CHAPTER ONE
BACKGROUND OF THE STUDY
1.1 INTRODUCTION
The ultimate aim of the government of
any country is to achieve a well-developed economy which can be depicted
by the realization of macroeconomic objectives of equitable income
distribution, prices stability and economic growth. Consequently,
various policies and strategies can be adopted in the realization of
these objectives. While some countries prefer inward looking import
substitution model because it enables them to evolve their own styles of
development and become master of their own fate, others believes in the
adoption of export oriented strategy. Nigeria like many other
developing countries had at one time or the other adopted the policy of
import replacement under the philosophy of economic nationalism, have
now switched to export promotion strategy because it was realized that
this was more effective than import substitution in achieving a faster
growth and structural upgrading of an economy. Export promotion strategy
is commonly referred to by many scholars as governmental efforts to
expand the volume of country's export through export incentives in form
of public subsidies, tax rebates, special credit lines and other kinds
of financial and non-financial-measures designed to promote a greater
level of economic activities in export industries so as to generate more
foreign exchange and improve the current account of the balance of
payments Todaro, (2003). It has been established in the literature that
export trade is an engine of 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 eventually transform into better living condition for the
nationals of the exporting economy since foreign exchange derived would
contribute to meeting their needs for some essential goods and
services. 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. In the years immediately after independence,
the Nigerian economy was dependent on export of agricultural commodities
for survival. However, as a result of the setting up of commodity board
by the federal government to act as buying agent, this board went about
fixing prices arbitrarily and below market prices, therefore, farmers
moved out of the business because they no longer found it profitable.
The policy effect was therefore negative development of exports in the
agricultural sector. Moreover, available data revealed that the
manufacturing sub sector of the economy had often been making minimal
contribution to export. The reason that can be adduced for this had been
neglect of the sector by colonial masters before independence in favour
of export of industrial· raw-materials for their domestic industries.
Even after independence, poor infrastructure, lack of adequate finance,
high cost of production, and low market penetration due to poor quality
control were factors constraining the development of manufacturing
exports.
1.2 STATEMENT OF THE PROBLEMS/BACKGROUND OF STUDY
The Nigerian economy remains under
developed and backward. The situation is particularly disturbing given
the country's abundance of human and natural resources. In the 1960's
and early 1970s, Nigeria, Malaysia, Indonesia, Taiwan, Singapore and
South Korea had similar per capital income, Gross Domestic product (GOP)
growth rate, and under developed political structures. Today, the
"Asian Tigers" (as the South East Asian countries are popularly know I
have escaped under-development and poverty partly because of the way in
which their economies have been managed (EKPO, 2003).The Nigerian
economy on the other hand has experienced all the phases of typical
business cycle; decline, depression and/ or recession, recovery and
boom. However, none of the booms associated with agriculture, oil and
financial sector has resulted in any significant restructuring or
transformation of the economy as they were linked to the real sector.
The result is that; Nigeria has been unable to maximize the benefits
associated with economic booms.
Currently, the government of Nigeria is vigorously pursuing a market-determined interest rate regime/ system
but not undermining the importance of export, a policy which does not
permit a direct state intervention in the general interest of the
economy. Therefore, the central macroeconomics issues in the Nigerian
economy thus, have to do with the problems of persistent unemployment,
high rates of inflation, sluggish growth in output. exchange rate,
instability, low capacity utilization, debt burden, large fiscal
deficits and interest rate fluctuations.
Given the serious concerned expressed by
all stakeholders and Federal Government, there is the pressing need to
conduct an empirical investigation of macroeconomic and real interest
rate spread in Nigeria in order to ascertain the cause as well as
proffer some policy suggestions. In the light of the above, every
country would have to achieve a growth rate that is consistent with her
balance of payments equilibrium on current account, and with its overall
balance on the current and capital account. Since trade (with emphasis
on export) is the major engine of economic growth, then, export
promotions must therefore, be the focus of any country that intends to
achieve a desirable level of economic growth of many countries in the
world. This has been a lesson for most developing countries
particularly, Nigeria. Therefore, the issue is whether diversification
should be undertaken in the oil export sector or non-export sector of
the economy. To determine this, a critical analysis of the export
penetration will absolutely necessary,
1.3 AIM AND OBJECTIVES OF THE STUDY
The main aim of the study is to examine
the impact of export penetration on Nigeria economic, while the specific
objective are follows;
1. To examine the impact of infrastructural support put in place by the government to promote export programmes in Nigeria
ii. To identified the penetration of Nigeria Products In International market
iii. To investigate the challenges faced by exports programme In Nigeria
iv. To examine the impact of export on the value of the' country's output
1.4 JUSTIFICATION OF THE STUDY
This study is important because adequate
understanding of importance of export market penetration will enhance
economic growth and this will help the government relate policy thrust,
geared towards prioritizing export promotion in their objectives, so
that necessary economic development will be enhanced. Findings in this
study will also help other economic thinkers, scholars in having a clear
cut idea as to what constraint does export market causes in the
economy.
1.5 RESEARCH QUESTIONS
The following are the research questions:
i. Does export market penetration enhance the development of agricultural sector in Nigeria?
ii. Does export promotion improve the level of economic development in Nigeria?
iii. Does exports market stimulate exchange rate in Nigeria
iv. Does financial sector impact positively on exports in Nigeria?
1.6 STATEMENT OF HYPOTHESES
In pursuance of the objectives of the study, the following hypothesis are imperative.
Ho: There is no significant relationship between export market penetration and economic development
Hi: There is significant relationship between export market penetration and economic develop
Ho: There is no
significant relationship between exchange rate, index of agricultural
output, index of manufactural output, 'bank loans and exports.
Hi: There is significant
relationship between exchange rate, index of agricultural output, index
of manufactural output, bank Loans and exports
1.7 METHODOLOGY OF THE STUDY
The methodology adapted in this partly
comprises of theoretical and quantitative techniques. Data requirements
for the study shall be obtained purely through secondary data. Such data
include the various publications of the Central Bank of Nigeria (CBN),
federal office of statistics (FOS), conference paper, journals etc. The
data abstained through the secondary data would be analyzed using an
econometric techniques, precisely regression analysis.
1.8 SCOPE OF THE STUDY
This study covers a period between 1990 - 2007. The choice of this
period is informed based on the structural transformation polices out in place by the government during the periods.
1.9 ORGANIZATION OF THE STUDY
This study is divided into five(5)
chapters. Chapter one contains the introduction of the study while
Chapter two is the review of relevant literature, chapter three examines
the structure of export in Nigeria, while chapter four entails the
research methodology, presentation and analysis of results. Chapter five
summarizes the entire study and also brings out policy recommendations