Actually, no it doesn't. The actual lyrics are this-
Oh I come from a land, from a faraway place
Where the caravan camels roam
Where it's flat and immense
And the heat is intense
It's barbaric, but hey, it's home
When the wind's from the east
And the sun's from the west
And the sand in the glass is right
Come on down
Stop on by
Hop a carpet and fly
To another Arabian night
Arabian nights
Like Arabian days
More often than not
Are hotter than hot
In a lotta good ways
Arabian nights
'Neath Arabian moons
A fool off his guard
Could fall and fall hard
Out there on the dunes
The song is sung by the Peddler, the narrator of the story, and he says it's HIS home. He does not say that Arabia is the area where Agrabah is and, even if he did, he's an unreliable narrator at best (remember, he's telling you this story so you buy the crappy lamp he's trying to foist off on you).