An econometric analysis of sustainable agriculture and rural development in Nigeria: A Vector Autoregressive Approach (VAR)

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1 Journal of Agricultural Economics and Development Vol. 2(5), pp , May 2013 Available online at ISSN Academe Research Journals Full Length Research Paper An econometric analysis of sustainable agriculture and rural development in Nigeria: A Vector Autoregressive Approach (VAR) Bakare A. S. Department of Economics, Adekunle Ajasin University, P.M.B 001, Akungba Akoko, Ondo State, Nigeria. stevebakare@yahoo.com. Tel: Accepted 22 March, 2013 Nigeria is a vast agricultural country, endowed with substantial natural resources which include: 68 million hectares of arable land, fresh water resources covering about 12.6 million hectares, 960 km of coastline and an ecological diversity which enables the country to produce a wide variety of crops and livestock, forestry and fisheries products. Available statistics show that agriculture is the most important Nigerian economic sector in terms of its contribution to the GDP, after oil. The sector contributes about 41% of the country s GDP, employs about 65% of the total population and provides employment to about 80% of the rural population. Despite the articulation of government policies, strategies and programs and the commitment of Government and donors to the broader framework of sustainable agriculture and pro-poor rural development, the rural economies of Nigeria remain underdeveloped and many complex issues regarding the design, implementation, and monitoring and evaluation remain unresolved. This study consequently examined the relationship between sustainable agriculture and rural development in Nigeria. Vector Auto Regression analytical technique (VAR) was employed for the empirical study. The a priori expectation is that sustainable agriculture will impact positively on rural development in Nigeria. The results of the finding show that the past values of agricultural output could be used to predict the future behaviour of rural development in Nigeria. The main conclusion of this study therefore is that while agriculture remains dominant in the Nigerian economy, it is unsustainable; the food supply does not provide adequate nutrients at affordable prices for the average citizen and rural development is deteriorating. The findings and the conclusion of the study suggested the need for the policy makers to promote agriculture to a sustainable level. In doing this, rural development will be enhanced. Key words: Sustainable agriculture, rural development, Federal Ministry of Agriculture and Rural Development, food and nutrition, rural health centers. INTRODUCTION Nigeria is a vast agricultural country, endowed with substantial natural resources which include: 68 million hectares of arable land, fresh water resources covering about 12.6 million hectares, 960 km of coastline and an ecological diversity which enables the country to produce a wide variety of crops and livestock, forestry and fisheries products (Buren, 1998). The country is divided into seven agro-ecological zones, that is, semi-arid, found only in the northern region; the savannah, found in the northern and middle region; a small highland area found in the middle and southern region; a larger transition environment of savannah derived from the forest overlapping the southern and middle regions; mangroves in the Niger Delta; freshwater swamps in the Niger Delta; and Lowland rain forest in the south. The agro-ecological setting and technology base, in principle, determines the production systems. Two major production systems dominate these zones: (i) the traditional production system, which is found in all parts of the country and consists of land holdings with a variety of food crops intended for consumption purposes mainly, and (ii) the improved irrigation production system which comprises

2 J. Agric. Econ. Dev. 185 the improved small scale irrigation using low-lying or water logged areas for crop and livestock production as well as large-scale mechanized and/or commercial irrigation farming systems. Available statistics show that agriculture is the most important Nigerian economic sector in terms of its contribution to the GDP, after oil. The sector contributes about 41% of the country s GDP, employs about 65% of the total population and provides employment to about 80% of the rural population. The statistics equally show that agriculture is the major source of food and meat production. It is estimated that some 25 million hectares are cultivated each year by smallholders for food production hence the sector plays an important role in rural livelihoods. It is estimated that it accounts for about 70% of rural households total incomes (Ogen, 2004). In other words, majority of Nigerian households obtain a large share of their income from farm activities. They are involved in peasant and medium scale farming. Women are more engaged in food processing and livestock s rearing. Thus, there is direct linkage between agriculture and rural development in Nigeria which brought about the creation of the Federal Ministry of Agriculture and Rural Development (FMARD). The Federal Ministry of Agriculture and Rural Development is responsible for development, review and implementation of policies for agricultural development dealing with crops, livestock, fisheries, and forestry. The objective of the ministry is to improve agricultural production and, in turn, enhance national food security and alleviate rural poverty. It provides technical support, production infrastructure, and supplies inputs to promote adoption of productivity enhancing techniques. Federal Department of Rural Development (FMARD) has additional responsibility of formulating policies and strategies for integrated rural development. Its mandate is to accelerate the transformation of the nation s rural life and landscape in a coordinated and sustainable manner with a view to eradicate rural poverty, expand rural economic opportunities, enhance food security and integrate rural dwellers into the mainstream of national development. The FMARD, like the other ministry, maintains offices in most states and local governments, which promotes rural infrastructure, and Community Based Organizations (CBO) development, and supports social services and information dissemination. Apart from its direct activities, the FMARD also supervise other agencies including Area Development Agencies/Area Development Projects, input supply companies, and semi-autonomous agricultural development projects. Each of the state ministries in general terms have two service departments: Finance and Administration which is responsible for finance, accounts, budget, administration and personnel including human resource development; and Planning, Research and Statistics which collaborates with other departments in planning research, studies and data collection, management, rolling and annual plans, and monitoring and evaluation (Ogen, 2002). The problem and objective of the study It is evident that although departments that are supposed to implement the policies, strategies and priority areas of focus for agriculture towards rural development exist, there is no effective institutional arrangement for their efficient coordination. Secondly, despite the articulation of government policies, strategies and programs and the commitment of government and donors to the broader framework of propoor rural development, the rural economy remain underdeveloped and many complex issues regarding the design, implementation, and monitoring and evaluation remain unresolved. Up till now, the rural economies in Nigeria lack adequate economic and social infrastructure such as electricity, pipe born water, good roads, health centers and many others and the rural poverty is at its peak. This deficiency is due to a number of factors, including lack of resources, manpower, appropriate skills and inadequate investment in data support systems to diagnose the problem and provide solution to the erring difficulties. Above all, the policy makers and research community in Nigeria at present seem not to have sufficient information on this paradox and deficiency neither do they have the capacity to adequately support, implement and advance the rural development strategy and the NEEDS agenda that Nigeria has embarked on. It is however instructive to study how sustainable agriculture is in Nigeria and evaluate if any significant relationship exist between agriculture and rural development with particular emphasis on the efficient implementation of the activities of FMARD geared towards agriculture and rural development. The study will therefore conclude on defining an appropriate institutional policy framework for the effective and sustainable development of Nigeria s agriculture and rural sector that is consistent with international standard. Consequent upon the foregoing, the study shall test the following null hypotheses: (i) Agriculture is unsustainable in Nigeria (ii) There is no significant relationship between agriculture and rural development in Nigeria. The rest of the paper is therefore organized as follows. Following the study s introduction, a review of the literature was presented. The methodology of the study was discussed, after which an empirical analysis of the relationship between sustainable agriculture and rural development in Nigeria was considered. Finally, the summary and conclusions of the paper were presented.

3 Bakare 186 LITERATURE REVIEW The literature is growing over the sustainability, the importance, the prospects, the roles and the problems of agriculture in the development process of developing nations. The study of economic history provides this study with ample evidence that an agricultural sustainability is a fundamental pre-condition for rural and overall economic development. According to Eicher and Witt (1964), Oluwasanmi (1966), and Jones and Woolf (1969), the agricultural sector has the potential to be the industrial and economic springboard from which a country s development can take off. Indeed, more often than not, agricultural activities are usually concentrated in the less-developed rural areas where there is a critical need for rural transformation, redistribution, poverty alleviation and socio-economic development (Stewart, 2000). The central hypothesis of this work, therefore, is that a productive agricultural sector lies at the root of the rural transformation and stupendous economic advancement of Nigeria. In connection to this, sustainable agriculture and rural development has been defined by FAO as... The management and conservation of the natural resource base, and the orientation of technological and institutional change in such a manner as to ensure the attainment and continued satisfaction of human needs for present and future generations. Such sustainable development in the agriculture, forestry, and fisheries sectors conserves land, water, plant and animal genetic resources, and is environmentally non-degrading, technically appropriate, economically viable and socially acceptable. Sustainable agriculture has a lot of positive implications for rural and overall development of a nation. However, several studies have indicated the importance of sustainable agriculture. According to Oyejide (2008), agriculture is the sector accounting for the dominant share of gross domestic product (GDP), employment, export earnings and food supply. It carries a great deal of the economic burden and contains much of the potential of many African countries. In line with this view, Husain (2004) asserted that agriculture is by far the most important sector for Pakistan s economy. This view was also corroborated by Loto (2011). According to Loto, the agricultural sector is a sector with a potential for earning foreign exchange. It is a sector that Nigeria could boast of having a comparative advantage. It provides food, employment and export earnings for the economy. She believed that the agricultural sector is critical for both overall economic growth and the reduction of poverty especially in the typical rural areas of African countries. FAO (1995) remarked that: for thousands of years, agriculture has been the economic activity which is most essential to human survival and well-being. It has also been the economic sector which most affects, and is most dependent on the natural environment. The report of the FAO/Netherlands Conference on Agriculture and the Environment (FAO, 1995) pointed out that more than 500 million people are facing difficulty in earning a living and are undernourished. Higher demand as a result of population growth and urbanization, as well as the lack of alternative opportunities in rural areas, is putting pressure on agriculture to increase production, resulting in degradation of the environment. Deforestation, erosion, desertification and the loss of biological diversity, as well as various forms of pollution, all threaten the ability of agricultural systems to even maintain their present level of production, let alone increase it. Turning to the problem of the study, the performance of African agriculture over the last three to four decades has not been particularly robust (Townsend, 1999; FAO, 2003). The sector experienced very low rates of growth in the 1980s, but the growth rates increased somewhat during the 2000s. Omanukwue (2005) pointed out that agriculture has become a complex activity, more so in the light of dynamic changes and innovations that have pervaded the global economy. In a developing economy like Nigeria, this becomes much more challenging given the desire and need to compete both domestically and internationally. The central opinion is that though agriculture is the major source of food and meat production and is the most important Nigerian economic sector in terms of its contribution to the GDP, after oil, the sector has failed to ensure the attainment and continued satisfaction of human needs in terms of food and meat production. More importantly, the rural economy of Nigeria has remained underdeveloped. Thus it can be proposed that agriculture is unsustainable in Nigeria and that agriculture has not substantially contributed to the development of rural Nigerian economy. In line with the proposal of Rev Malthus, Population growth in most developing countries is far more than agricultural growth. Uniamikogbo (2007) found that the arithmetic growth in food production coupled with geometric growth in population made agriculture unsustainable in the first instance. Abayomi (2006) and Child (2008) canvassed the same opinion. Measuring agricultural sustainability The bedrock of rural development in a developing nation like Nigeria is agriculture and agricultural development, without which all efforts at rural development will be futile. In other words, household food and nutrition security relies heavily on rural food production and this contributes substantially to rural development and poverty alleviation. Consequently, the first pillar of food security is sustainable agriculture. But statistics show that in the early 1980s, while the population grew rapidly, food production and agricultural incomes declined in Nigeria. Thus the sustainability of agriculture can be measured on the basis of the ratios of agricultural output to food security and gross domestic product. In many of the

4 J. Agric. Econ. Dev. 187 developing countries, especially Nigeria, the diminishing capacity of agriculture to provide for household food and nutrition security is an indication of unsustainable agriculture. Hence, since the bulk of the poor (some three-quarters according to a recent World Bank estimate) live in rural areas where they draw their livelihoods from agriculture and related activities, evidently, development, food security and poverty alleviation will not be truly achieved without rapid agricultural growth. Assisting the rural poor to enhance their livelihoods and food security in a sustainable manner is an evidence of agricultural sustainability. Broadly put, increases in agricultural productivity are central to growth, income distribution, improved food security and alleviation of poverty in rural Nigeria. But while agriculture remains dominant in the Nigerian economy, the food supply does not provide adequate nutrients at affordable prices for the average citizen. The nutritional status of both rural and urban dwellers in this largely agrarian country should normally be much higher than what has been the case. The daily per capita protein intake is under 7 g/day, while calorie intake is less than 2,600 calories per capita per day (Ogen, 2003). From the 1980s, the Nigerian food sector has been characterized by excess demand over supply due primarily to high population growth rates of about 3.2% per annum, high rates of urbanization, and rising per capita income, stimulated by an oil export revenue boom. Consequently, the pattern of food consumption has been changing rapidly in terms of quantitative and qualitative adaptations to new food preferences and consumption habits. The increasing emphasis on agricultural growth and development amidst rapidly growing population, in part, reflects the concern with which policy makers have viewed the rising demand for food. MATERIALS AND METHODS Population of the study This study covers the years from which is a period of thirty years. This period is believed to be long enough to capture the long-run relationship between rural development and sustainable agriculture in Nigeria. The model To determine the model of rural development and sustainable agriculture in Nigeria, this study first considered a plant with a Cobb-Douglas production function model formulated by Mary and Josef (2005). According to the formulations of Mary and Josef (2005), the following equation is derived: Yit = Ait(τ)Lβlit Kβkit Mβmit (1) Where output in firm i is at time t; Yit, is a function of labor; Lit, capital; Kit and Mit, materials. Since this study is interested in assessing whether agriculture is sustainable and rural development is a function of sustainable agriculture, so the first stage is to estimate agricultural sustainability, and in the second stage how rural development can be affected by sustainable agriculture was specified. In doing this however, the relationship between economic growth and agricultural output was defined and the possible links between rural development and agriculture sustainability parameter was defined also. Using the Cobb-Douglas production function parameter from Equation 1, it can be specified that economic growth depends on sustainable agriculture and rural development in turn depends on sustainable agriculture parameter Ait(τ), that is: GDP = γ 0 + γ 1 AGRIP 2 RDEV = γ 0 + γ 1 AGRIP 2 Where AGRIP is the sustainable agriculture index which is equivalent to agricultural output parameter, RDEV is the rural development and GDP is the index of economic growth. In this circumstance, this study generated Equations 2 and 3 simultaneously in which economic growth depends on sustainable agriculture, and rural development in turn depends on sustainable agriculture. In a circumstance where Y = f(x) for instance, but also X = f(y), it is not allowed for a single equation model to be used for the description of the relationship between Y and X. A multi-equation model must be used, which would include separate equations in which Y and X would appear as endogenous variables, although they might appear as explanatory in other equations of the model. A system describing the joint dependence of variables is called a system of simultaneous equations. To grasp the relevance of this specification to the objective proposed in this paper, some other variables that determine rural development such as, rural health centers, and school enrolment in rural areas were incorporated and the following rural development model was specified: RDEV= Y/y= γ 0 + γ 1 AGRIP + γ 2 GDP + γ 3 RUHEALT+ γ 4 RUEDU) + γ 5 FDNS + t 3 Where: RDEV = Rural Development, AGRIP = Sustainable Agriculture, FDNS = Food and Nutrition, RUHEAT = Rural Health Centers, RUEDU = School Enrolment in Rural Areas, and t = Error Term. Using Vector Autoregressive model and rearranging equation (3) gives the expanded form of the VAR model, which can be written as: RDEV = γ 0 + γ 1 AGRIP + γ 2 GDP + γ 3 RUHEALT+ γ 4 RUEDU) + γ 5 FDNS + t..4

5 Bakare 188 Table 1. Analysis of stationarity test. Variable Test statistics Critical value Level of significance (%) Level AGRIP (1) RDEV (1) GDP (0) RUHEALT (1) RUEDU (1) FDNS (1) Source: Computed by the author in January, AGRIP = γ 0 + γ 1 AGRIP + γ 2 GDP + γ 3 RUHEALT+ γ 4 RUEDU) + γ 5 FDNS + t..5 GDP = γ 0 + γ 1 AGRIP + γ 2 GDP + γ 3 RUHEALT+ γ 4 RUEDU) + γ 5 FDNS + t 6 RUHEALT = γ 0 + γ 1 AGRIP + γ 2 GDP + γ 3 RUHEALT+ γ 4 RUEDU) + γ 5 FDNS + t 7 RUEDU = γ 0 + γ 1 AGRIP + γ 2 GDP + γ 3 RUHEALT+ γ 4 RUEDU) + γ 5 FDNS + t..8 FDNS = γ 0 + γ 1 AGRIP + γ 2 GDP + γ 3 RUHEALT+ γ 4 RUEDU) + γ 5 FDNS + t.9 The innovations of the current and past one-step ahead forecast errors are orthogonalised using Cholesky decomposition so that the resulting covariance matrix is diagonal. This assumes that the first variable in a prespecified ordering has an immediate impact on all variables in the system, excluding the first variable and so on. Therefore, in this study, the policy variable are placed first then followed by the target variables, because the target variables are less endogenous than the policy variables. The ordering are rural development, agricultural output, gross domestic product, rural health centers, school enrolment in rural areas and food and nutrition. From the VAR model, two important analytical tools are used for data analysis: the regression result and the variance decomposition. The variance decomposition shows the fraction of the forecast. The error terms are assumed to be serially independent with zero mean and finite covariance matrixes. A priori expectations These models imply that rural development will positively be related to sustainable agriculture, gross domestic product, rural health centers, school enrolment and food and nutrition in rural areas in Nigeria. That is, this study expects the parameter: γ 1 >0, γ 2 >0, γ 3 >0, γ 4 >0 and γ 5 >0. The theoretical proposition of the model Since sustainable agriculture has the potential to increase productivity and income of rural dwellers and thus can lead to rural development, it can be hypothesized that sustainable agriculture is positive. In line with Cobb-Douglass production function, gross domestic product is a parameter that to a large extent theoretically determines rural development. Thus, positive GDP growth rate is expected to have positive impact on rural development. An adequate supply of food and nutrition is expected to make agriculture sustainable and foster rural development. Hence, food and nutrition is expected to have a positive sign. Also, in line with economic theory, good health status and positive literacy rate are index of rural development, thus we expect their coefficients to be positive. Type and sources of data Secondary data were used for this study. The data were obtained from the publications of the Central Bank of Nigeria, African Development Indicators, website, journals and newspapers. The data collected are: sustainable agriculture, food and nutrition, rural health centers, and school enrolment in rural areas of Nigeria. Data processing technique In this study, the empirical investigation consists of three main steps. First, the Phillips-Perron (PP) tests of stationarity (1988), secondly, the Johansen test of cointegration (1988, 1991) and thirdly, the regression of the VAR model. The secondary data were processed using E-view for windows econometric packages. E-view is preferred to SSPS because it enables the correction of the serial correlation in the data. RESULTS AND DISCUSSION The Stationarity and Co-integration test Table 1 shows the summary of the unit root test of the variable used for empirical study. The test shows that Gross Domestic Product (GDP) was stationary in levels at 1% level of significance respectively. Rural Development Index (RDEV), Agricultural Output (AGRIP),

6 J. Agric. Econ. Dev. 189 Rural Health Centers (RUHEALT), Rural School Enrolment (RUEDU) and Food and Nutrition (FDNS) were all stationary in the first difference at 5% level of significance. A variable is stationary (has no unit root problem) if the test statistics is greater than the critical value in absolute terms. The term 1(0) indicates at levels, and 1(1) indicates first difference. The next step after finding out the order of integration was to establish whether the non-stationary variables are co-integrated. Differencing of variables to achieve stationarity leads to loss of long run properties. The concept of co-integration implies that if there is a long run relationship between two or more non-stationary variables, deviations from this long run part are stationary. To establish this, Engel Granger s two-step procedure was used. This was done by generating residuals from the long run equation of the non-stationary variables, using DF and ADF tests. The residuals were found to be stationary for the model hence the variables were co-integrated. The regression results The output of the regression is given in Table 2. The standard error and the t-statistics are written in parentheses. With several lags of the same variables, each estimated co-efficient will not be statistically significant, possibly because of multi-colinearity but collectively they may be significant on the basis of the F- test. The vector auto-regression result reveals the statistical and theoretical significance of the parameter estimate. Looking at the results individually, rural development index (RDEV) and agricultural output (AGRIP) were found to be statistically significant. The statistical significance of this variable was evaluated on the basis of the value of the standard error. When compared to the value of coefficient of the variable, the value of the standard error was less than half of the value of coefficient of the variable in absolute term. All other variables did not pass the standard error test. Nevertheless, the F-statistics of and are high enough and they imply the overall significance of the model. In other words, the hypothesis which states that collectively all lag terms are statistically significant cannot be rejected. The Akaike and Schwarz statistics strengthened the statistical significance of the estimate since the lower value of the Akaike and Schwarz statistics suggest that the parameter estimate is significant statistically. The low values of the Akaike and Schwarz statistics put at 4.9 and 5.5 suggest that the parameters are statistically significant. The theoretical significance is evaluated on the basis of the signs of the coefficient. The result shows that the coefficient of agricultural output is negatively related to economic growth which implies that agriculture is unsustainable in Nigeria at least in the short run. The agricultural output exerts a negative impact on rural development in the short run and a negative impact on food and nutrition on the long run. This finding is contrary to the a priori expectations. Rural Health Centers, Rural School Enrolment and Food and Nutrition all impacted negatively on the rural development. This implies that Rural Health Centers, Rural School Enrolment, and Food and Nutrition do not enhance rural development in Nigeria. Overall, the theoretical implications of these variables can further be evaluated from the variance decomposition result. GDP The variance decomposition suggests that shocks to the GDP increase as evidenced in Table 3 shows that own shocks constitute the predominant source of variation for all the variables in the model. The shocks in GDP ranged between 100% in the first quarter declining in effects to about 35% in the fourth quarter, declining further to 23% in the eight quarter and rose marginally to 23% in the tenth quarter. Apart from its past values, rural development index, agricultural output, rural health centers, rural school enrolment and food and nutrition also accounted for variation in GDP. Specifically, shock in rural development did not contribute initially to the shocks in GDP in the first quarter but the contribution rose to 11.4% in the fourth quarter and to 29.30% in the eight quarters and decline marginally to 20.8% in the tenth quarter. Also, shocks in agricultural output did not contribute initially to the shocks in GDP in the first quarter but the contribution rose to 25.4% in the fourth quarter but declined to 16.30% in the eight quarters and declined further to 9.8% in the tenth quarter. Shocks in rural health contribute about 1.02% to the GDP throughout the ten quarters, and shocks in food and nutrition contribute about 1.5% to the GDP shocks throughout the ten quarters. Rural development When the forecast error variance decomposition of rural development was considered, the own shock seems to have a sustained impact on itself with an initial impact of 74.92% coming down to 33.73% in the fourth quarter and falling further to 19.72% in the eight quarter and increased to 33.81% in the 10th quarter. The shock in agricultural output causes rural development to increase from 31% in the fourth quarter to 34% in the eight quarter, but fell back to 31% in the tenth quarter. This finding confirms that in agriculture it does not consistently contribute to rural development in Nigeria. Whereas shock in rural education measured by school enrolment contributed to rural development in Nigeria also in the short run. The shock in rural education caused rural development to increase from a rise of 12% in the fourth quarter to 24% in the eight quarter.

7 Bakare 190 Table 2. Vector auto regressive estimate. Variable GDP RDEV AGRIP RUHELT RUEDU FDNS GDP(-1) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) GDP(-2) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) RDEV(-1) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) RDEV(-2) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) AGRIP(-1) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) AGRIP(-2) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) RUHELT(-1) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) RUHELT(-2) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) RUEDU(-1) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) RUEDU(-2) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) FDNS (-1) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) FDNS (-2) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) C ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( )

8 J. Agric. Econ. Dev. 191 Table 2 Contd. R-squared Adj. R-squared Sum sq. residues S.E. equation F-statistic Log likelihood Akaike AIC Schwarz SC Mean dependent S.D. dependent Determinant residual covariance Log Likelihood Akaike information criteria Schwarz criteria Date: 04/25/12; Time: 23:31. Sample (adjusted): Included observations: 23 after adjusting endpoints. Standard errors and t-statistics in parentheses. Table 3. Variance decomposition analysis. Period S.E. GDP RDEV AGRIP RUHELT RUEDU FDNS Variance decomposition of GDP Variance decomposition of RDEV Variance decomposition of AGRIP Variance decomposition of RUHELT Variance decomposition of RUEDU

9 Bakare 192 Table 3 Contd Variance decomposition of FDNS Agricultural output The result shows that own shock constitute highest cause of the variation as the agricultural output ranged from 1.6% in the fourth year rising to 6.9% in the eight quarter and to 10.17% in the tenth quarter. The contribution of rural health increase to shocks in agricultural output was about 45.5% in the fourth quarter. This figure increased to 48.04% in the eight quarter, and decreased finally to 44.0% in the tenth year. This finding is consistent with previous studies and the a prior expectation that increase in literacy rate do significantly and positively affect agricultural output. Rural health For the rural health, own shock contributes the highest source of variation with an initial impact of 54.67% in the first quarter declining in effect to about 44.56% in the fourth quarter and declined finally to 34.50% in the last quarter. GDP shocks contribute about 5.2% to rural health in the first year before rising to 10.0% in the fourth quarter and rose again to about 14.35% in the tenth quarter. The result demonstrated a direct but significant relationship between GDP shock and rural health in Nigeria. The result suggests that high national output stimulates rural health in the country. Shock in Food and Nutrition contributed positively to shock in rural health. It rose from 0.6% in the fourth quarter to 1.0% in the eight quarters and finally to 1.2% in the last quarter. The finding suggests that food and nutrition is an ingredient of rural health. Rural education For the rural education, own shock contributes the highest source of variation with an initial impact of 57.67% in the first quarter declining in effect to about 43.56% in the fourth quarter and declined finally to 48.50% in the last eight quarter and fell again to 44% in the tenth quarter. GDP shocks contribute about 22.2% to rural health in the fourth year before increasing to 25.0% in the eight quarter and fell back to about 22.35% in the tenth quarter. The result demonstrated a positive but diminishing impact of GDP shock on rural education in Nigeria. Food and nutrition For the food and nutrition, rural education shock contributes the highest source of variation with an initial impact of 45.67% in the fourth quarter and declined to 48.50% in the eight quarter and fell back to 41% in the tenth quarter. Agriculture output shocks contribute about 99.2% to food and nutrition in the first year and falls drastically before increasing to 1.6% in the fourth quarter and increasing slightly to 10.35% in the tenth quarter. The result demonstrated that agriculture does contribute meaningfully to the provision of food and nutrition in Nigeria. In other words, agriculture is not sustainable in Nigeria. CONCLUSION AND POLICY RECOMMENDATION This study examined and discussed how sustainable agriculture is in Nigeria and its implications on rural development. The study used Nigeria database and agricultural output variability to examine the impact of certain other variables such as rural health, rural education, gross domestic product and food and nutrition on rural development using Vector Autoregressive (VAR) model. At the preliminary level, the study examined statistical and theoretical significance of the variables under investigation using standard error test. The study found that individually, only rural development index (RDEV) and agricultural output (AGRIP) was statistically significant. Nevertheless, the F-statistics was high enough to validate the overall significance of the model. The statistical significance of the estimate was strengthened by the lower value of the Akaike and Schwarz. The variance decomposition also shows that agriculture is not sustainable in Nigeria. The findings confirm that agriculture does not consistently contribute to rural development in Nigeria. Whereas shock in rural education measured by school enrolment contributed to rural development in Nigeria only in the short run. Based on the findings, it was established and can be concluded that, while agriculture remains dominant in the Nigerian economy, it is unsustainable; the food supply does not provide adequate nutrients at affordable prices

10 J. Agric. Econ. Dev. 193 for the average citizen. The diminishing capacity of agriculture to provide for household food and nutrition security is therefore an indication of unsustainable agriculture. This finding is in tandem to that of Uniamikogbo (2007), Abayomi (2006) and Child (2008) who found that the arithmetic growth in food production in Nigeria coupled with geometric growth in population made agriculture unsustainable and rural development deteriorating. The findings and conclusion of this study suggested the need for the policy makers to promote agriculture to a sustainable level. In evolving more sustainable production systems, agriculture and rural development efforts should be directed towards three essential goals such food security, employment and income generation in rural areas, in order to eradicate poverty and natural resource conservation and environmental protection. Measures to promote agricultural sustainability should include: (i) Active participation by rural people in the development of integrated farming systems, by means of organizations such as agricultural cooperatives. Such groups will help prevent an increase in the influence of the middleman. (ii) Agricultural policies should be adjusted to promote production systems that can help attain the objective of sustainability. This includes promoting the demand for crops and livestock which can be produced sustainably. (iii) More attention should be paid to safeguard human health and environmental quality in relation to the use of dangerous pesticides and other chemicals. (iv) More sources of off-farm income such as food processing and handicrafts are needed in rural areas to prevent the migration of farmers to urban centers. REFERENCES Abayomi F (2006). An overview of Nigeria Agricultural sectors, J. Agric. Econ., 8(3): Buren R (1998). Africa south of the Sahara, 27th (Ed.), (Europa Publication Ltd., New York). Child MN (2008). The Effect of a Depressed Economy on Agricultural Sector, J. Afr. Stud., 3(2): Dmnaukwure PN (2005). A Logical Framework Approach to Agricultural Project Design and Costing in a Reformed Economy The CBN Bulletin Eicher C, Witt L (1964). Agriculture in Economic Development (New York: Mcgraw Hil. FAO (2003). Trade Reform and Food Security: Conceptualizing the Linkages, Rome: Food and Agriculture Organization. FAO (1995). A synthesis report of the African Region: Women, agriculture and rural development. Report prepared under the auspices of FAO s Programme of Assistance in Support of Rural Women in Preparation for the Fourth. FAO (2003). Brazilian Rankings in Global Agricultural Commodity Production %20Reports/AGM.pdf(Last accessed March ). Husain I (2004). Financial Sector Reform And Pro-Poor Growth: Case Study Of Pakistan Presidential Dress at the annual general meeting of the institute or bankers Pakistan held at karachi on February 21, Jones EI, Woolf SS (1969). Agrarian Change and Economic Development:The Historical Problems (London: Methuen). Mary A, Josef K (2005). Trade Liberalization, Intermediate Inputs and Productivity: Evidence from Indonesia Research Department, Trade and Investment Division, International Monetary Fund, th Street, Washington DC. Oluwasanmi HA (1966). Agriculture and Nigeria's Economic Development Ibadan: Ibadan University Press. Oyejide T A (2008). African Imperatives in the New World Trade Order (edited by Oyejide and Dominique). Ogen O (2003). Patterns of Economic Growth and Development in Nigeria since 1960 in S.O. Arifalo and Gboyega Ajayi (eds.) (2003) Essays in Nigerian] Contemporary History. Lagos: First Academic Publishers. Stewart R (2000). Welcome Address" Proceedings of the 7th World Sugar Farmers Conference. Durban. (Last accessed April , now discontinued Townsend RF (1999). Agricultural Incentives in Sub- Saharan African Policy Challenges, World Bank Technical Paper No. 444, Washington D. C. Uniamikogbo SO (2007). Industrial performance and Nigeria economy, 11 th inaugural lecture series, ambrosr ali University, Ekpoma.