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
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.
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 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
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 was made in 1956 by shell
at Oloibiri. The company started production and in 1961 the Federal government
of
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
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 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 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.
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 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 .
1.2
STATEMENT OF THE PROBLEM
Oil is a major source of energy in 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 . 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 ?
2. What is the relative impact of oil and non-oil exports on economic
growth in ?
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 . However, the specific
objectives are;
1. To determine the relative impact of oil and non-oil exports on
investment in .
2. To determine the relative impact of oil and non-oil exports on
economic growth in .
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 .
2.
Both oil and non-oil exports have no significant
impact on economic growth in .
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. 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 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 . 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.