant decline in agricultural output [9][10][11]. Consequently, following the stunt growth in agricultural output in developing countries, low agricultural investments have been seen as a major contributory factor to this development [12]. As such, government fiscal responsibility has always been seen as a fundamental stability, often viewed as prerequisite to achieving sustainable output growth [13]. Hence, the potential contribution of agriculture to economic development in Nigeria have been marred by poor funding, coupled with misguided government policies [1,14]. Agricultural sector in the 1960s contributed about 64 percent of the total gross domestic product (GDP) of Nigeria, but gradually declined to 48% in the 1970s during the oil boom [15]. Nigeria, has diverse agro-ecological conditions that can support a variety of farming models, which can create its own agricultural models. However, successive administrations over the years neglected the agricultural sector in favour of the oil industry [16,17].
Public expenditure, which serves as the bed rock of financing for the sector has consistently fallen short of the public expectation [6,18]. For instance, a collaborative study carried out by the International Food Policy and Research Institute (IFPRI) and the World Bank in 2008 revealed that Nigeria's public expenditure on agriculture is less than 2percent of total federal annual budget expenditure. This is significantly below the expected amount or  [16]. The objective of this paper is to analyze impact of Federal Government agricultural expenditure on agricultural productivity in Nigeria. By the time it is completed we shall be in a position to ascertain how much has been achieved in this regard.

Government Involvement in Agriculture in Nigeria
Government spending plays an important role in agricultural development [18,19]. This is based on the economic ideology that agricultural development is a process that involves adoption by farmers of new production practices and the acquisition of new input materials [2]. Unfortunately, the rural capital market cannot supply the needed funds to finance such innovations.
Consequently, agricultural development in Nigeria as in similar developing nations has been stunted. The problem of agricultural finance then becomes that of finding adequate fund for agricultural development, identifying the right farmers who could benefit from such fund, extending such fund to the right section are the Nigerian farm credit corporation and the new programmes. Having realized the declining role agriculture sector has had to economic development, the government over the years have put in place certain policy measures and programmes with a view to increasing the contribution of agriculture to economic development in Nigeria.
However, a peep into the Federal Government capital expenditure on agriculture portraits a gloomy future for the sector's development in the country. As indicated in Table 1, from 1981 to 2014, the Federal Government capital expenditure on agriculture were low.
Despite these huge sums of money allocated to the sector over these years (Table 1), there was little or insignificant improvement in agricultural production because successive governments only used the policies/programmes to embezzle public funds to the total neglect of food production by refusing to pay farmers the true value of their crops and at the same time selling fertilizer and seeds to them at high prices [2]. The food pricing and exchange rate policies of government have over the years been relatively low to the world market prices and in most cases, what is paid to the farmers has been half the world price. The continuous depreciation of the Naira (local currency) and the ineffective system of subsidies for inputs have also had their toll on agricultural finance. For, instance, the subsidies which were aimed at helping the poor, ended up reducing the income of the farmers who were much poorer than many of the urban consumers who actually benefited from the subsidies. The consequence of this is that these policies have reduced farmers incentives for production while consumption of urban dwellers have continued to increase thus making government rely on imported food dumped by industrialized countries, which in turn makes farmers to abandon their farms and migrate to the cities [20]. Rapid advances in agricultural production in Nigeria have also been a constraint to Besides, Nigeria government has taken advantage in the reduction of food prices to increase their food import to the neglect of the agricultural sector, thus increasing the government food import bills which further impede finance to the agricultural sector [21].
Another constraint to agricultural finance in Nigeria is the delay in the disbursements of loans to farmers. According to Aku et al. [22], farmers in Nigeria are usually confronted with delays in the disbursements of loans approved by government. These loans sometimes came after the planting season and with the actual disbursement falling far short of loan needed and approved. Even when these loans were disbursed early, it did not get to the poor farmers but rather to the rich farmers who would divert such loans to other activities that have no effect or bearing on agricultural production in most cases. Some of these rich farmers at times have failed to pay back such loans because they could not be penalized due to has been termed "high political cost." Farmers are also

The Role of Agricultural Financing and its Implication on Economic Growth, Food Security and Poverty Reduction
There has been serious argument on agricultural financing as a declining sector in the course of development in many developing countries; it is still a leading economic sector, the main exporter, and the major employer, especially for the poor and women even among Nigerians. Improved financial markets accelerate agricultural and rural growth. Financial services assist households in maintaining food security and smoothening consumption, thereby safeguarding or enhancing labour productivity which have been the most important production factor of the poor [23]. Studies also have not identified any effects of financial liberalization on the price and availability of informal credit to agriculture [24]. was presented in tables and analyzed using simple percentage method. Hypothesis was also tested using the chi-square method.
Data analyzed indicated that there is a direct relationship between development finance and agriculture development and therefore it was recommended that farmers should be provided with adequate funds and that adequate extension services should be granted so as to improve farmer's capacity to produce more food. Uger FI [16] examined while Bagachwa (1995) observed that approximately 55% of startup capital for micro entrepreneurs in urban and rural areas in developing countries was provided by the informal financial sector.
Okurut N [33] stated that informal credit was demanded for both productive investment (agriculture production or business) and consumption smoothing. Verhoef G [35] reported the great impact of "Stokvels", which is a type of Rotating and Savings Association (ROSCA) in South Africa, as informal market savings mobilizers.
He stated that overtime "Stokvels" developed into a network of

Econometric Model
Following the lead of Uger [16] and Iganiga and Unemehilin [3], the study used three econometric procedures to achieve its empirical

Ordinary Least Squares Results
From the results presented in Table 2 above, only average annual rainfall (AAR) and population growth (POPG) were found to be positive and very significant in explaining the changes in agricultural output in Nigeria; As a matter of fact, they lead agriculture productivity ( Table 2)

Unit Root Test
The first step involved in the data analysis was testing the order of integration of the individual variables under consideration.
Researchers have developed several procedures for the test of order of integration. The most popular ones are Augmented Dickey-Fuller (ADF) test due to Dickey andFuller (1979, 1981).
Augmented Dickey-Fuller test relies on rejecting a null hypothesis of unit root test (that the variables are non-stationary) in favor of the alternative hypothesis of stationarity. The unit root results are therefore presented (Table 3).

Co-Integration Tests
The second step is to test for the presence of co-integration between the variables of the same order of integration through forming a co-integration equation. The basic idea behind cointegration is that if, in the long-run, two or more variables move closely together, even though the variables themselves are trended, the difference between them would be constant. It is possible to regard these variables as defining a long-run equilibrium relationship, as the difference between them is stationary. This study used the Johansen co-integration test as presented (Table 4 & 5). it was concluded that a long run equilibrium relationship rightly existed among these variables of interest used in our study.

Vector Error Correction Model (ECM)
The error correction model (ECM) was presented (Table 6). Similarly, the coefficient of annual average rainfall (AAR) for the lag one was positively signed and statistically significant at 5 percent level, while the lag two period was positive and insignificant. This means that average annual rainfall had impacted on agricultural output in Nigeria positively and significantly every year. Furthermore, the coefficient of population growth rate (POPG) is outstanding negative and most significant at both lag one and two. In fact, it led agricultural output in Nigeria. The result that changes in population caused agricultural output to depress in Nigeria. This is attributed to the fact that increasing population could result to increase in labour force in a situation hereby we depend less on mechanical agriculture as at the moment. With this result, it was accepted that population growth has a significant effect on agricultural output in the Nigerian economy. It speaks volume in the need to the government to inject more funding to agriculture in the area of the country being provided to go into mechanized improved agricultural practice in the years ahead.
Finally, the coefficient of real exchange rate (INF) at lag one and lag two were not statistically significant at 5 percent in influencing the changes in agricultural output. Therefore, real exchange rate was considered to be an insignificant variable in this regard. However, its negative effect on agricultural productivity clearly shows that a high exchange rate portends a bad omen for importation of raw materials that go into agriculture produce.

Conclusion and Recommendations
The economic history of Nigeria is agro-based. Agricultural production provides employment opportunities and a source of income to about 80 percent of the country's population. It is also a source of food security, raw materials to local industries and generates foreign exchange earnings for the country. The findings of this paper revealed that there exists positive and significant relationship between government agricultural expenditure (financing) and its output, although a weak one, as rightly shown in our regression analysis. As a sector that provides basic foundation to the Nigerian economy, increased improvement in agricultural production would not only enable Nigeria to feed its teeming population but it would also assure a return to its former position (glory) as an exporter of agricultural products to global markets in the years ahead.
Based on the findings of this study we recommended the following for immediate policy actions in the times thus: a) That since the coefficient of annual rainfall positively and significantly influenced agricultural yields in Nigeria government should ensure that meteorically agencies which forecast annual rainfalls be well funded and catered for and that their recommendations be followed to the letter so as to be getting good farm produce annually and thereby in minimize agricultural losses due to vagaries of weather in our agricultural investment climate [37].
b) That because of the shortfall in agricultural outputs as a result of poor financing (funding) by various governments (Federal, States and Locals) as revealed in the study, governments should be more proactive in insisting on the private sector, especially, the financial sector to set aside funds annually for agricultural financing and rescue to compliment government efforts as we are presently doing in education sector via TetFund. Moreover, agricultural term loans should always be extended to farmers for long-term funding consideration for large scale farming due to risks inherent in agricultural lending [38].
c) Above all, the Federal Government needs to take a holistic appraisal of agricultural programmes and schemes, with a view of streamlining them to meet the dynamics of the times, for the benefits of the Nigerian citizenry [39][40][41][42][43][44]. Nigeria should, as a matter of urgency, go into mechanized farming to boost her agric produce in rice and palm oil, maize, cassava, etc as we used to lead the world in the 1960s [45,46].