The impact of non-oil export on economic growth in nigeria (1986-2010)

Project Abstract

This research aims to investigate the impact of non-oil exports on economic growth in Nigeria from 1986 to 2010. Nigeria, being a resource-rich country, has historically relied heavily on oil exports as the main driver of its economy. However, due to the volatility of oil prices in the international market and the need to diversify the economy, there has been a growing interest in exploring the potential of non-oil exports in promoting economic growth. The study utilizes a time-series analysis to examine the relationship between non-oil exports and economic growth in Nigeria over the specified period. Various economic indicators such as GDP growth rate, non-oil export revenue, exchange rate, inflation rate, and foreign direct investment are considered to assess the impact of non-oil exports on the overall economic performance of the country. The findings of the research reveal a positive correlation between non-oil exports and economic growth in Nigeria. The results indicate that an increase in non-oil export revenue is associated with higher GDP growth rates, reflecting the potential of non-oil sectors to drive economic development in the country. Furthermore, the study shows that non-oil exports play a significant role in reducing the vulnerability of the Nigerian economy to external shocks, particularly fluctuations in oil prices. In addition to the quantitative analysis, the research also examines the various challenges and constraints faced by the non-oil export sector in Nigeria. Issues such as inadequate infrastructure, limited access to finance, bureaucratic hurdles, and inconsistent government policies are identified as major obstacles that hinder the growth of non-oil exports and limit their contribution to economic development. Based on the findings, the study concludes that promoting non-oil exports is crucial for sustainable economic growth in Nigeria. It recommends policy measures to address the challenges facing the non-oil export sector, including investment in infrastructure development, provision of financial support to export-oriented industries, streamlining of export procedures, and implementation of stable and supportive trade policies. Overall, the research contributes to the existing literature on the role of non-oil exports in economic development and provides insights for policymakers, researchers, and practitioners interested in enhancing the contribution of non-oil sectors to Nigeria's economy.

Project Overview

<p> INTRODUCTION<br>1.1 BACKGROUND OF THE STUDY<br>There is a number of reasons for a country to be concerned about its<br>rate of economic growth. Economic growth is desired by both affluent<br>and non-affluent economies. Economic growth is the desire for higher<br>levels or real per capital income, real output which must grow faster<br>than the production of the economy in question. Economists, policymakers,<br>public and private sectors work ceaselessly towards attaining<br>economic growth by the use of development and growth models and<br>policies. Among the policies used are trade policy (Import and export<br>policies, monetary policy, exchange rate policy, fiscal policy, market<br>etc). In this study, the non-oil exports and economic development in<br>Nigeria will be examined.<br>Non-oil exports are the products, which are produced within the country<br>in the agricultural, mining and querying and industrial sectors that are<br>sent outside the country in order to generate revenue for the growth of<br>11<br>the economy excluding oil products. These non-oil export products are<br>coal, cotton, timber, groundnut, cocoa, beans etc.<br>Today, as in the past, the growth of Nigerian economy remains partly<br>dependent upon increasing productivity of the agricultural sector.<br>Helleiner (2002:124) states that no matter how much development and<br>structural transformation achieved, it will remain its relative dominance<br>in the economy to many decades to come. Precisely, it is from<br>agricultural exploits that the economy has received its principal stimulus<br>to economic growth.<br>Agricultural sector can assist through the exportation of principal<br>primary commodities which will increase the nation’s foreign earnings<br>and which can be used to finance a variety of development projects.<br>The growth of the agriculture sector can make a substantial contribution<br>to the total tax revenue, as well as having some implications for intersectional<br>terms of trade. Also in the area of capital formation, the<br>savings generated in this sector can be mobilized in development<br>purposes, while increase in rural income as a result of increasing<br>agricultural activities can further stimulate the product of the modem<br>12<br>sector. The needs of the agricultural sector could indirectly influence the<br>creating of additional infrastructures which are indispensable to rapid<br>economic development. (Olaloku. 2001:13).<br>Another non-oil export to be dwelled on, is industrial sector. It is the<br>fastest growing sector in Nigeria economy. It comprises of many<br>manufacturing and mining. Nigeria has manufacturing base prior to<br>1960 and shortly after.<br>The problem was due to lack of modern technology skills, managerial<br>experience of complex organizations and financial back -up. The<br>problem was further aggravated by the colonialists’ merchants<br>convincing arguments on the goodness of comparative cost advantage.<br>Nigerians were coaxed into concentrating their efforts in the production<br>of primary agricultural products and exporting them to the metrological<br>industries in Europe.<br>Our industrial sector took off after independent relied on satellite firms<br>representing British interest. The bank sector, which is constellation of<br>colonial banks branches and some companies that were able to invest<br>in manufacturing were the multi-national that have access to funds,<br>13<br>technology and managerial expertise. This greatly hindered the<br>progress of indigenous entrepreneurs.<br>The Nigerian manufacturing sector has been described by Ikediala<br>(1983) as consisting of more assembling plants. He says that the<br>implication of this is that the industries have very little backward linkage<br>in the economy, since the bulk of the inputs is imported, thus the<br>manufacturing sector depends on imported raw-material the extent of<br>42%. The capacity utilization of manufacturing industry has always<br>been low in this country. The reasons as put by CBN (1998) are not<br>unconnected with raw materials scarcity, consumers resistance due to<br>high prices, increase in cost of manpower. Others mentioned are<br>equipment breakdown due to poor technology, lack of spare parts. Time<br>lags between, when inputs are ordered for and when they arrive, cash<br>flow problems in industries becomes a permanent features.<br>The Nigerian Civil war brought about the deterioration of the oil palm<br>grooves and plantation were abandoned and little if any new planting<br>was undertaken. As a result of that, the output of palm oil and palm<br>kernel declined drastically. But according to Onwuka (1985), the<br>14<br>problems of palm products are due to the stagnation in the production<br>of this commodity, which is partly explained by the presence of wild<br>palm trees, which are of low-yield quality, and the difficulties<br>experienced in harvesting them. In addition, the old system of pricing<br>which guarantees low producer prices for palm produce discourage<br>substantial investment from being made for further production of this<br>product. Also, the problem marketing boards cannot be over looked.<br>Marketing board is an institution set up by the government with the<br>exclusive right to buy and sell certain agricultural products.<br>They purchase some products locally export sales are made through<br>the Nigerian marketing company, which is jointly owned by all state,<br>marketing. One of the functions of the marketing board is to stabilize the<br>prizes or our cash crops and hence creates stability of income for<br>farmers and to accumulate funds for development purposes. But the<br>operation has failed to provide incentives to farmers to increase their<br>input. Also, the producers paid unnecessary tax and they took from the<br>producers some money, which should have gone to them as income.<br>They thus reduced the amount of capital available to the producers.<br>15<br>This criticism, according to Adenira (1999) made the Federal<br>Government to reform the Marketing Board System with a view to<br>increase producers’ prices and income. He said that the essential<br>features of the new reform are the prices, which are now fixed by a<br>single authority while producer taxation (export duty and produce sale<br>tax) has been abolished. Another major innovation in the system is the<br>creation of commodity boards with responsibility of marketing specific<br>products whenever they are produced in the country. These boards are<br>likely to reduce administrative problems and be more economical<br>compared with all oil-produced state Marketing Boards previously in<br>existence.<br>The major fault of the successive government that are supposed to<br>sustain this sector through the building of macro-economic structures<br>and incentives diverted their attention away from agriculture. The result<br>was sharp in the export/import equation as country started importing<br>even palm oil that was hitherto imploring from Nigeria. The situation<br>was becoming worrisome thus by 1975 there were attempts to<br>recapture the lost of glory of agriculture. General Olusegun Obasanjo’s<br>16<br>operation feed the nations becomes the first real expressed official<br>attempt in this direction. It was followed by the establishment of two<br>River Basin Development Authorities in 1977. By 1978/1979, the federal<br>Government made budgetary provision to establish 4,000 hectares of<br>mechanized farms in each of the 19 states then, by 1979, there was a<br>re-launch of “operation feed the nation” with a new tag “Green<br>Revolution” with various committees set for its implementation (Oko,<br>1999).<br>If the efforts of the two leaders-General Olusegun Obasanjo and Alhaji<br>Shehu Shagari’s regimes could have brought vigor to the agricultural<br>sector, the activities of the sic-commodity boards did not assist much..<br>Oko said that fixing export product prices without recourse to cost<br>inputs discourages agriculture therefore remained slow because food<br>demand was growing at the rate of 3.5% per in the 80’s while<br>agricultural output was crawling at 11 %. Between 1990 and 1998 GDP<br>in agriculture declined to 6.2%. Then the distributions of agriculture<br>inputs to producers were neglected, infrastructure facilities like<br>motorable feeder roads, and irrigation facilities etc, made it difficult to<br>17<br>increase agricultural production. CBN mandate to bank with regard to<br>bank loans to agriculture as priority sector for preferential leading was<br>floated.<br>18<br>THE TABLE BELOW SHOWS YEARLY PALM PRODUCTS<br>PRODUCTION AND COCOA PRODUCTS PRODUCTION IN TONES,<br>WHICH COVER FROM 1990-2004.<br>Year Palm Products Cocoa Products<br>1990 730 1190<br>1991 760 1363<br>1992 792 1321<br>4191993 825 419<br>1995 837 503<br>1995 871 403<br>1996 920 591<br>1997 938 635<br>1998 992 683<br>1999 1003 721<br>2000 1411 832<br>2001 1603 925<br>2002 114 1160<br>2003 1701 1165<br>2004 1770 1200<br>Source: CBN Annual Report and Statement of Account 2004 <br></p>