1.1. BACKGROUND OF THE STUDY
Exportation is key to any economy to enhance revenue and promote economic growth and development. It is therefore critical for economic growth and this has informed the idea of export-led growth. Export is a catalyst necessary for the overall development of an economy (Abou-Strait, 2005). It was also noted that foreign trade creates an avenue for foreign capital to flow into a country (Ricardo, 2007). This increases the earnings of the country thereby creating an avenue for growth by raising the national income of the country. It also increases the level of employment in the economy as a higher demand for exports will require more production which will in turn lead to the employment of more people. Exportation by a country also helps attain a favourable balance of trade and balance of payment position for the exporting country provided its exports reasonably exceed it’s imports. In a country like Nigeria where the level of investment is low, foreign capital is very much needed in order to accelerate the creeping rate of economic growth. The Nigerian economy is one that depends largely on foreign trade for growth and is also one which depends majorly on one export commodity at a time. For instance, at independence, the major export commodity was cocoa and the leading sector in the economy was the agricultural sector but today, the major export commodity is crude oil and the leading sector is now the petroleum sector. This has not allowed for balanced growth in the economy as some sectors have been allowed to grow while growth has been impeded in others and this has made the country remain a developing country. The growth of Nigeria’s non-oil exports has been sluggish and non encouraging in the post-independence period. It averaged about 2.3% during 1960 to 1990 but in relative terms, declined systematically as proportion of total exports fell from about 40% in 1970 to about 5% in 2010, World Bank, 2011. A well developed export sector will provide employment opportunity for the people with the attendant reduction in social cost of unemployment. Earning from export will reduce the strain on the balance of payment position and even improve it. A rewarding export drive can turn a hitherto underdeveloped economy into a prosperous economy. Income earned through exporting will help in increasing the level of demand within the economy. An assessment of the trend and patterns of activities in the non-oil sector of Nigeria revealed that despite the various policies, strategies and reform programmes, the contributions of the sub-sectors of this sector have been dismal, disheartening and below its full potential. Agriculture that serves as mainstay is still characterized by low productivity. This stems from small farm size with crude and outdated farm implements, lacking access to credit facilities production machinery and inputs by farmers owing to inadequacies of their provision among others. The challenges of non-oil export sector is not that it is being over shadowed by the oil export trade, but traceable to declining non-oil export and loss of market share in the non-oil trade globally is a clear evidence of how the non-oil sector competitiveness of the Nigerian economy has been consistently eroded over the last three decades. 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 advantages possessed by the country. Also, exports of commodities are possible when domestic demand for such are satisfied and surpluses exist in commercial quantities. Thus, the non-oil export sector serves as the hub for exporting these surpluses produces by the non-oil base of the country’s economy. There has been several research works which have examined the relationship between non-oil export and economic growth. Okoh (2004) observed that global integration had positive but not significant relationship in explaining the behavior of non-oil exports in the long-run. Since the aggregate non-oil exports data used by previous studies may biased their conclusion and the need to correct the existing cultural distortions and put the economy on the path of sustainable growth is therefore compelling. This raises the question of what need to be done in order to diversify the economy and develop the non-oil sector to realize the potentials of the sector.
Export trade is an instrument for growth. It increases foreign exchange earnings, improves balance of payment position, creates employment and development of export oriented industries in the manufacturing sector and improves government revenue through taxes, levies and tariffs. These benefits will in turn enhance the process of growth and development in such economy. However, before these benefits can be fully realized, the structure and direction of these exports must be carefully tailored such that the economy will not depend on only one sector for the supply of needed foreign exchange (Onayemi & Akintoye, 2009). Hence, there is a need for economic diversification in the economy. Abebefe (2008) noted that Nigeria’s over-dependence on crude oil is dangerous for two reasons one being because crude oil is a wasting asset with a proven reserve which would eventually become depleted and secondly, the vagaries of the oil market has resulted in a significant decline in the earnings because of the exogeneously determined price of crude oil. Osuntokun and Edordu (2001), in their research on the potentials for diversifying Nigeria’s non-oil export to non-traditional markets found out that Nigeria could not fully utilize its potential because the implementation of export promotion policies followed key market concentration strategy i.e. concentration on developed countries like Europe or USA, thereby resulting in less attention to gathering trade facilitating information that may further diversify Nigeria’s export market to less developes countries such as the countries in sub-saharan Africe. This inter-regional trade, if conducted, will require lower transportation costs and enhance the competetiveness of commodities traded and ensure market clearing of export commodities thereby reducing such problems faced by exports to developed countries. Lyakurwa (2010) also posited that export diversification is important because it will play an important role in reducing the variability of the export earnings of developing countries and raising the growth rates of both exports and domestic output. However, he warned that the composition of a diversifying country's exports has to match the import structure of the target countries (Osuntogun, Edordu, & Oramah, 2007). According to the World Trade Organisation (2010), diversification of countries export base increases local production, employment, income and economic growth. Developing countries that export large amounts of a small number of products have export revenues that are quite volatile. Many OPEC members derive more than 80 percent of their export revenues from oil and gas. As a result, the decline in oil prices from the early 1980s to 2000 reduced export receipts. After the four Asian Tigers (South Korea, Singapore, Taiwan and Hong Kong) achieved economic progress through export promotion, Dunn and Mutti (2004) observed that the export promotion strategy does enhance economic growth but they also pointed out that the strategy rests upon the diversification and expansion of non-traditional exports. Osuntogun, Edordu, and Oramah (2007) discovered that the core of the export-led strategy is the diversification of export products and export markets to minimize risks and ensure a more stable and sustainable current account position. Lewis (2006) also found that diversification of exports will help countries achieve and maintain a high level of economic growth. Opara (2010) said that exports are the bed-rock of any economic development which is meaningfully centred on non-oil export in most countries of the world. He also said that promoting non-oil export products will bring about a reduction of the nation’s level of dependence on crude oil or what he describes as, “monocultural foreign trade product”. Opara (2010) listed some benefits that the diversification from oil to non-oil exports will have on the Nigerian economy as stated by the Nigerian Export Promotion Council.
1.2. STATEMENT OF THE GENERAL 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 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 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.
1.3. AIMS AND OBJECTIVES OF THE STUDY
The broad objective of this study is to investigate the impact of non-oil export on economic growth in Nigeria between 1980 and 2015. The specific objectives are as follows;
1. To examine the trends and patterns of non-oil export and economic growth in Nigeria.
2. To analysis the impact of non-oil exports on economic growth of Nigeria.
3. To test for the causal relationship between non-oil export and economic growth in Nigeria.
4. To assess the role of government in boosting non-oil export in Nigeria.
5. To examine the major challenges to effective non-oil export in Nigeria.
6. To recommend ways of improving non-oil export in Nigeria.
1.4. RESEARCH QUESTIONS
1. What are the trends and patterns of non-oil export and economic growth in Nigeria?
2. What is the impact of non-oil exports on economic growth of Nigeria?
3. What is the relationship between non-oil export and economic growth in Nigeria?
4. What is the role of government in boosting non-oil export in Nigeria?
5. What are the major challenges to effective non-oil export in Nigeria?
6. What are the ways of improving non-oil export in Nigeria?
1.5. RESEARCH HYPOTHESIS
Ho: Non-oil export has no significant impact on the Gross Domestic Product (GDP)
H1: Non-oil export has a significant impact on the Gross Domestic Product (GDP).
1.6. 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.
1.7. SCOPE AND LIMITATION 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 1980 to 2015. 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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