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Top1. Introduction
To attain agricultural sector goals, several policies were formulated and implemented after Nigeria’s independence. Some macroeconomic and sectoral policies implemented from 1970 to 1985 promoted growth with some shortcomings. According to Dayo, Ephraim, John and Omobowale (2009) government policies however led to the provision of many farm inputs and services which helped in the production, processing, and marketing of farm commodities (Chimobi and Uche, 2010). The need to correct some shortcomings of policy outcomes in Nigeria led to adoption of the Structural Adjustment Programme (SAP) of 1986. After SAP was introduced, there was general improvement in agricultural production and external trade from 1986 to 1989. Thereafter, growth indices of agricultural production fluctuated between stagnation and decline, a situation blamed mainly on policy reversals and inconsistencies. Government expenditure is a policy instrument targeted at influencing the level of production. Spending in agriculture is one of the most important government instruments for promoting economic growth (Sanyal, 2010; Fan et al, 2008; Ikpi, 1995). Over the years, spending in agriculture decreased and the GDP contribution from agriculture gradually declined in the 70’s to 48% and it continues to decline to 20% and 19% in 2005 (Everett et al., 2010). According to Isedu (2002), one way capital expenditure impacts economic growth is the creation of employment and causes economic growth through the re-allocation of resources to every sector of the economy. Aregbeyen (2007) found a positive and significant relationship between capital expenditure and economic growth but a negative relationship between recurrent expenditure and economic growth but research on the impact of aggregate government expenditure on agricultural growth remain scanty in Nigeria.
According to Federal Ministry of Agriculture and Rural Development, FMARD (2016) the vision of the current administration in Nigeria for agriculture is to build an economy capable of delivering sustained prosperity by meeting domestic food security goals, generating exports, and supporting sustainable income and job growth. In line with this, its policy objectives for the period 2016 – 2020 aim at: Growing the integrated agriculture sector at 100% to 200% the average of Nigerian GDP. This implies that assuming a GDP growth of 7%, agriculture would aim to achieve 7% - 14% growth. Accordingly, the target for agriculture’s share of GDP is 23% for the period; agriculture’s share of the labor force: 70%; crop production: 85%; livestock and other non-crop: 15%; agriculture’s share of non-oil exports earnings: 75% and agriculture’s share of federal budget: 2.0%. Although FMARD (2016) also reported that agricultural sector recorded a historical growth of between 3% - 6% per annum in 2011 – 2015, agricultural export crops had been on the decline since the late 1970s (Adubi, 1999). However, inadequate funding of the agricultural sector has been re-echoed by several experts as an obstacle to increased agricultural growth (Ammani and Aliyu, 2012; Agbonkhese and Asekome, 2014; CBN, 2013). Fan and Rao (2003) showed that government spending on agriculture has provided a strong contribution to economic growth in Asia. Amassoma, Nwosa, and Ajisafe (2011); Abu and Usman (2010) showed that spending on rural infrastructure and productivity enhancing investments in agricultural export crops and livestock has the most promise for growth in income and food consumption in Africa. According to Obansa and Maduekwe (2013) agriculture remains the mainstay of the economy given its share in employment. Yet, in the majority of developing countries, public expenditure in agriculture is stagnant or declining, and this is reflected in poor contribution of agricultural outputs to GDP (Hartwich et al., 2010; World Bank, 2007; Olomola, 2007; Manyong et al., 2005). Still, most agricultural based economies depend on agriculture for a large share of their foreign exchange as exemplified by tobacco exports in Malawi and labor intensive nontraditional exports in Kenya and Senegal (World Bank, 2008).