The impact of Non-oil export on economic growth of Nigeria. Download the full research work in doc editable format. The export of crude oil now constitutes about 96% of total exports. The performance of the non-oil exports in the past two decades leaves little or nothing to be desired. The policy concern over the years has therefore been to expand non-oil export in a bid to diversify the nation’s export base.
1.1 Background to the Study
Export promotion has been argued by many economist as a major driver of economic growth in any country of the world. In Nigeria, the export sector is characterized by the dominance of a single export commodity. In the decades of the 1960’s and 1970’s the Nigerian economy was dominated by agricultural commodity exports. Such commodities included Cocoa, groundnut, cotton and palm produces. From the mid-1970s crude oil became the main export product of the Nigerian economy (Ifeacho, Omoniyi, and Olufemi, 2014). The economy is said to be suffering from the Dutch disease resulting from her mono export of oil. Of course, Nigerian crude oil is of the light and sweet type and is highly sought after in the international oil market.
The export of crude oil now constitutes about 96% of total exports. The performance of the non-oil exports in the past two decades leaves little or nothing to be desired. The policy concern over the years has therefore been to expand non-oil export in a bid to diversify the nation’s export base. The diversification of the Nigerian economy is necessary for important reasons, first the volatility of the international oil market with the attendant volatility of government revenue gives credence to any argument for diversification of exports (Ifeacho, Omoniyi, and Olufemi, 2014). Secondly, the importance of export to a nation’s economic growth and development cannot be over-emphasized.
Exports are goods and services produced domestically and purchased by foreigners. Net exports are the difference between total exports and total imports. According to Afolabi (2011) Export can be defined as surplus goods and services of a country that are sent to other countries in the world for sale.
Samuelson and Nordhaus (2010) see exports as the mirror image of imports. That one countries export is another’s imports. However, export is any goods or commodity transported from one country to another country in a legitimate fashion typically for use in trade (Oluchi, 2017).
Export is a catalyst necessary for the overall development of an economy. The primary objective of export policies in any economy is to increase the level of economic activities. It follows, therefore that export policies should be directed to the sector in which the impact of an increase in export demand will be both desirable and large. It is a source of foreign exchange earnings and since trade transaction followed by the ―oil boom period which arose from oil glut in the world oil market since 1981 only led to the neglect of non-oil export productive base.
This has also led to panic measures by successive government from the economic stabilization Act of 1982. Counter trade policy of Buhari/Idiagbon regime and the introduction of structural adjustment programme (SAP) by the Babangida Administration hence the need to diversify the export base of the economy. Prior to the phenomena emergence of the oil sector, Agriculture is one of oldest occupations in Nigeria and has been the main slay of the Nigerian economy contributing 80% of the export earnings and 75% of the Gross Domestic Product (GDP).
Consequently, this position has fallen consistently to date, the attendant fluctuation in the non-oil export promotion, the world prices of agriculture and manufacture products and the emergence of oil have helped in no small measure in diverging the role of agriculture in the nation’s development. This situation is worsened by the almost total neglect of the agricultural sector. The Nigerian economy has not recovered from the resultant disequilibria in both domestic and external sectors, this has therefore brought about the need for adjustment in Nigeria to diversify and restructure the productive base of the economy in order to reduce its dependence on oil export. It is this concerns the country non-oil exports.
Furthermore, a well-developed sector will provide employment opportunity for the people with the attendant reduction in social costs of unemployment. Earnings from export reduce the strains on the balance of payment position and even improve it. A rewarding export drive can turn hitherto under developed economy into a prosperous economy.
Export help in increasing the level of aggregate economic activities through its multipliers effects on the level of natural income. Income earned through exporting will help in increasing the level of demand within the economy. The Nigerian external sector has always been dominated by primary commodities which have the well-known basic characteristic of low price and income elasticity of demand, low growth of demand, terms of trade and instability of export earnings. This monoculture situation brought untold hardship on the people of the country.
For instance, from 1970 to date oil exporting has constituted on the average of 90% of the total foreign exchange earnings. The adversity of the fluctuation in oil prices has in no small measure slated the developmental efforts of the various governments. This has made the Nigerian economy to scoring from the ―oil boom era‖, as exemplified by the buoyant economy of the period with massive infrastructural development and the Udoji award (Ifeacho, Omoniyi, and Olufemi, 2014)
A robust and strong export trade is indicative of how competitive the commodities and services are, and how large the scale of the industrial base of an economy is, this is reflected by the comparative advantages possessed by the country. Also, exports of commodities are possible when domestic demand for such are satisfied and surpluses exist in commercial quantities. Thus, the non-oil export sector serves as the hub for exporting these surpluses produces by the non-oil base of the country’s economy. Okoh (2004) observed that global integration had positive but not significant relationship in explaining the behavior of non-oil exports in the long-run. Since the aggregate non-oil exports data used by previous studies may biased their conclusion and the need to correct the existing cultural distortions and put the economy on the path of sustainable growth is therefore compelling. This raises the question of what need to be done in order to diversify the economy and develop the non-oil sector to realize the potentials of the sector at large.
1.2 Statement to the Problem
Prior to the discovery of oil in Nigeria in commercial quantities, agriculture sector dominates the economy in terms of export earnings, contribution to gross domestic product, and employment generation. Government earnings also depended heavily on taxes on export. Thus, during the period, the current account and fiscal balances depended on the agricultural sector. Until the early 1970’s where reliance was shifted to crude oil with the discovery of oil and rise in the price of oil in the 1970’s.
According Noko ( 2014) Nigeria is generously endowed with abundant natural resources such as crude oil, columbite, limestone, Cole, lead, iron-ore, tin, with a whole lot of Agriculture produce amongst which are cocoa, rubber and timber. All these resources if carefully and properly harnessed would foster the economic growth and development of Nigeria. Yet the Nigeria economy has from time to time been crippled by issues like corruption, balance of payment problem, High Debt, Inflation, and Unemployment. Despite all the numerous blessings Nigeria still remain underdeveloped whereas she stands a better chance, as the giant of Africa, to become one of the world leading economies.
However, in response to these enormous problems the government has embarked on several policy reforms as a way of liberalizing and diversifying the economy. Prominent among the policies is the Structural Adjustment Programme (SAP). Some previous studies showed the relationship between non-oil exports and Nigeria economic growth while other showed the extent at which non-oil export individually affect the economic growth of Nigeria. This study, however, failed to analyze clearly the effect of Bank credit on non-oil export earning cum economic growth of Nigeria. This research work will attempt at verifying the effect of this variable and hence closed the gap in knowledge inherent in other studies.
1.3 Research Question
In attempt to address the various problems prominent with Nigeria non-oil export, various questions has been raised by the researcher. The following questions will guide the research work:
- To what extent does non-oil export impacted on Nigeria economic growth?
- Is there any observed long-run relationship between non-oil export and economic growth of Nigeria?
1.4 Objectives of the Study
The objective of this study is to evaluate; the significant relationship between non-oil export and economic growth in Nigeria. Specifically, the objective of this study include to:
- Examine the impact of non-oil export on the economic growth of Nigeria.
- Investigate the long run relationship between non-oil export and economic growth of Nigeria.
1.5 Statement of Hypothesis
Ho: Non-oil export has no significant impact on the economic growth of Nigeria.
Ho: Non-oil export has no long run relationship with economic growth in Nigeria.
1.6 Significance of the Study
The impact of non-oil export on the sustainable growth of any nation cannot be over-emphasized; since increase in export earnings (over its counterpart, import) would make any Nation better-off in trade with other countries. Therefore, this work will be of immense importance to government and its agencies, and the general public. Also, it will be of great importance to ministry of trade and industry, investors as well as financial intermediaries or institutions. Above all, it will be a stream of knowledge for economist, students and researchers who have interest on issues relating to non-oil export in Nigeria.
1.7 Scope and Limitation of Study
This research analyze the impact of non-oil export in Nigeria economy, taking proper analysis on various ways and means put forward by the government of Nigeria to improve non-oil export earnings since 1981-2016.
The research work, however, is not void of constraints as the researcher encountered a number of constraints in the cause of this work. The constraints include data sourcing as well as data inconsistency due to poor nature of information management in Nigeria. However, host of other constraints that prevent the researcher to present a better work than this abound. Prominent among them are time factor, financial constraints and lack of electricity.
In spite of the aforementioned constraint above, the researcher made adequate efforts to present a clear and well-articulated research work.
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