THE IMPACT OF NON-OIL SECTOR IN ECONOMIC GROWTH AND DEVELOPMENT IN NIGERIA

THE IMPACT OF NON-OIL SECTOR IN ECONOMIC GROWTH AND DEVELOPMENT IN NIGERIA. (A CASE STUDY OF FIRST BANK OF NIGERIA PLC)

 

ABSTRACT

This research work was conduced to evaluate the impact of Non-oil sector in the Economic growth and development in Nigeria research questions were developed in consonance with what the study want to find out. Three hypotheses were formulated and tested using percentage. Structured questionnaire was developed and used for the study. It was validated by the supervisor. The questionnaire was used to collect data from forty (40) respondents made up of top class, middle class, lower class and supervisor. The data collected were analyzed using percentage test the hypotheses. The study found out that some factors like government support, good policies and implementation and good usage of domestic products affected non-oil sector positively. Nigeria has achieved some appreciable economic growth in the recent times. A number of explanations of this observed trend have been attempted in different academic papers. Non-oil exports performance has also improved considerably during this period. Several factors appear to have contributed to this phenomenon including a rapid improvement in trade liberalization, concerted efforts to diversify the productive base of the economy, and a substantial increase in Foreign Direct Investment (FDI) inflows into the country. Arguably, FDI is one of the most important strategies for the production of economic growth and development in poor developing countries. FDI can serve as an engine of growth and development for developing countries by increasing the opportunity for their integration into global financial and capital flows, expand employment and exports base, generate arrangements capability – building and efficiency spillovers to local firms, as well as establish investment arrangement that increase the potential of host countries for economic growth expectedly, the role of exports in economic performance of developing countries has become one of the more intensively studied topics in recent years.

The non-oil sector of the Nigerian economy no doubt occupies a prime place in the countries quest for a paradigm shift from a mono cultural economy. Largely driven by revenue from crude oil to a robust diversified and non-oil depend country.

It was in recognition of the abundant but untapped potential of the non-oil sector that the federal government through the Nigerian export promotion council in order to promote the development and diversification of Nigeria is export trade. Nigeria through Nigeria Export Promotion Co-operation (NEPC) ACE 26 of 1976 established Nigeria export promotion council. This is to promote and develop the diversification of Nigeria’s Export Trade. This research work made use of the economic approach in estimating the relationship between non-oil export and the Nigerian economic growth. The dependent variable was the real gross domestic product while the independent variable is the non-oil export. The ordinary least square (OLS) technique was employed in obtaining the numerical estimates of the coefficients in different equations using statistical packages for social science (SPSS).

The OLS method is chosen because it possesses some optional properties. Its computational procedure is fairly simple and it is also- an essential component of most of other estimation techniques. Hence Gross Domestic Product (GDP) was used as the proxies for the level of the economic activities.

The chapter contains statistical analysis of the data collected from the field. The purpose of the analysis is to examine questionnaire structured to test research hypotheses contained in chapter one of the project. The analyses are based on the administered questionnaire and responses to each question and computed and measured with the use of chi-square test instrument.

Each of the questions contains two options and the categories of the option provided are Yes or No.

The researcher looked into the impact of non-oil sector in the economic growth and development in Nigeria.

Non-oil sector can simply mean all the products of the nation except the oil products. This is the product which is the nucleus of Nigeria GDP before independence. This comprises of the production of farm produce like cocoa, palm produce, groundnut, tanker, to men but a few.

 

TABLE OF CONTENT

   PAGES

Title Page                                                                               i

Certification                                                                            ii

Dedication                                                                              iii

Acknowledgement                                                                iv

Abstract                                                                                  v

Table of Content                                                                             vii

CHAPTER ONE

INTRODUCTION

1.1    Background of Study                                                  1

1.2    Statement of Problem                                                 7

1.3    Objective of Study                                                       7

1.4    Research Questions                                                   8

1.5    Research Methodology                                                        9

1.6    Significance of the Study                                           9

1.7    Research Hypothesis                                                 10

1.8    Scope of the Study                                                      10

1.9    Definition of Terms                                                      11

CHAPTER TWO

LITERATURE REVIEW

2.0    History/Evolution of the Non-oil Sector in the Nigerian Economy                          12

2.1    Introduction of Non-Oil Sector                                    14

2.2    Meaning of Non-Oil Sector                                         16

2.3    Meaning of the Impact of Oil Sector                           16

2.4    Types of Oil Sector                                                      17

2.5    Merits of Non-Oil Sector in the Economic Growth and Development in Nigeria               19

2.6    Demerits                                                                       22

CHAPTER THREE

RESEARCH METHODOLOGY

3.1    Research Design                                                                  25

3.2    Population and Sample of Study                               25

3.3    Instruction                                                                     26

3.4    Validity                                                                          27

3.5    Procedure for Collecting Data                                    27

3.6    Method of Data Collection                                          27

3.7    Reliability of Instrument                                              28

CHAPTER FOUR

DATA ANALYSIS, FINDINGS AND DISCUSSIONS

4.0    Introduction                                                                  29

4.1    Data Presentation Interpretation                                29

4.2    Discussion of Findings                                                         38

CHAPTER FIVE

SUMMARY, CONCLUSION AND RECOMMENDATION

5.1    Summary                                                                      40

5.2    Conclusion                                                                             41

5.3    Recommendations                                                     41

References                                                                   44

Appendix                                                                      45

 

 

CHAPTER ONE

INTRODUCTION

1.1    Background of Study

Nigeria has achieved some appreciable economic growth in the recent times.  A number of explanations of this observed trend have been attempted in different academic papers.  Non-oil exports performance has also improved considerably during this period.  Several factors appear to have contributed to this phenomenon including a rapid improvement in trade liberalization, concerted efforts to diversify the productive base of the economy, and a substantial increase in Foreign Direct Investment (FDI) inflows into the country.  Arguably, FDI is one of the most important strategies for the production of economic growth and development in poor developing countries.  FDI can serve as an engine of growth and development for developing countries by increasing the opportunity for their integration into global financial and capital flows, expand employment and exports base, generate arrangements capability – building and efficiency spillovers to local firms, as well as establish investment arrangements that increase the potential of host countries for economic growth.  expectedly, the role of exports in economic performance of developing countries has become one of the more intensively studied topics in recent years.  The major impetus for most studies on this relationship is the Export – Led Growth (ELG) hypothesis which interestingly represents a dominant explanation in this context.  The ELG hypothesis states that the growth of exports has a favorable impact on economic growth.  However, the empirical evidence on the casual relationship between export and growth is mixed.  In particular, available time series studies fail to provide uniform support for the ELG hypothesis while most cross-sectional studies provide empirical evidence in support of the hypothesis.  The liberalization process in developing countries has increased not only trade but also FDI flows.  Thus, FDI has also become an important link in the export-growth relationship.

Overall, empirical evidence in the last few decades indicates that FDI flows have been growing at a pace far exceeding the volume of international trade.  Between 1975 and 1995, the aggregate stock of FDI rose from 4.5% to 9.7% of world GDP, with sales of foreign affiliates of multinational enterprises substantially exceeding the value of word exports (Barrell and Pain, 1997).  The United Nations Conference on Trade and Development, (UNTAD, 2007) reports that FDI flow to Africa has increased from 9.68 billion in 2000 to 1.3 trillion in 2006.  The UNCTAD World Investment report in 2006 shows that FDI inflow to West Africa is mainly dominated by inflow to Nigeria, who received 70% of the sub-regional total and 11% of Africa’s total.  Out of this Nigeria’s oil sector alone received 90% of the FDI inflow.

Phase Two – Economic Development

The performance of the Nigerian non-oil export sector as pointed out earlier has however been relatively impressive in recent times.  For example, the international monetary Fund (IMF) 2008 is of the view that the robust non-oil sector growth in the 2007 fiscal year had offset the drag from a decline in oil production in the Niger Delta, thus boosting growth in the Nigeria economy.  Aggregate output growth measured by the gross domestic product (GDP), according to the Central Bank of Nigeria (CBN) 2007, economic report for third quarter of 2007, was estimated at 6.05 percent, compared with 5.73% in the second quarter.  The growth was driven by the non-oil sector which was estimated at 9.47 percent.  This growth was driven mainly by major agricultural activities such as yam, Irish and sweet potatoes, groundnuts and maize.

The favorable economic environment has made some countries in SSA increasingly attractive as destinations for private capital inflows.  Net private capital inflows reached record levels in 2007, led by strong FDI inflows.  However, the bulk of FDI is still focused on a few countries and targeted mainly at extractive industries, particularly the petroleum sector, based on evidence from cross-border mergers-and-acquisition related inflows, an important fraction of gross FDI inflows.  But, deposit outflows from some oil exporters notably Libya, Nigeria and Russia displayed some of the highest correlations, while for others including Saudi Arabia and other middle Eastern oil exporters, the accounted for one-half or more of total gross capital outflows.  These huge capital outflows are linked mainly to extract FDI and calls to question the ability of FDI to drive growth effectively in these countries.

It is noteworthy however, that despite the observed increasing inflows of FDI, there has not been any satisfactory attempt to assess its contribution to Nigeria’s non-oil exports performance – a major channel through which FDI affects economic growth.  This calls for an empirical investigation and the questions here now are, can we find evidence to support the non-oil export led growth in Nigeria?  What vital role does FDI play in the ELG relationship if it exists?  Are there any casual relationships in Nigeria?  In this study, we explore an economic analysis of these issues using appropriate techniques.  The rest of the paper is divided into sections as follows: Section two comprises a brief survey of related literatures and it addresses mainly the theoretical and empirical issues.  Section three considers methodology and data while the fourth section is devoted to the empirical findings of results.  Section five is the last section and is made of summary and conclusions.

Given this scenario, the paper posits that the dependence of the Nigerian economy on the world market for the supply of industrial and agricultural inputs as well as expertise for industrial and agricultural production is likely to be reinforced with the implementation of the terms of the WTO agreement.  The dependency syndrome is likely to continue unabated leading to dumping, imported inflation, high cost of production further deterioration of the terms of trade, lower standard of living and increased urban and rural unemployment as well as poverty (Okoh and Egbon 1999).  The question that readily comes to mind is: “Is integration and hence openness the panacea for the poor performance of the non-oil sector?  The major objective of this paper examined Nigeria’s membership of the World Trade Organization (WTO) and its effects on the growth of country’s non-oil exports.  The paper is divided into five sections.  The first section introduced the subject matter, the second section discussed theoretical framework, third section examined the macroeconomic policy and structure of non-oil exports, model specification, result and discussions are presented in the fourth section, while the fifth examined the conclusion and policy options.

  • 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 of the oil market and the failed attempts to achieve any meaningful economic diversification (Osuntogun, et al, 1997) reflecting the effect of the so-called “Dutch diseases”, 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 needs to be done in order to diversify the economy and develop the non-oil sector in order to realize the potentials of the sector.  This calls for new thoughts and initiative which is the essence of this project.

  • Objective of Study

The objectives of the study are as follow:

  • To examine the profile of the non-exports in Nigeria
  • To identify the various policies and programmes used in promoting non-oil export in Nigeria
  • To investigate the extent of the contribution of non-oil export sector to the Nigerian economy
  • To identify the factors that are responsible for the unimpressive performance of the non-oil sector in Nigeria.

1.4    Research Questions

The research questions to be examined in this study are as follows:

  1. What is the structure of the Nigeria’s non-oil export since 1986?
  2. What efforts has the government made to revamp the on-oil export in Nigeria?
  3. What impact does non-oil exports have on the economic growth of Nigeria?
  4. What factors are responsible for the unimpressive performance of the non-oil sector of Nigeria and how can they be resolved?

1.5    Research Methodology

The data for this study would be obtained mainly from secondary sources, particularly from Central Bank of Nigeria (CBN) publications such as the CBN statistical bulletin, CBN Economic and Financial Review Bulletin, CBN monthly reports, CBN Annual Reports and Statements of Accounts of various years.

1.6    Significance of the Study

The significance of this study is as follows:

  1. It would provide an econometric assessment of the performance of the Nigerian non-oil export in relation to the gross domestic product.
  2. The study would also identify the factors that are responsible for the poor performance of the non-oil export in Nigeria.

1.7    Research Hypotheses

The research hypothesis will make use of the economic approach in estimating the relationship between non-oil sector and Nigerian economic growth and development.  The dependent variable is real gross domestic product while the i8ndependent variable is the non-oil sector product.  The data for this research will be obtained from the secondary sources particularly from Central Bank of Nigeria (CBN) publications such as the CBN statistical bulletin, CBN Economic and Financial Review Bulletin, CBN monthly reports, CBN Annual Reports and Statements of Accounts of various years.

1.8    Scope of the Study

This project work focuses on the role of the export sector in the economic and development of Nigeria, specifically on the role of the non-oil export.  The causes and consequences of the neglect of the non-oil export shall be discussed in detail as well as the trend examined since 1986 to 2008 in order to note its growth.  Besides, the contribution of the non-oil export to the economic growth of Nigeria shall be investigated empirically with data spanning from 1986 to 2009

1.9    Definition of Terms

Concepts whose meanings are not obvious in the content of the study are defined or explained to enhance the proper understanding and assimilations.

Constitute – Make up or a whole

Dissemination – Act of spreading idea widely

Effective – Able to bring about the result intended

Facilitate – Process that makes easy or lessen the difficulty of understanding

Implementation – Instrument for working with

Significant – Having a special or suggestive meaning/importance

Target – Total which is desired to reach

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