The Impact of Agribusiness Sustainability on Productivity and Economic Growth of Rural Dwellers of Ondo State Nigeria
Johnson Olaniyan
University of Abuja , Abuja, Nigeria
Agribusiness plays key roles in the sustainability of human life. It entails all businesses related to agriculture starting from the stage of input production to the final stage of marketing/ distribution of agricultural output. The formidable roles of agribusiness in transforming lives and its potentials to enhance the productivity of agribusiness practitioners were considered. Agribusiness was considered to be crucial to resuscitate Nigeria’s economic crisis due to set back in income generation via oil and gas. However, agribusiness activities are impaired by many problems among which include: scarcity of funds, poor policies implementation, erratic political system, unfavorable climatic conditions etc. This study focuses mainly on the assessment of the impact of agribusiness sustainability on economic growth of rural areas in Ondo State, challenges militating against agribusiness actors and some of the inventions to ameliorate them. The quantitative data are gathered via questionnaire and analyzed via descriptive statistics. Selection of the participants involved random sampling. The total sample size for the study was 150 respondents. The research finding showed that the economic growth of rural dwellers is significantly influenced by agribusiness activities. The result indicated that sustainable agribusiness has great impact on income generation at the rural communities and has potential to transform their productivity. Interventional measures such as mechanization, favorable agribusiness policies and incentives are recommended to boost agribusiness activities to assist rural dwellers’ productivity. The results of this study may be pertinent in the development of policies and strategic plans for sustainable agribusiness productivity among agribusiness actors.
Keywords: Agribusiness, productivity, Sustainability, Economic growth
The sustainability and functionality of human existence largely requires the abundant supply of food which is one of the fundamental roles of agribusiness. Agribusiness development presents viable opportunities that are instrumental for eradication of poverty, wealth creation and rural economic development and transformation (World Bank Group 2022). Agribusiness has a broad business scope involving numerous activities ranging from inputs production, farming, processing, packaging, marketing and products distribution. Innovative development in agribusiness is a precursor to increase business efficiency and a driving force for sustainable economic growth of rural communities of African Nations (Sokolova & Litvinenko, 2020). It is a strong tower essential for the stimulation of employment opportunities for great population of people and a veritable tool for empowerment and industrialization vital for advancement of developing nations’ economy (World Bank, 2012).
In Nigeria, agribusiness remains one of the prominent sectors with high profile for income generation. Agribusiness operation accounts for more than 60 % of business endeavors that are found in Nigeria (World Bank Group 2022). The levels of successes recorded which marks the difference between the poor and the rich farmers varies significantly based on funds availability coupled with acquisition of pertinent skills essential for running agribusiness (Olaguju, 2004). Crude oil has been the main source of income generation in Nigeria in the past. However, the recent drastic decline in income generation through oil and gas has necessitated diversifying into non-oil productive sectors. Special consideration has been given to agribusiness as a veritable resort to revamp the Nigerian economy and pull it out of recession because of its previous antecedence and potential for economic growth (Pawa, 2013). According to the assertion of World Bank (2020) agribusiness has major role to play in accelerating the recovery of Nigeria’s economy from recession caused by covid-19 pandemic of 2020. The continual increase of the population of the world with prediction of substantial rise from 6.7 billion to 9 billion come 2050 is suggestive of active involvement of agribusiness activities to meet up with the feeding challenges of this large number of the world’s population (UNIDO, 2008).
Rural dwellers rely significantly on agribusiness as their means of survival and income generation. However, poverty rate is higher in the rural areas than in the urban areas. Boosting the level of growth in their productivity in a sustainable manner through agribusiness could help to improve on their rate of income generation as well the standard of their living. (World Bank Group, 2022). Agribusiness operation is confronted by many challenges which have served as cloak in the wheel of progress of agribusiness activities. In Ondo State Nigeria, agribusiness development is affected my invasion of farm land by armed Herdsmen and kidnappers who constitute security threats to agribusiness actors. Some farmers have abandoned their farm land due to fear of being kidnapped for payment of ransom before they could be released. This has lowered productivity and resulted to hike in the price of available food. The climate for operating business is not very congenial as Nigeria was ranked 131 out of 190 nations based on ease at which business could be done (World Bank, 2020). Unstable policies and ineffective implementation strategies on the part of the Government has also hindered agribusiness development. Paucity of fund or inadequacies in monitoring standards may result to failure of policies that ought to be implemented. Adoption of mechanization which is potentially capable to facilitate the transformation of agribusiness has remained a mirage to many rural agribusiness practitioners due to scarcity of funds. Advanced technological improvement and automation that can boost growth in productivity can only be adopted by large agribusiness firms that have sufficient funds (Sokolova and Litvinenko, 2020).
The exacerbation of the rate of dollar to Nigerian naira is another factor confronting agribusiness activities. This is because some of the inputs required are usually imported. Farmers sometimes are at the cross road due to insufficient inputs to aid their productivity (Ofana et al, 2016). Agribusiness has enormous potentials to improve the rate of income generation of rural dwellers in Nigeria but is impeded by these constraints.
This study is intended to be embarked upon for assessing the impact of agribusiness sustainability on income generation, challenges encountered as well as the interventions that can possibly be instrumental to reducing the effects of the challenges. The assessment was done in the rural areas. The relevant interventions to curtail the constraints were reviewed in this study and how agribusiness can be harnessed and upgraded in order to attain its full potential and ensure sustainable productivity among rural dwellers needed for their economic growth. With regard to this, the following research questions are addressed.
Numerous research studies had been embarked upon by scholars on agribusiness theory among which are Pawa, (2013), Munonye, & Esiobu (2017) etc but the studies did not focus on the impact of agribusiness on economic growth of rural dwellers. This study reviews literatures that are relevant to agribusiness and as well contributes to body of knowledge on impact of agribusiness on economic growth which is pertinent to bridge the gap between present and future research on agribusiness.
The word agribusiness according to Hassanzoy (2019) was first coined by a notable economist Davis John in his speech at Boston conference as “the sum of farming operations manufactures and distribution of farm commodities”. Davis and Goldberg further elaborated on agribusiness as “the sum total of all the operations involved in the manufacture and distribution of farm supplies, production operations on the farm and the storage, processing, distribution of commodities and items”. Agribusiness plays active role in socio-economic empowerment of agribusiness operators in rural areas (Sarma and Raha, 2017
The concept of productivity has to do with measure of output quantity based on the input quantity. According to Krugman (1994), productivity is a measure of an average efficiency with which production factors or inputs are used for production of certain level of output. It is an essential element of economic growth. It is a key dependent variable for comparison. Productivity is a tool for evaluation of performance rate in production (Olagunju. 2004).
Economic growth as a concept involves change in production in terms of goods and services over a period of time usually a year in an economy (Liberty fund Network, 2023). Economic growth is a dependent variable that is influenced by capital equipment, labor productivity, technological advancement etc. It measures the increase in the rate of goods and services that are produced per head in an economy. Economic growth can be measured through Gross national product (GNP) or Gross domestic product (GDP).
Agribusiness in Nigeria is a field of study with a wider scope about agriculture. It plays a major role in industrialization, job creation, wealth generation and supply of food for life sustenance (Siwatu et al, 2020). It is the main source of livelihood for majority of people living in the rural communities in Nigeria. It has always been notable as being paramount for diversification and economic recovery (World Bank Group, 2022). Crude oil has been the main source of income generation in Nigeria in the past. However, the recent drastic decline in income generation through oil and gas as a result of fall in its price in global market has necessitated the need for considering agribusiness as a veritable resort to revamp the Nigerian economy and pull it out of recession. Agribusiness is projected to create million jobs and recovery of the economic from the impact of Covid-19 pandemic (World Bank Group, 2022).
The current economic situation in Nigeria requires the service of economic sector that can provide an inclusive recovery from economic challenges and 2020 recession. Agribusiness sector is viewed perhaps as the timely and formidable prospects that can accelerate inclusive recovery and growth of Nigeria’s economic right from the rural communities down to the urban centers (World Bank Group, 2020).
Factors affecting agribusiness development and potentials
There are internal and external factors that affect the successful manifestation of the potentials of agribusiness as a veritable instrument for economic growth and income generation. These determine the success or impact that could be achieved by the agribusiness actors both in the rural areas or urban areas. The investigation made on factors influencing agribusiness productivity by Umer and Ambisa (2019) opines that internal and external factors have significant effects on the success that could be recorded in agribusiness development. This is in consonant with the study carried out by Hove and Tarisai (2023) on factors influencing the growth of small and micro agribusiness organizations which shows that there are internal and external factors affecting agribusiness which influence the performance of agribusiness actors. Internal factors could be viewed as forces or variables within a business firm that can influence the performances, operations policies, mission, (Genic, 2014). Baloy (2010) is of the view that internal factors are the forces within a firm that influence the ability of agribusiness to effectively operate regardless of innate ability of the agribusiness operators.
Internal factors affecting agribusiness: There are different kinds of internal factors that could affect agribusiness potentials. Availability of funds is a crucial internal factor which is required for successful implementation of agribusiness production (Hove and Tarisai, 2023) The research conducted by Nnamdi (2019) on identifying internal factors serving as barrier to agriculture entrepreneurship confirmed paucity of fund as the top most factor affecting agribusiness development in rural areas. About 70% of the labor requirement for farm operation in Nigeria depends on human power due to scarcity of fund to adopt technology which can reduce the use of human labor with higher efficiency and sustainable impact (NISER, 2001). Business fails where there is no fund to acquire essential resources, pay workers, and execute major operations needed by a firm (Shafeek, 2009). The managerial skill possessed by agribusiness practitioners is another internal factor that can determine the success or failure that would be recorded in business activities (Hove and Tarisai, 2013). Inability to manage the scare resources of both human and capital can hinder the potentials of a business venture.
Technology adopted by agribusiness firms has great impact on their level of productivity. Udemezue and Osegbue (2018) identify technology-know-how and access to improved inputs (seeds, animals with desirable attributes) as internal factors that may affect agribusiness development in the rural areas who are engaged in agriculture as means of income generation. There is a strong connection existing between technological changes and economic growth of a production firm (Tisdell, 1988). Technology is an internal factor that affects the rate of production. Adoption of a new technology may help to save time, labor cost and increase the rate of production (Ruttan, 1985). Baloyi (2010) asserts that the knowledge about a particular form of technology and its application contributes meaningfully to the continuous relevance of any firm in a particular line of business. Moreover, Agribusiness firms need to apply strategy in the allocation of resources and management of operations. Integration of emergent and deliberate strategies may be crucial in managing the activities of an organization (Anderson, 2004).
External factors affecting agribusiness potentials
According to Isiac (2014) external factors are considered are forces outside a firm that are capable of influencing the operations and performances of a business firm indirectly or directly. They are notable for affecting agribusiness development both in the rural and urban centre. External factors such as infrastructural facilities, policies of government are part of major factors affecting agricultural sustainability. These external factors cannot be easily handled by the agribusiness actors as they are beyond their jurisdiction to tackle in most cases. In Nigeria, infrastructures needed for economic growth are inadequate. Onohaebi (2014) opines that “only about 10% of the rural dwellers and less than 40% of the urban areas have access to electricity” which is still unstable. Deficiencies in infrastructures have negative effects on quality of life. According to Kessides (1993) and Alaba (2001) poor infrastructures contribute enormously to poverty rate and reduce productivity and the rate of income generation. Moreover, external factor such as external shock affects agribusiness sustainability. Inflation in the country coupled with depreciation of the value of Naira affect exchange rate (Nnamdi, 2019). Farm inputs such as fertilizers and herbicides are imported into the country to aid agricultural productivity. Fluctuations in the exchange rate of dollar to naira affect the price and availability of imported farm inputs. This in turn affects cost of production and the productivity of agribusiness operators which has consequential effects on the selling price of agribusiness products (Wasiu and Innocent, 2018).
Agribusiness and its Impact on Economic Growth
Agribusiness is a wide sector of Nigeria economy with a significant impact on economic growth and wider potential for diversification and sustenance of its economy (World Bank Group, 2022). The investigation carried out by Tolulope & Chinonso (2019) on the contribution of the agriculture sector to economic growth of Nigeria using “Granger causality test”, showed that agriculture sector had contributed meaningfully to economic growth in Nigeria. This is reaffirmed by the investigation of Aminu & Anono (2019) on contribution of agricultural sector to “the economic growth and development (GDP) of the Nigerian economy between 1980 and 2018”which also affirms the sector as being importance to Nigeria’s economy. The contribution of agribusiness as a more encompassing sector to wealth creation and economic development needed for human sustenance is quite enormous. It is a key player in the provision of employment opportunities and generation of income in every part of the world (FAO, 2013). Agribusiness is considered as an engine that drives economic growth because of its numerous impacts (World Bank, 2008). Assertion made by Gardner (2005) indicates that agribusiness contributes significantly to the Gross Domestic Product (GDP) of most developing nations of the world. Sheikh et al (2012) opine that there is a “causal relationship between agribusiness, GDP and economic growth”. Their investigation indicates that agribusiness has contributed immensely to economic growth on the long term and short run. Agribusiness is gaining more relevance in strategies and policies formulation with an intention for promoting investments and value chains to enhance economic growth (FAO, 2013). Close to 70% of the population of sub-Saharan Africana are engaged in agriculture-related business with greater percent of their GDP generated from agribusiness. The foreign direct investment (FDI) of the sub-Saharan Africa through agribusiness related exports grew significantly to $61billion in 2009 (Business Trends, 2009). The increase in economic growth was attributed majorly to agribusiness activities.
The reduction in income generation via oil and gas known to be the bedrock of the Nigerian economic growth has stimulated the urge to improve on agribusiness because it is considered to be instrumental to resuscitate the moribund economy of Nigeria to become a vibrant and dynamic economy.
Ondo State which is the research location for this research work is located in the south west of Nigeria with land mass of 14606 sq km and estimated population of over 4,671,695million (National Bureau of Statistics, 2017). Over 80% of the people are engaged in agribusiness activities which includes growing and processing of crops like cocoa, maize, coffee, yam, rice cocoyam etc along with livestock and fish production. Ondo state is one of the best cultivators of cocoa in Nigeria as the means of economic growth because of the favorable climatic conditions that suits its production (Fowole & Rahji, 2016). The returns of tonnage and revenue of graded cocoa for over ₦135,013,500 was realized in Ondo state which was not recorded in most states producing cocoa in Nigeria (Ministry of Natural Resources, 2007). Agribusiness is competing fairly in the area of income generation that is necessary for economic growth both in the domestic market and also in the global market operation (Nnamdi, 2019).
Among the sectors through which foreign exchange earnings are generated to the economy of Nigeria, agribusiness ranks as the second largest contributor and major source of foreign exchange through exports after the crude oil which is the largest and the main source of foreign exchange earnings (ICAE, 2015). Adeboye (2004) is of the view that agribusiness accounts for over 30% of the annual GDP (Gross domestic product) and is responsible for more than 70% of the exports that are non-oil. It supplies more than 80% of food that is needed in Nigeria. Agribusiness is considered as the major force necessary for building a viable economic growth and a panacea for revitalizing the economic growth of Nigeria and other African nations. Agribusiness constitutes more than 65% of the entire export through foreign earnings that are generated in Nigeria in the past. (Sertoğlu et al, 2017).
In Nigeria, the views of several researchers show that there is positive relationship between agribusiness and economic growth of Nigeria through the use of different econometric methods (Izuchukwu, 2011). However the studies carried out by some scholars such as Oluwatoyese and Applamidu (2013); Aggrey (2009) indicated that the relationship existing between agribusiness and economic growth is negative.
Constraints of agribusiness activities for rural development
Despite the high potentials agribusiness has to positively impacting the rural families, it is hindered by some factors. The choice of market channel depends on existing market demand. Where rural farmers lack knowledge about market demand, it is inherently risky to be producing farm products where there is no potential demand for them (Koira, 2014). Lack of understanding of marketing intelligence is a serious issue that can result to investment failure (Stokes and Wilson, 2006). The rural dwellers engaged in agribusiness must have the knowledge of the market they are targeting and the products to meet such market (Shafeek, 2009).
Large numbers of rural dwellers are poor and lack enough fund to carry out their farm operations. Unavailability of fund is one of the greatest challenges facing most rural agribusiness practitioners. This hinders the expansion of their farm operations to attain greater productivity.
Land tenure is another sensitive factor that affects agricultural production since most agricultural activities requires land before they can be done. Land plays crucial function in supporting livelihood of large number of people through livestock and crops production and other production activities (Adeboye, 2004). The system of land ownership varies from one region to another in Nigeria. Land ownership by individual or group leads to fragmentation of land or limits availability of land for agribusiness activities (Onyebianama, 2004). A lot of young rural inhabitants move from the rural areas to urban centers to seek for better life. This is due to poor social amenities and returns on their labor in the rural areas. The continuous migration of young people from rural communities results to shortage of labor force (Mgbakor et al, 2014). This rural- urban migration causes a shift in labor line and results to women taking charge of agricultural activities and headship of some rural households (Bull, 2001).
Method and procedure
Agribusiness actors in the rural areas of Ondo state Nigeria constitutes the population of this study. Random sampling was used to draw participants to represent the whole population. The sample size involved 150 respondents which were randomly drawn from the entire population. Questionnaire was used as a data collection instrument in gathering the quantitative data from the respondents needed for the research work which includes, agribusiness actors like farmers, farm input sellers, and Agricultural students. Analysis of data was done through descriptive statistics.
The research questions
The research study tends to answer the research questions below:
What are the factors affecting agribusiness development in the rural communities?
In what ways does agribusiness impact economic growth?
The factors affecting agribusiness development in the rural communities
Internal factor affecting agribusiness
The findings from the research conducted reveals that all the examined variables of internal factors affecting agribusiness have mid effect on the productivity of agribusiness. The respondents that participated in the research were of the opinion that capital/fund ranked high in term of the internal factors affecting agribusiness. The result implies that lack of fund could have largely hindered productivity of agribusiness. The research results also indicate that other factors like market, managerial skill, and technical-know-how internally affect agribusiness production to a large extent. This result implies that inadequacy in any of these factors aforementioned will have adverse effects on the capacity of agribusiness productivity of any firm. This is in conformity with Genic, (2014) that opines that the performance and success of a business enterprise largely depends on the improvement on the internal factors towards ensuring productivity of business enterprises. This implies that agribusiness firm that wants to ensure sustainability in its agribusiness productivity should ensure the availability of these internal factors.
Table 1: Internal factors affecting agribusiness productivity
| N | Mean | Std. Dev. | Rank | |
| Capital/Fund | 125 | 3.46 | 1.28 | 1 |
| Technical know-how /skill | 113 | 3.27 | 1.17 | 2 |
| Market knowledge | 103 | 3.23 | 1.22 | 3 |
| Managerial skill | 61 | 3.14 | 1.30 | 4 |
| Mid Score | 3.27 |
Source: Field Survey, 2022
External factors affecting agribusiness productivity
Among the external factors affecting agribusiness productivity considered namely are; infrastructure, patronage, government policies, politics, security. The research showed that government policies were considered as the highest factors that affected agribusiness potential followed by poor infrastructural development. This indicates that the role of the government in terms of formulating policies and provision of basic infrastructure cannot be undermined for agribusiness productivity to be able to attain its full potential among the agribusiness actors.
This assertion is corroborated by Federal Ministry of Agriculture (2004) who is of the view that agricultural policies made by government play major role in ensuring sustainable growth which can transform agriculture landscape for improvement of the standard of living of the citizens. The issue of security is now a very sensitive matter due to the rising problems of insecurity in Nigeria. From the research 83respondents out of 150 identified it is a major concern. Many farmers are running away from rural farming communities due to fear of being attacked by Bandit, Boko haram, Fulani herdsmen and other terrorist groups who are causing havoc on farmers living in the agrarian communities. This has resulted to rise in the price of available food stuff.
According to the assertion made by Bright 2018, insecurity problems have resulted to the reduction in productivity of agricultural output. The government has major role to play in addressing this germane issue as it is saddled with the responsibility of ensuring the security of lives and properties of its citizens.
Table 2: External factors affecting agribusiness productivity
| N | Mean | Std. Deviation | Rank | |
| Infrastructure | 110 | 3.32 | 1.34 | 2 |
| Patronage | 97 | 2.95 | 1.18 | 5 |
| Government policies | 114 | 3.21 | 1.25 | 3 |
| Politics | 88 | 2.95 | 1.24 | 4 |
| Security | 83 | 3.59 | 1.46 | 1 |
| Mid Score | 3.20 |
Source: Field Survey, 2022
Impacts/effects of agribusiness on the economic growth of rural communities of Ondo state
The above research question assessed the impact of agribusiness on the rural communities within Ondo state. The findings from table 3 indicate that 49.3% of the respondents are of the view that agribusiness has single impact on their community. 22% (33) respondents are of the view that the agribusiness impacts highlighted were all felt in their community. This shows that the impacts of agribusiness are felt in some areas more than others. The fact remains that agribusiness is felt in some areas than others. Although agribusiness impact is felt in all the rural communities however, the impact felt differs from one community to another.
Table 3: Impacts of Agribusiness
| Count | Frequency | Percent |
| .00 | 3 | 2.0 |
| 1.00 | 74 | 49.3 |
| 2.00 | 13 | 8.7 |
| 3.00 | 7 | 4.7 |
| 4.00 | 9 | 6.0 |
| 5.00 | 9 | 6.0 |
| 6.00 | 2 | 1.3 |
| 7.00 | 33 | 22.0 |
| Total | 150 | 100.0 |
Source: Field Survey, 2022
From table 4, the areas of impacts captured ranges from employment generation, economic growth, industrialization, rural development, poverty reduction and income generation. The most prevalent area of impact of agribusiness on the communities was in the area of food supply which was estimated as 69.4%while the least among the impact felt was in the area industrialization. The reason for this result may be due to the fact that the communities under investigation are rural settlement where their major concern may be on food supply with less concern or interest in industrialization. The findings of this research study is in tandem with the result findings of Pawa (2013) which stated that agribusiness has impact on rural development.
Table 4: Impact of Agricultural Business on Community Frequencies
| Responses | Percent of Cases | |||
| N | Percent | |||
| Impact of Agribusiness on communitya | Food supply | 100 | 23.0% | 69.4% |
| Employment generation | 65 | 15.0% | 45.1% | |
| Economic growth | 56 | 12.9% | 38.9% | |
| Industrialization | 45 | 10.4% | 31.3% | |
| Rural development | 46 | 10.6% | 31.9% | |
| Poverty reduction | 55 | 12.7% | 38.2% | |
| Income generation | 67 | 15.4% | 46.5% | |
| Total | 434 | 100.0% | 301.4% | |
| a. Dichotomy group tabulated at value 1. | ||||
Source: Field Survey, 2022
The result finding from the research showed that the impact of agribusiness is felt in all the rural communities under this study according to the views of the respondents that participated in the research study. However, the impacts are more felt in one area than the other. The impact of agribusiness is felt in the area of employment opportunities, rural development, and economic growth, reduction in the rate of poverty, industrialization, and generation of income. The predominant area in which impact of agribusiness activities is felt mostly in the rural communities examined was in food supply (69.4%) while industrialization is the area where the impact of agribusiness was less felt. This implies that conducive environment such as security, good roads, technological advancement (such as mechanization/ automated farming practices), favorable agribusiness policies and incentives etc. that can stimulate industrialization and agribusiness activities should be provided by the government. Both internal and external factors influencing agribusiness should be well addressed by both the private organizations and the federal government.
This research work reveals that agribusiness development has notable and significant impacts on economic growth of rural areas of Ondo state. In realizing the full potential that agribusiness productivity has, the agribusiness actors need to be given necessary supports and enabling environments that can enhance smooth running and sustainability of their business activities.