Economists divide all economic activity in an economy into two broad categories, which are goods and services. So it is either that a country is producing goods or it is producing services. Before 2014, it was reported that agriculture contributed close to 40 per cent of Nigeria’s Gross Domestic Product. After the last rebasing of the economy in 2014, the nation’s economy showed a declining share of the contribution from the agricultural sector to the GDP, in line with the global trend. Currently, agriculture’s contribution to the GDP revolves around 21 and 22 per cent behind the service sector, which is over 50 per cent. This implies that the global economy is now service-based rather than factor (goods) based. It also means that developing economies must endeavour to move from being a factor-driven economy to a service-driven economy.
If an economy is more service-based, by implication it means that the various industries that make up the service sector employ more people and create more wealth than other sectors, including the agricultural sector.
Let me briefly describe what constitutes the service sector in an economy. According to Encyclopedia Britannica, the service sector is that part of the economy that creates services rather than tangible goods.
In the service sector, there are activities, such as research, private professional services, government services (including defence and administration), banking, information technology, communications, entertainment, wholesale and retail trade, medicine, nonprofit economic activity, all consumer services and many more. This explains why the developed economies have agriculture at 2 to 3 per cent share of the GDP.
In a country like Israel, even the tourism sector contributes over 15 per cent of the GDP, while the agricultural sector is around 3 per cent. Globally, the highest contributor to the GDP now is the service sector or the manufacturing sectors, implying that what drives a contemporary economy are ideas and services. In the early part of the 21st century, service industries accounted for more than three-fifths of the global GDP and employed more than one-third of the labour force worldwide.
Let me give a background to my argument: There are different stages of national development. The first stage is described as the factor-driven stage. At this stage, a country’s competiveness is based on natural endowments, such as agriculture, natural resources (solid minerals, crude oil etc.) and labour. The second stage is the investment-driven stage, which is characterised by manufacturing and service exports. The final stage is the innovation-driven stage during which the country develops the ability to produce innovative products and services at the global technology frontier, using the most advanced methods. This is where you find countries like the United States of America, the United Kingdom, European Union member states, Israel and some Asian countries.
As countries develop, their labour force shifts from agriculture to industry and services and in the process, the well-being of the people improves. The idea is that a developed service sector helps to reduce the amount of labour input into the agricultural sector and other goods-based sectors.
The aim of this piece is to shed some light on the economic logic that drives developmental processes and stages, as well as the important role of agricultural productivity. I would want to argue that agricultural productivity growth in developing countries, as it stands now, is only a key to employment and poverty alleviation and not essentially a condition for national development in the contemporary world.
Many people may not agree with this theory, but it is high time we Africans understood that the developed world wants us to remain where we are with this concept of comparative advantage by staying at the production level of agriculture. So we continue to be producers of raw materials for their industrial manufacturing sectors. Africans, who worked in the era of the trans-Atlantic slave trade on European farms for the production of raw materials, are now working on African farms and still producing for the same European industries. My point is that production-based agriculture does not develop an economy; it is the manufacturing and service sectors that can make us competitive in the global system.
In recent time, government has had too many campaigns aimed at encouraging the youth to go back to agriculture. I would like to learn what it means by going back to agriculture and at what level. What innovations are in place to encourage the youth to produce at a globally competitive level? Why should we have an army of youths in the farms when the over 80 per cent of the population that are already farming are not efficient?
It shows that we are still at the medieval stage of development. As a matter of fact, we need to reduce the number of farmers in Nigeria, if that is possible. In Australia, only about 135,000 farmers feed a nation of over 80 million people and still has a surplus for export. The youth should rather be employed in sectors that will develop innovations, which can also complement the agricultural sector and improve the efficiency of existing farmer.
The continuous practice of agriculture at the primary level without innovation leaves us at the 19th century development stage. Countries that want to develop economically transit from being dependent on agricultural commodities to being dependent on the provision of services. While we accept existing realities, let us at least move to the second stage of economic development, which is manufacturing.
Agriculture’s role in structural transformation has been demonstrated in many countries, especially in Asia. But competition in the global market is way beyond groundnut pyramids and cocoa boards. For me, the medieval stage of development starts with production-based agriculture because people need to work and eat. The history of England, US, Japan is a clear evidence of an agricultural revolution preceding an industrial revolution. There is too much emphasis on the Nigerian agricultural sector, as if national development depends on it. To the extent that it creates employment, agriculture is good, but for Nigeria to compete in the contemporary global economy, we must recognise the fact that we are in an innovation driven times where agriculture will play just a complementary role.