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ULAKPA .N. MERCY

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  • Name: IMPACT OF NON-OIL EXPORT ON NIGERIAN ECONOMY (1986-2010)
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  • Length: [53] Pages

 

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

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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.
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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 foreign
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
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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
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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. He said that the essential
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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 Obasanjo’s Operation feed the
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
1979, there was a relunch of “operation feed the nation” with a
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new tag “Green Revolution” with various committees set up for its
implementation (Oko, 1999).

If the efforts of the two leaders – General Olusegun Obasanjo and
Alhaji Shenu Shagari’s regimes could have brought vigor to the
agricultural sector, the activities of the sic-commodity boards did
not assist much Oko said that fixing export product prices
without recourse to cost inputs discourages agriculture therefore
remained slow because food demand was growing at the rate of
3.5% in the SD’s while agricultural output was crawling at 11%.
Between 1990 and 1998, GDP in agriculture declined to 6.2%.
then the distributions of agriculture inputs to producers were
neglected, infrastructure facilities, like motor able feeder roads,
and irrigation facilities, etc made it difficult to increase
agricultural production CBN mandate to bank with regard to
bank loans to agriculture as priority sector for preferential
leading was floated

The table below shows yearly palm production and coca products

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Production in tones, which cover from 1990-2004.
Year Plan products Cocoa products 1990 730 1190 1991 760 1363 1992 792 1321 1993 825 419 1994 837 503 1995 871 403 1996 920 591 1997 938 635 1998 992 683 1999 1003 721 2000 1411 832 2001 1603 925 2002 114 1160 2003 1701 1165 2004 1770 1200

Source: CBN-Annual report and statement of Account 2000

1.2 STATEMENT OF THE PROBLEM
Nigeria remained a net exporter of agricultural products between
1960 and 1970. Goods exported include palm oil, palm kernel
cotton, groundnut, etc; agriculture through export of non-oil
products has a rosy record contribution up to 80% of the gross
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domestic product and providing employment for over 70% of the
work population. But recently there has been a steady decline in
terms of agricultural product, to export and an abandonment of
sector by a large percentage of the workforce.

But the story of its decline is as pathetic as its impact on
industry that relied heavily on the sector for raw material. Thus,
the decline comes with surge of revenue from oil (oil export). But
the discovery of crude oil alone cannot be held responsible
completely for the misfortunes or decline of the agricultural
sector. The policy instruments put in place by successive
government were more of lip- service than concrete action.
The creation of marketing board contributes greatly to the decline
of non-oil export since the board has the stole right to export the
commodities. It is also pertinent to say that fixing of export
product prices by marketing board discouraged further private
investments in the sector. Further, the sector suffers from
inadequate credit facilities; they have no security to back up their
loan applications. Those who are lucky to be given loans do not
make proper use of them. Even existence serious was neglected,
infrastructural facilities, not provided, CBN objectives on
agricultural loans floated. The package of policies used did not
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only discriminate against export development but also disturbed
the economy in several other ways. For instance an exchange rate
of an artificially high level was maintained which in turn reduce
the profitability of exports, raised domestic cost alone world
process and reduced level maintenance uncompetitive in the
world market.

In view of these problems resulting from the inappropriate use of
policies persisted over times and necessitated the need to change
policy direction. More emphasis was directed towards the
promotion of non-oil exports. Various monetary and fiscal
policies have been restored to various governments in Nigeria to
encourage the non-oil performance and the economy generally.

The question today is to what extent has the redirection in policy
affected the performance of non-oil export in Nigeria? But more
simply, this research work is set to answer the following research
questions:-
(1) To what extent has the non-oil exports sector contributed to
the overall gross domestic product (GDP) of the economy?
It is on this background that this research work is focused.

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1.3 OBJECTIVE OF THE QUESTION
This research has a particular focus that aim at examining the
causes of growth in government revenue using non-oil revenue of
the government as an instrument. The non-oil revenue takes the
range of products as agriculture and manufacturing. The major
objectives are broadly defined as follows;
a) To empirically find out the impact of non-oil export earnings on
the nation Gross Domestic Product (GDP)
B) To evaluate government policies or measures towards boosting
non-oil sector contribution to the economy.

1.4 STATEMENT OF HYPOTHESIS
To carry out this research, the following hypotheses were
formulated:-
1. Ho: b1 = o: Non-oil export has no significant impact on the
Gross Domestic Product (GDP)
H1: b1 ≠ o: Non-oil export has a significant impact on the
Gross Domestic product (GDP)
2. H1: b1 = o: Government policies has no significant impact in
boosting the non-oil sector of the
Economy
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H1: b1 ≠ o: Government policies have a significant impact in
boosting the non-oil sector of the economy.

1.5 SIGNIFICANCE OF THE STUDY
The study of the contributions of non-oil export to the growth of
Nigerian economy is significant and important, for this
knowledge, it will enable the policy makers to formulate
appropriate policies that will aim at improving on the quota of the
total revenue brought about by the non-oil sectors of the
economy. This study is also important and significant in that it
will examine the various ways of improving non-oil sector towards
raising the living standard of Nigerians in the period under review
(1986-2010).

Since not so much works have been done on the contributions of
non-oil exports to Nigerian economic growth, this study will be of
great importance.

1.6 SCOPE AND LIMITATIONS OF THE STUDY
This study is an attempt to evaluate and review agricultural
products and policies in the economy towards economic growth
and development in Nigeria. It intends to cover the period 1986 to
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2010. It also intends to evaluate the contribution of non-oil
exports to Nigeria economic growth and development.

This study would be based largely on secondary data the
reliability of the findings of this study would largely depend on
the liability of these data.
Again, our discussions will be restricted to non-oil exports even
though we realize that the GDP of the country is composed of Oil
and non-oil exports.

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