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
1.0 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;
1. Both oil and non-oil exports have no significant impact on investment in Nigeria.
2. 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 1983-2007.