Economics 2013; 2(5): 38-54 Published online September 30, 2013 (http://www.sciencepublishinggroup.com/j/eco) doi: 10.11648/j.eco.20130205.11 Agriculture and intersectoral linkages and their contribution to Nigerian economic growth ONAKOYA, Adegbemi Babatunde Department of Economics, Tai Solarin University of Education, Ijebu Ode, Nigeria Email address: adegbemionakoya@yahoo.com To cite this article: ONAKOYA, Adegbemi Babatunde. Agriculture and Intersectoral Linkages and their Contribution to Nigerian Economic Growth. Economics. Vol. 2, No. 5, 2013, pp. 38-54. doi: 10.11648/j.eco.20130205.11 Abstract: This study investigates the contributions of the agricultural sector to Nigeria's economy by estimating a macroeconometric model which is a system of simultaneous equations that seeks to explain the behaviour of key economic variables at the aggregate level, based on the received theories of economics. Within the context of the inter-linkages of the various sectors of the real economy, the estimates incorporate the linkages among agriculture, manufacturing, oil and gas and the service sectors, especially how the affect of the other sectors influence the growth of agriculture. The findings is that inter sectoral relationships are complicated and multi-directional. The spill-over effects and externalities generated by the interactions and linkages between the different sectors attest to the dynamic nature of the economy. Also, the economic role of the agricultural sector is a one-way path as the flow of capital is mainly towards the industrial, oil and gas and the tertiary services sectors. This study establishes that sectoral linkages are not always beneficial especially between agriculture and the oil sector and recommends the modernization of the industrial and services sectors in order to generate increase in local content value addition to agriculture. Keywords: Agriculture, Intersectoral Linkage, Economic Growth, Macroeconometric Model 1. Introduction The Neoclassical Theory postulated by [1] and [2] has the basic assumptions of closed economy with competitive markets, identical rational individuals and a production technology that exhibits diminishing returns to capital and labour separately and constant returns to both inputs jointly. Reference [3] suggests that the structural change is not an important side effect of the economic development. On the other hand, new growth economists [4] and [5] posit that the changes in an economy’s sectoral composition is a critical determinant of growth. In developing the theory of development, [6] and [7] employ the classification of countries into developed and less developed status on the basis of the distinction between primary, secondary and tertiary productions. The rationale being that when the basic necessities of life are met, a primary commodity producing nation graduates to secondary activities (manufacturing). When the demand for industrial goods becomes saturated, resources are move into tertiary activities with a higher income elasticity of demand. A country in the classification of [8], becomes economically developed when the productivity of the agricultural sector approximately matches those of the industrial and service sectors. Developing countries are beset with the malaise of varying degrees including high proportion of consumption relative to savings and investment, population growth, chronic unemployment and underemployment. These are in addition to the predicament of low levels of GDP per capita and productivity, large income inequalities, dependence on primordial agricultural practices, backward industrial and technological structure, and economic dualism [9]. Given the afore stated symptoms, Nigeria qualifies as a developing country. Indeed, the size of her economy marked by the Gross National Income per capita is put by the [10] at $1,190. In 2011, [11] reports that the economy suffers from stagflation. In addition, the structure of the economy makes it vulnerable to external shocks. Nigeria is overly dependent on revenue from crude oil export. Reference [12] reports that oil accounts for over 95 per cent of export earnings and about 40 per cent of government revenues. The country is trou bled by the 'Resource curse' or 'Dutch disease' which is the co- existence of vast wealth in natural resources and extreme personal poverty leading to unbalanced growth [13].