IMPACT OF NON-OIL EXPORT ON NIGERIAN ECONOMY


IMPACT OF NON-OIL EXPORT ON NIGERIAN ECONOMY

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ABSTRACT

The study investigated the impact of non-oil exports on Nigerian economy during the period of 1986-2010. This study was carried out against the background of the crucial role non-oil export can play as an alternative source of revenue apart from crude oil exports. To achieve this objective, multiple regressions were used in analyzing the data. The empirical result shows that non-oil export is statistically significant to Nigeria economic growth. On the other hand, Government Expenditure (GEX) was not significant to Nigerian economy. Due to this, some recommendations were made which include encouraging financial institutions, improving in data collection and banking, efficient allocation and use of resources, and creating economic environment that will help boost the activity of non-oil export sector.

TABLE OF CONTENTS

Title Page……………………………………………….…. i

Approval Page ………………………………………… ii

Dedication…………………..…………………………………………..iii

Acknowledgement……………………………………..iv

Abstract………………………………………………………. v

Table of Contents……………………………………vi

CHAPTER ONE

1.0 INTRODUCTION

1.1 Background of the Study………………………………………… 1

1.2 Statement of the Problem………………………………………… 8

1.3 Objective of the Question………………………………………… 11

1.4 Statement of Hypothesis………………………………………….11

1.5 Significance of the Study………………………………………… 12

1.6 Scope and Limitations of the Study…………………………… 12

CHAPTER TWO

2.0 LITERATURE REVIEW

2.1 Theoretical Literature……………………………………………. 14

2.1.1 The Agricultural Commodities and Products Exports…. 15

2.1.2 The Manufacturing and Craft Export Product…………… 16

2.1.3 The Solid Mineral Export Product………….………………..17

2.2 Empirical Literature………………………………………………18

2.3 Limitations of the Previous Studies…………….…………….26

 

CHAPTER THREE

3. O RESEARCH METHODOLOGY

3.1 Model Specification………………………………………………..27

3.2 Methods of Evaluation…………………………………………… 29

3.3 Model Justification………………………………………………..30

3.4 Sources of Data and Software Packages……………………. 31

CHAPTER FOUR

4.0 PRESENTATION AND ANALYSIS OF RESULTS

4.1 Presentation of Result…………………………………………… 32

4.2 Result Interpretation……………………………………………. 32

4.2.1 Analysis of the Regression Coefficients…………………. 32

4.2.2 Evaluation Based on Economic Criteria……….………..33

4.2.3 Evaluation Based on Statistical Criteria……..………… 33

4.2.4 Evaluation Based on Econometric Criteria……………… 34

4.3 Evaluation of the Research Hypothesis……………………. 38

4.4 Policy Implication………………………………………………. 39

CHAPTER FIVE

5.0 SUMMARY, RECOMMENDATIONS AND CONCLUSION

5.1 Summary of Findings…………………………………………… 40

5.2 Policy Recommendations….…………………………………… 40

5.3 Conclusion….……………………………………………………..43

Bibliography…………………………………………………………….44

 

CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND OF THE STUDY

There are a number of reasons for a country to be concerned about its rate of economic growth. Economic growth is designed by both affluent and non-affluent economies. Economic growth is the desire for higher levels or real per capital income, real output which must grow faster than the production of the economy in question. Economists, policymakers, public and private sectors work ceaselessly forwards attaining economic growth by the use of development and growth models and policies. Among the policies used are trade policy (import and export policies, monetary policy, exchange rate policy, fiscal policy, market, etc). In this study, the non-oil exports and economic development in Nigeria will be examined.

Non-oil exports are the products which are produced within the country in the agricultural, mining, and querying and industrial sectors that are sent outside the country in order to generate revenue for the growth of the economy excluding oil product. These non-oil export products are coal, cotton, timber, groundnut, coca, beans, etc.

Today, as in the past, the growth of Nigeria economy remains partly dependent upon increasing productivity of the agricultural sector.

Helleiner, 2002 state that no matter how much development and structural transformation achieved, it will remain its relative dominance in the economy to many decades to come. Precisely, it is from agricultural exploits that the economy has received its principal stimulus to economic growth.

Agricultural sector can assist through the exportation of principal

primary commodities which will increase the nation’s forei earnings and which can be used to finance a variety of development projects. The growth of the agricultural sector can

make a substantial contribution to the total revenue, as well as having some implications for intersectional terms of trade. Also in the area of capital formation, the savings generated in this sector can be mobilized in development purposes, while increase in rural income as a result of increasing agricultural activities can further stimulates the product of the modern sector.

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The needs of the agricultural sector could indirectly influence the creating of additional infrastructures which are in dispensable to rapid economic development (Olaloku, 2001).

Another non-oil export to be developed on is industrial sector. It is the fastest growing sector in Nigerian economy. It comprises of many manufacturing and mining. Nigeria has manufacturing base prior to 1960 and shortly after.

The problem was due to lack of modern technological skills, managerial experience of complex organizations and financial back-up. The problem was further aggravated by the colonialists merchants convincing arguments on the goodness of comparative cost- advantage.

Nigerians were coaxed into concentrating their efforts in the production of primary agricultural products and exporting them to the metrological industries in Europe.

Our industrial sector took off after independent relied on satellite firms representing British interest. The bank sector, which is constellation of colonial bank braches and some companies that were able to invest in manufacturing were the multi-national that have access to funds, technology, and managerial expertise. This greatly hindered the progress of indigenous entrepreneurs. The

 

Nigerian manufacturing sector has been described by Ikediala (1983) as consisting of more assembling plants. He says that the implication of this is that the industries have very little background linage in the economy, since the bulk of the inputs is imported, thus the manufacturing sector depends or imported raw-materials of 42%. The capacity utilization of manufacturing industries has always been low in this country. The reasons as put by CBN (1998) are not unconnected with raw materials scarcity, consumers’resistance due to high prices, and increase in cost of manpower. Others mentioned are equipment breakdown due to poor technology, lack of spare parts. Time lies between when inputs are ordered for and when they arrive, cash flow problem in industries becomes a permanent features.

The Nigeria civil war brought about the deterioration of the oil palm grooves and plantations were abandoned and little if any new planting was undertaken. As a result of that, the output of palm oil and palm kernel declined drastically. But according to Onwuka (1985), the problems of palm products are due to the stagnation in the production of this wild palm tress, which are of low-yield quality, and the difficulties experience in harvesting them. In addition, the old system of pricing which guarantees low

 

production prices for palm produce discourage substantial investment from being made for further production of this product. Also, the problem of marketing boards cannot be over-looked.

Marketing board is an institution set up by the government with the exclusive right to buy and sell certain agricultural products. They purchase some products locally export sales are made through the Nigerian.

Marketing company, which is jointly owned by the state, one of the marketing functions of the marketing board is to stabilize the prices or our cash crops and hence creates stability of income for formers and to accumulate funds for development purposes. But the operation has failed to provide incentives to farmers to increase their input. Also, the producers aid unnecessary tax and they took from the producers some money, which should have gone to them as income they this reduced the amount of capital available to the producers.

This criticism, according to Adenira (1991) made the federal Government to reform the marketing board some with a view to increase producers’ prices and income

 

features of the new authority while producer taxation (export duty and produce sale tax) has been abolished. Another major boards with the responsibility of market specific products wherever they are produced in the country. These boards are likely to reduce administrative problem and be more economical compared with all oil –produce state market boards previously in existence.

The major fault of the successive government that are supposed to sustain this sector through the building of macro-economic structures and incentives diverted their attention away from agriculture. The result was sharp in the export/import equation as country started importing even palm oil that was hither to imploring from Nigeria. The situation was becoming worrisome thus by 1975 there were attempts to recapture the lost of glory of

agriculture. General Olusegun Obasan nations becomes the first real expressed official attempt in this direction. It was followed by the establishment of two river basin development authorities in 1977 by 1978 and 1979, the federal government made budgetary provision to establish 4,000

hectares of mechanized farms in each of the 19 states then, by
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