ABSTRACT
The study is made up of two
independent models, Gross Domestic Product (GDP) and Investment respectively.
The independent variables Oil export, Non-oil export, Real exchange rate and
Inflation rate were modeled to capture their effect on GDP and Investment
respectively.
The study employed Log Linear Model.
Following the empirical findings in this study, we observed that, Non-oil
export have not contributed a lot to economic growth in Nigeria but other
indicators exert enough pressure on the strength of the economy, evidence from
the result of the first model. Judging from the result of the second model, Oil
export proves a negative non significant variable with investment growth in
Nigeria.
The study recommends appropriate
economic policies, institutional reforms and massive political will for the
country to address the issues of dwindling exportation of Non-oil sector and
the trap of Dutch Disease associated with oil-dependency.
Pages
LIST OF TABLE
Unit Root Test for Stationarity
——————————————- 42
Co-integration Result
—————————————————— 45
Modeling Log of Differenced GDP by
OLS ————————— 45
Modeling Log of Differenced INV by
OLS —————————- 46
Summary of t-statistic test for
model 1 ———————————- 50
Summary of t-statistic test for
model 2 ———————————- 52
TABLE
OF CONTENT
Title page —————————————————————-
i
Approval page
———————————————————- ii
Dedication
————————————————————– iii
Acknowledgement
—————————————————– iv
Abstract
—————————————————————– v
List of tables
———————————————————– vi
Table of content
——————————————————- vii
CHAPTER ONE
- Introduction ——————————————————- 1
1.1 Background of study
——————————————— 1
1.2 Statement of problem
——————————————–
3
1.3 Objective of the study
——————————————-
5
1.4 Statement of hypothesis
—————————————– 5
1.5 Significance of the study
—————————————-
6
1.6 Scope and limitations of the
study
—————————–
6
CHAPTER TWO
2.1 Meaning of oil and non-oil
exports —————————- 7
2.2 A brief historical perspective
on oil in Nigeria
————–
7
2.3 Oil and economic policies in
Nigeria
————————- 10
2.4 The Dutch-Disease
———————————————-
15
2.5 The boom and burst periods in
oil sector and policy response —–17
2.6 Macroeconomic policies and
structure of Non-oil export in Nigeria-22
2.7 Oil export, Non-oil export and
Economic growth in Nigeria ——- 26
Empirical
Literature—————————————————-29
CHAPTER THREE
Research methodology——————————————————–35
3.1 Model
Specification——————————————————35
3.2 Method of
Evaluation—————————————————-37
CHAPTER FOUR
4.1 Data
presentation———————————————————41
4.2 Data Analysis
————————————————————44
CHAPTER FIVE
Summary, Conclusion and
Recommendation—————————58
5.1 Summary——————————————————————58
5.2
Conclusion—————————————————————-61
5.3
Recommendation———————————————————62
BIBLIOGRAPHY———————————————————66
Appendix
CHAPTER ONE
INTRODUCTION
1.1THE BACKGROUND OF THE STUDY
Oil, a very versatile and flexible,
non-reproductive, depleting, natural (hydrocarbon) is a fundamental input into
modern economic activity, providing about 50% of the total energy demand in the
world. (Anyanwu J.C. et al, 1997)
Petroleum or crude oil is an oily,
bituminous liquid consisting of a mixture of many substances, mainly the
element of carbon and hydrogen known as hydrocarbons. It also contains very
small amounts of non-hydrocarbon elements, chief amongst which are sulphur
(about 0.2 to 0.6% in weight), then nitrogen and oxygen. (Anyanwu J.C. et al,
1997)
Non-oil exports comprises of
agricultural products, solid mineral, textile, tyre, manpower, etc. it is made
up of every other thing we export, except petroleum products. In the decades of
the 1960s and 1970s, the Nigeria economy was dominated by agricultural
commodity exports. Such commodities include cocoa, groundnut, cotton and palm
produce. From the mid 1970s, crude oil became the main export produce of the
Nigerian economy. (Anyanwu J.C. et al 1997)
The development of the petroleum
(oil) industry in the country began in 1909. It started with exploration
activities by the German Bitumen Corporation, but their search for oil seized
after the First World War because the Germans started the war and lost in the
war. With Nigeria being under British sectorial control, it was only natural
that the Germans had to stop their exploration activities.
In 1937, an oil prospecting license
was granted to shell D’Arcy Exploration parties. The first commercial discovery
of crude oil in Nigeria was made in 1956 by shell at Oloibiri. The company
started production and in 1961 the Federal government of Nigeria issued ten oil
prospecting licenses on the continental shelf to five companies. Each license
covered was subject to the payment of N1 million. With this generous concession
full-scale on-shore and off –shore oil exploration began.
Oil was found in commercial
quantities at Oloibiri in the Niger delta, further discoveries at Afam and Boma
established the country as an oil-producing nation. The Nigerian crude oil is
described as a sweet type because of its lightness and its low sulphur content.
It was largely sought-after in the international oil market.
The global perception of Nigeria is
that of a really blessed oil producing nation, but with a growing poverty
index. (Maaji Umar YAKUB, 2008). The problems of low economic performance of
Nigeria cannot be attributed solely to instability of earnings from the oil
sector, but as a result of failure by government to utilize productively the
earnings from the export of crude oil from the mid 1970s to develop other
sectors of the economy. Nigeria is among the poorest countries in the world,
with the poverty incidence estimated at 54% in 2006. The economy has been
substantially unstable, a consequence of the heavy dependence on oil revenue
and the volatility in its prices. The oil boom of the 1970s led to the neglect
of non-oil tax revenue, expansion of the public sector, and deterioration in
financial discipline and accountability. In turn, oil-dependency exposed
Nigeria to oil price volatility which threw the country’s public finance into
disarray.
This study will examine the relative
impact of oil and non-oil export on economic growth in Nigeria.
1.2 STATEMENT OF THE PROBLEM
Oil is a major source of energy in
Nigeria and the world (in general). Oil being the mainstay of the Nigerian
economy plays a role, vital role in shaping the economy and political destiny
of the country. It was towards the end of the Nigerian civil war (1967-1970)
that the oil industry began to play a prominent role on the economic life of
the country.
Non-oil product on the other hand
plays an important role in the economic growth and development of the country.
Non-oil exports, especially agricultural product like groundnut, palm oil,
cotton, natural rubber, coffee, gum Arabic, sesame seed, etc. was our main stay
before the period of the oil boom. It was during that period (that is, period
of oil boom) that Nigerians neglected non-oil exports to an extent.
Nigeria can be categorized as a
country that is primarily rural, that is, it depends on primary product export
(especially, oil product). Since the attainment of independence in 1960 it has
experienced ethnic, regional and religious tensions, magnified by significant
disparities in economic, educational and environmental development in the south
and in the north. This could be partly attributed to the major discovery of oil
in the country which affects and is affected by economic and social components.
Crude oil discovery has had certain
impact on the Nigerian economy both positively and adversely. On the negative
side, this can be considered with respect to the surrounding communities within
which the oil wells are exploited. Some of these communities still suffer
environmental degradation, which leads to deprivation of means of livelihood
and other economic and social factors. Although, large proceeds are obtained
from the domestic sales and exports of petroleum products, its effects on the
growth of the Nigerian economy with regard to returns and productivity is still
questionable.
Hence, there is need to evaluate the
relative impact of oil and non-oil exports on economic growth in Nigeria. In
the light of the study, the main objective is to assess the relative impact of
oil and non-oil export on the Nigerian economy.
Below are the research
questions of the study.
1. What is the relative impact of
oil and non-oil exports on investment in Nigeria?
2. What is the relative impact of
oil and non-oil exports on economic
growth in Nigeria?
1.3 OBJECTIVES OF THE STUDY.
The broad objective of this study is
to investigate the impact of oil and non-oil exports on economic growth in
Nigeria. However, the specific objectives are;
1. To determine the relative impact
of oil and non-oil exports on
investment in Nigeria.
2. To determine the relative impact
of oil and non-oil exports on
economic growth in Nigeria.
1.4
RESEARCH HYPOTHESIS
The following hypotheses are tested in
this study;
- Both oil and non-oil exports have no significant impact on investment in Nigeria.
- Both oil and non-oil exports have no significant impact on economic growth in Nigeria.
1.5
SIGNIFICANCE OF THE STUDY
Countries of the world today are
engaging themselves more in international trade to earn foreign currency,
maintain a surplus Balance of Payment (BOP), establish good relationship with
foreigners and most of all achieve economic growth. Nigeria as a country is not
left out in the international trade. Our export commodities can de divided into
oil and non-oil.
It is important to study the
relative impact of oil and non-oil exports on economic growth in Nigeria to
ascertain whether the exportation is contributing to our economic growth and per
capita income or whether we have just been wasting our resources.
1.6 SCOPE AND
LIMITATIONS OF THE STUDY
This research work covers the impact
created on economic growth by oil and non-oil exports. The geographical area
involved is Nigeria. The study is as such a comparative one. The variables of
interest are oil export, non-oil export, real interest rate, inflation rate,
investment and GDP. The time period is from 1980-2012.
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