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Agricultural growth and investment options for poverty reduction in Nigeria

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  • Diao, Xinshen
  • Nwafor, Manson
  • Alpuerto, Vida
  • Akramov, Kamiljon
  • Salau, Sheu

Abstract

This study uses an economy-wide, dynamic computable general equilibrium (DCGE) model to analyze the ability of growth in various agricultural subsectors to accelerate overall economic growth and reduce poverty in Nigeria over the next years (2009-17). In addition, econometric methods are used to assess growth requirements in agricultural public spending and the relationship between public services and farmers’ use of modern technology. The DCGE model results show that if certain agricultural subsectors can reach the growth targets set by the Nigerian government, the country will see 9.5 percent annual growth in agriculture and 8.0 percent growth of GDP over the next years. The national poverty rate will fall to 30.8 percent by 2017, more than halving the 1996 poverty rate of 65.6 percent and thereby accomplishing the first Millennium Development Goal (MDG1). This report emphasizes that in designing an agricultural strategy and prioritizing growth, it is important to consider the following four factors at the subsectoral level: (i) the size of a given subsector in the economy; (ii) the growth-multiplier effects occurring through linkages of the subsector with the rest of the economy; (iii) the subsector-led poverty reduction-growth elasticity; and (iv) the market opportunities and price effects for individual agricultural products. In analyzing the public investments that would be required to support a 9.5 percent annual growth in agriculture, this study first estimates the growth elasticity of public investments using historical spending and agricultural total factor productivity (TFP) growth data. The results show that a 1 percent increase in agricultural spending is associated with a 0.24 percent annual increase in agricultural TFP. With such low elasticity, agricultural investments must grow at 23.8 percent annually to support a 9.5 percent increase in agriculture. However, if the spending efficiency can be improved by 70 percent, the required agricultural investment growth becomes 13.6 percent per year. The study also finds that investments outside agriculture benefit growth in the agricultural sector. Thus, assessments of required growth in agricultural spending should include the indirect effects of nonagricultural investments and emphasize the importance of improving the efficiency of agricultural investments. To further show that efficiency in agricultural spending is critically important to agricultural growth, this study utilizes household-level data to empirically show that access to agricultural services has a significantly positive effect on the use of modern agricultural inputs.

Suggested Citation

  • Diao, Xinshen & Nwafor, Manson & Alpuerto, Vida & Akramov, Kamiljon & Salau, Sheu, 2010. "Agricultural growth and investment options for poverty reduction in Nigeria," IFPRI discussion papers 954, International Food Policy Research Institute (IFPRI).
    • Handle: RePEc:fpr:ifprid:954
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    Cited by:

    1. David Booth & Frederick Golooba-Mutebi, 2014. "Policy for Agriculture and Horticulture in Rwanda: A Different Political Economy?," Development Policy Review, Overseas Development Institute, vol. 32(s2), pages 173-198, September.
    2. Yalew, Amsalu W. & Hirte, Georg & Lotze-Campen, Hermann & Tscharaktschiew, Stefan, 2017. "General equilibrium effects of public adaptation in agriculture in LDCs: Evidence from Ethiopia," CEPIE Working Papers 11/17, Technische Universität Dresden, Center of Public and International Economics (CEPIE).
    3. Boureima Sawadogo & Tegawende Juliette Nana & Maimouna Hama Natama & Fidèle Bama & Emma Tapsoba & Kassoum Zerbo, 2015. "Impact de l'expansion économique et commerciale de la Chine sur la croissance et l'emploi au Burkina Faso: une analyse en équilibre général calculable," Working Papers MPIA 2015-03, PEP-MPIA.
    4. Diao, Xinshen & McMillan, Margaret S., 2014. "Towards understanding economic growth in Africa: A reinterpretation of the Lewis Model:," IFPRI discussion papers 1380, International Food Policy Research Institute (IFPRI).
    5. Abdoul Murekezi & Songqing Jin & Scott Loveridge, 2014. "Have coffee producers benefited from the new domestic cherry market? Evidence using panel data from Rwanda," Agricultural Economics, International Association of Agricultural Economists, vol. 45(4), pages 489-500, July.
    6. Diao, Xinshen & Bahiigwa, Godfrey & Pradesha, Angga, 2014. "The role of agriculture in the fast-growing Rwandan economy: Assessing growth alternatives:," IFPRI discussion papers 1363, International Food Policy Research Institute (IFPRI).
    7. Robinson, Sherman & Levy, Stephanie, 2014. "Can cash transfers promote the local economy? A case study for Cambodia:," IFPRI discussion papers 1334, International Food Policy Research Institute (IFPRI).
    8. Xinshen Diao & Margaret McMillan, 2015. "Toward an Understanding of Economic Growth in Africa: A Re-Interpretation of the Lewis Model," NBER Working Papers 21018, National Bureau of Economic Research, Inc.
    9. Badiane, Ousmane & Odjo, Sunday & Ulimwengu, John, 2011. "Emerging policies and partnerships under CAADP: Implications for long-term growth, food security, and poverty reduction," IFPRI discussion papers 1145, International Food Policy Research Institute (IFPRI).

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