SCHOOL PROJECT TOPICS & MATERIALS:
CHAPTERS: Chapter 1-5
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IMPACT OF NON-OIL EXPORT ON THE ECONOMIC GROWTH OF NIGERIA (1986-2014).
This study examined the impact of non-oil exports on the growth of the Nigerian economy. It investigated the specific impact of the following independent variables: agricultural export, solid mineral export, semi-manufactured export and manufactured export on the growth of the Nigerian economy. Real GDP was proxied as our dependent variable. The period covered runs from 1986 through 2014; ex-post facto technique was adopted and Augmented Dikkey-Fuller was used to test for stationarity. Findings from the study reveal that agricultural export had a negative and insignificant impact on the economic growth of the Nigerian economy. Solid mineral export had a negative and significant impact on the economic growth of the Nigerian economy, semi- manufactured export had a negative and insignificant impact on the economic growth of the country. And manufactured export statically had a positive and significant impact on the growth of the Nigerian economy within the period under study. The study recommends among others improvement on infrastructures, reformation of agricultural sector by eliminating all barriers, imposing heavy tariff on the importation of product that can be produced locally, granting wavier and loans to farmers at a lower rate. Strengthen of export promotion board to collate products from farmers and package them to meet international standard to avoid wastage and dumping of Nigerian product. And diversification Nigerian exports, in order to reduce the effect of the oil price fluctuation (oil shock) on the economy.
1.1 BACKGROUND OF THE STUDY
Historically, Nigeria is largely an agrarian society; non-oil export (Agriculture) was the mainstay of the economy during the pre-colonial and colonial periods. Despite lack of modern farm implements which undermined the potential for large scale production, the sector was encouraging. Nigeria emerged in her first decade of her independence as a leading exporter of non-oil commodities like palm kernel, coal, tin ore, groundnut and the largest producer and exporter of palm oil. Nigeria was also the second largest producer of cocoa in the world. During that period, subsistence farmers collectively produced over 90% of the food needs and 70% of Nigeria’s export earnings which have a dominant share of the country’s GDP.
However, with the discovery of crude oil in a commercial quantity, this paved way for the gradual neglect of Agriculture by successive governments especially in the 1970’s oil boom. Crude oil became the dominant source of revenue while agricultural production nose-dived considerably. From over 60% in the late 1960s, the contribution of non-oil exports to the GDP plummeted to 22.2% in the 1980s. Recently many farmers engage in farming at subsistence level only. This in turn has contributed to food insufficiency and subsequently has led to importation of food to supplement local production.
Nigeria has also lost its place in non-oil exports even in areas it once dominated. In palm oil supply for example, Nigeria now produces a meager 1.7% of total world production which is inadequate for local consumption that is put at about 2.7%. Malaysia, a country Nigeria gave palm oil seedlings, has overtaken her as one of the largest producers and leading exporter of palm oil. Malaysia and Indonesia produce now over 83% of total world palm oil (Ayodele, 2010).
According to Ogunkola, Bankole and Adewuyi (2006) and Okoh (2004), the situation later changed, crude oil now constitutes 96% of total exports as against 4% for non-oil exports in Nigeria (a negative trend). The performance of the non-oil sector leaves little or nothing to be desired Crude oil is the major export because of huge revenue it generates which has led the economy to focus on petroleum sector while ignoring the other sectors that funded the oil sector at its discovery, as well as the potential revenue they can generate. Nigeria since the 1970s has been a mono –cultural economy relying heavily on oil as its major income. The implication is that the sustainability of the economy is at the mercy of the oil revenue, which for most part, has been volatile, Enoma and Mustafa (2011) cited by Onodugo, Ikpe and Anowor (2013). The major fallout of this fragile structure of financing Nigerian economy is situation where the economy has been growing without creating jobs nor, reducing poverty (Onodugo, 2013). An explanation to this economic paradox is that the oil sector which produces over 90% of the export earnings in Nigeria are in the hands of less than 1% of the Nigerian population dominated by expatriates and members of the political class who control production and proceeds respectively (Onodugo, Ikpe and Anowor 2013).
This research is aimed at determining if the contribution of non-oil exports is significant to the Gross Domestic Product (GDP) of the economy and to what extent, now that there is a decline in price of crude oil globally.
1.2 STATEMENT OF THE PROBLEM
Nigeria’s heavy dependence on crude oil as main source of export earnings has made her vulnerable to market vagaries and other conditions associated with international oil politics. The recent drop in crude oil price being experienced has started taking its toll on Nigeria as the Federal Government has announced some austerity measures aimed at cushioning its impact on the economy. Some of the measures announced by the former Minister of Finance/Coordinating Minister for the economy are payment of heavy tax on importation of luxury goods by Nigerians, and reduction in public expenditures and international travels by public servants (Okonjo, 2014).
Although Nigeria is universally acknowledged a country well-endowed in human and natural resources, yet the focus of government since after independence has been more on crude oil exploration and exportation to the detriment of other economic activities that could bring in the much desired foreign exchange earnings.
Some scholars believe that Nigeria’s heavy reliance on one source of economic activity is a carry-over from colonial rule in Africa, in which each of the colonizing countries were made to produce a single cash crop or two, with no attempts made to diversify the economic base. But it is uncharitable to blame the colonial government for the development since the imperial government left more than five decades ago.
It was observed that the lack of economic diversity has caused the economy to rely heavily on crude oil for revenues and as the major export commodity in the economy (Osuntogun, 1997). Prior to the 1970s, Nigeria’s exports were predominantly non-oil commodities with agricultural commodities accounting for the lion share.
During the oil boom of the 1970s, Gen. Yabuku Gowon, Nigerian Head of State made a statement that “Nigeria’s problem is not money but how to spend it” (Yakubu, 2008). Obviously, Nigeria’s problem then was not lack of money; it was basically how to spend it. Over 40 years on, problem has broadened in scope. Nigeria still does not know how to spend its oil money to the benefit of her citizens and other sectors.
Currently, Nigeria wallows in the fate of uncertainty of the oil market the issue of oil prices has become a subject of international discourse, with fears that the sinking oil prices could affect the nation’s economies in diverse ways.
The knowledge gap filled by this study is the investigation of individual contribution of each sub-sector of the non-oil export to the gross domestic product of Nigeria. We also filled the gap of time by covering the period of 28years (1986 to 2014).
1.3 OBJECTIVES OF THE STUDY
The main objective of this study is to examine the impact of non-oil export on the growth of the Nigerian Economy. In view of the above, the specific objectives of study include the following:
(i) To examine the impact of Agricultural export on the growth of the Nigerian economy.
(ii) To ascertain the impact of solid mineral export on the Nigerian economic growth.
(iii) To evaluate the impact of Semi- Manufactured products export on the growth of the Nigerian economy.
(iv) To examine the impact of manufactured products export on the growth of the Nigerian economy.
1.4 RESEARCH QUESTIONS
The research questions for this study are as follows:
(i) To what extent has Agricultural export sector contributed to the growth of the Nigerian economy?
(ii) How far does solid mineral exports sector contribute to the growth of the Nigerian economy?
(iii) How far does export of Semi- Manufactured products contribute to the growth of the Nigerian economy?
(iv) To what extent has export of manufactured products contributed to the growth of the Nigerian economy?
1.5 HYPOTHESES OF THE STUDY
The hypotheses for this research are:
Ho: Solid mineral export does not have a positive and significant impact on the growth of the Nigerian economy.
HO: Semi- Manufactured export products does not have a positive and significant impact on the growth of the Nigerian economy.
HO: Manufactured export product does not have a positive and significant impact on the growth of the Nigerian economy.
All the hypotheses will be tested, to further achieve the objectives of the study.
1.6 THE SCOPE OF THE STUDY
The study focuses on the impact of non-oil export on the growth of the Nigerian Economy over the period of 1986-2014. Our proxy for economic growth is real GDP, which will be our dependent variable. On the other hand, the naira values of agricultural export, solid minerals export, semi-manufactured products export, and manufactured products export will form our independent variables.
In justification for the choice of the base year, we noticed that the Nigerian economy took a new turn in September 1986 when then military government introduced the Structural Adjustment Programme (SAP). Its effect was the deregulation of the economy, which limited government influence on the economy. Basically, this policy transformed banking system and the Nigerian economy generally, hence the choice of 1986, knowing the expected effects the programme would have on the entire Nigerian economy.
Our discussion would be restricted to non-oil exports and data collection will be basically from secondary data.
1.7 SIGNIFICANCE OF THE RESEARCH
This study will greatly benefit the following stakeholders-
§ Investors: The study will help educate both indigenous and foreign investors on the role non-oil export sector play in an economy; it will sharpen their understanding of investment opportunities in the sector and further develop their understanding on the fundamental relationship between non-oil export and economic growth.
§ Bankers: The study will also boost their understanding of the relationships that exist between non-oil export and economic growth in Nigeria. It will expose investment opportunities in the sector and this will in long run increase their (bankers) understanding on when to grant and not grant credit facilities to investors since both are in business to make profit.
§ Researchers: Researcher and Students who wished to carry out a related study will find this study useful since it will add to the existing body of knowledge on the subject area. It will throw more light on the relationship between non-oil export and economic growth.
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