The Role of Agriculture in Nigeria’s Economic Growth: A General Equilibrium Analysis

Blessed with abundant land and water resources, Nigeria’s agricultural sector has a high potential for growth, but this potential is not being realized. Productivity is low and basically stagnant. Farming systems, which are mostly small in scale, are still predominantly subsistence-based and for the most part depend on the vagaries of the weather. Many agricultural policies have also been ineffective, either because they have been misguided, or because their impacts have been swamped by macro policies affecting inflation, exchange rates, and the cost of capital. Recognizing these challenges, the Federal Government of Nigeria has identified the modernization of the agricultural sector as a major priority. In this paper we have applied the Global Trade Analysis Project (GTAP) framework to estimate the growth potential of agriculture in Nigeria. Our results show that although a 1% percent technological progress in the oil sector gives the largest welfare benefits in dollar terms ($142.72 million), when we abstract for size several food and agricultural sectors have a value that is higher than that for the oil sector. Some subsectors in the agricultural sectors (e.g. cattle, fruit and vegetables) outperform some of the oil and manufacturing sectors in terms to return to investment. Also our results show technological improvements related to unskilled labor produced the highest returns in agriculture compared to any other sector. In manufacture, the highest returns are obtained from technological improvements related to capital.