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PROJECT TOPIC AND MATERIAL ON EFFECT OF NON-OIL EXPORTS ON THE NIGERIAN ECONOMY
The Project File Details
- Name: EFFECT OF NON-OIL EXPORTS ON THE NIGERIAN ECONOMY
- Type: PDF and MS Word (DOC)
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- Length:  Pages
This work investigates the impact of non-oil exports to the Nigerian economy. Although various factors have been adduced to Nigeria’s poor economic performance, the major problem has been the economy’s continued excessive reliance on the fortunes from the oil market without any meaningful economic diversification. The dilemma facing the non oil export sector is not only that it is being overshadowed by the oil export trade, but the declining non oil exports and loss of market share in the non-oil trade. The main objective of this study was to investigate the effect of non-oil exports on economic growth in Nigeria. This research work is fundamentally analytical and descriptive as it embraces the use of secondary data using annual data from 1986 to 2015 as published by Central Bank of Nigeria. Multiple regression models was used in analyzing the data obtained from Central Bank Statistical Bulletin. The result of the findings show that manufacturing revenue has a significant effect on economic growth in Nigeria which is positively signed indicating that an increase in manufacturing revenue will increase the economic growth in Nigeria while agricultural revenue has no significant effect on economic growth in Nigeria which means that an increase in agricultural revenue in has no impact on economic growth in Nigeria. The study therefore recommends that the government should endeavor to support various export promotion programmes and institutions. This could be achieved by encouraging financial institutions, both formal and informal, to make loans available at reduced rates of interest for investors as to increase the level of investment in this country.
1.1 Background of the Study
Prior to liberalization, the overall objectives of trade policy in Nigeria included a Marketing Board (1960-1977) through which all exportable agricultural products were purchased by the Government at prices far lower than world prices and incentives were given to farmers to increase their acreage and adopt some imported technologies.
The importance of export to a nation’s economic growth and development cannot be overemphasized. Export is a catalyst necessary for the overall development of an economy (Abou-stait, 2005).
The Nigeria economy has been and is currently being characterized by a reasonable degree of openness; hence its performance can be enhance through the development of the external sector. The Nigerian 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 earning (Iyoha and Oriakhi, 2002). This has made the Nigeria economy to swing from the “oil boom era”, as exemplified by the buoyant economy of the period with massive infrastructural development and the Udoji award followed by the period which arose from oil glut in the world oil market since 1981 only led to the neglect of the non-oil export productive base.
The monetary policy measures were to provide the suitable monetary environment that would guarantee a viable, stable and productive economic system with emphasis on reduction in imports, especially non-oil products. In pursuit of this vision, monetary instruments to curb the rising inflation were developed by the Central Bank of Nigeria (CBN), better system of foreign reserve management were adopted such traunching and an improved way to guarantee favorable of balance of payments. The previous exchange rate policy of foreign exchange allocation was discarded on September 26, 1986. In place of it was an exchange rate that is market determined, and this was introduced for the aim of achieving a realistic exchange rate (CBN and NEXIM, 1999), this lead to the era of deregulated exchanged rated through the Second-tier Foreign Exchange Market (SFEM). However, the exchange rate was reserved to a guided deregulation of foreign exchange with system called Autonomous Foreign Exchange Market (AFEM). This was to reduce paralled market premium, stabilize the naira and encourage the inflows of non-oil export receipts (Abebefe, 1995). Now though this system is now obsolete, the aim of prompting non-oil exports and stabilizing the naira was still considered as at when the new exchange rate system was adopted which is the Wholesale Dutch Auction system (WDAS).
The continued unimpressive performance of the non-oil sector and the vulnerability of the external sector thus dictate the urgent need for a reappraisal of the trust and content of the development policies and commitments on their implementation.
Indeed, the need for a change in the policy focus and a shift in the industrialization strategy is imperative, if Nigeria economy is to te returned to the path of sustainable growth and external visibility.
1.2 Statement of the Problem
Although various factors have been adduced to Nigeria’s poor economic performance, the major problem has been the economy’s continued excessive reliance on the fortunes from the oil market without any meaningful economic diversification (Osuntogun et al.,1997), reflecting the effect of the so called “Dutch disease”. Cocoa is one of the products that has been a major export crop in Nigeria dominating the major export of Nigeria economy.
The dilemma facing the non oil export sector is not only that it is being overshadowed by the oil export trade, but the declining non oil exports and loss of market share in the non-oil trade globally is a clear evidence of how the non oil sector competitiveness of the Nigeria economy has been consistently eroded over the last three decades.
It was discovered that the value of non-oil exports has been on the decline ever since. For example, “the share of agricultural products in total exports declined from 84% in 1960 to 1.80% in 1995” (CBN, 2000; Ogunkola and Oyejide, 2001). Consequently, there was an overall fall in the export of these agricultural commodities and other non-oil products. According to CBN (2000),
“Manufactures sector decrease from 13.10% in 1960 to 0.66% in 1995. Also, WTO (2003) affirms that manufacturing sector remain within the same range in 2002.
The analysis in Figure 1 below reveals an increasing pattern of the percentage contribution of non-oil export to GDP over the period under study.
Fig. 1: Percentage Contribution of Non-oil export to GDP
The figure above shows that between 1980-1985, the contribution of non-oil export to gross domestic product was nothing to write home about, as it contributed less than one percent to GDP. However, with the emergence of the Structural Adjustment Programme in 1986, the trend changed. The graph showed volatile fluctuations between 1995 to year 2000. After the trend showed an upward pattern onwards.
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 advantage possessed by the country.
The need to correct the existing structural distortions and put the economy on the path of sustainable growth is therefore compelling. This raises the question of what else need to be done in order to diversify the economy and develop the non-oil sector to realize the potentials of the sector.
1.3 Research Questions
- What is the impact of manufacturing sector on economic growth in Nigeria?
- What is the effect of agricultural export on economic growth in Nigeria?
1.4 Objectives of the study
The broad objective of the study is to investigate the impact of non-oil exports to the Nigerianeconomic. However, the specific objectives are to:
- Investigate the impact of manufacturing sector on economic growth in Nigeria.
- Determine the effect of agricultural export on economic growth in Nigeria.
- Determine the long-run relationship between non-oil revenue economic growth.
1.5 Research Hypothesis
The following hypotheses will be tested in this study:
H01: Manufacturing sector has no significant impact on economic growth in Nigeria
H02: Agricultural export has no significant effect on economic growth in Nigeria
H03: There is no significant long-run relationship between non-oil revenue and economic growth
1.6 Significance of the Study
This study will be o immense importance to the Nigerian Export Promotion Council because it will enable them increase foreign exchange earnings of the country by exportation of non-oil goods, create employment and reduce unemployment problems in the country through exporting oil and non-oil trades.
It will also help in further researches that will be made in the field of management science and be of assistance to tutor, students and prospective researchers in similar topic.
1.7 Scope and Limitations of this Study
This research covers the effects of non-oil exports on economic growth in Nigeria. The variables of interest are non-oil exports, real interest rate, inflation rate, investment and GDP. The time period is from 1986-2015.
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