EXPORT DIVERSIFICATION STRATEGY FOR ECONOMIC GROWTH IN NIGERIA
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EXPORT DIVERSIFICATION STRATEGY FOR ECONOMIC GROWTH IN NIGERIA
ABSTRACT
This work is a study of export diversification strategies for economic growth in Nigeria. Nigeria’s economic growth has been hampered by limited export diversification as a result of its export mono-product stance, a complete shift from previously exportable goods prior to the discovery of crude oil in the late 1950’s, despite the country’s great potentials and abundance of human material and natural resources.
Because of the aforementioned reason, the economy has consistently remained in the doldrums, and steps are now being taken to find a solution to ensure maximum growth. The goal of this research is to achieve optimum diversification in export and positive economic growth.
To do this effectively, certain relevant textbooks were viewed to have a good grasp of the historical trends of export activities and ensure an up to date knowledge of it.
Data for this study were gathered from published reports of the Central Bank of Nigeria (CBN). This research will be extremely beneficial to the government in its efforts to further develop the economy, as well as individuals interested in engaging in international (export) business. International managers will also be able to draw on the information contained therein for the export process.
INTRODUCTION TO CHAPTER ONE
1.1 BACKGROUND OF THE STUDY
Nigeria is located in Western Africa, between latitudes 40 and 140 north of the equator and longitudes 30 and 140 east of the Greenwich meridian. The country has a total land area of 9,323,768 square kilometres and a population of around 120 million people who are multi-ethnic. The Republic of Benin borders the country on the west, the Republic of Cameroon on the east, the Republic of Niger on the north, and the Atlantic Ocean on the south.
The country’s enormous arable agricultural and pasture land for animal husbandry from North to South, East to West, is a notable characteristic. The country’s vegetation is divided into two zones:
high zone forest (which covers one-sixth of the country) and Savannah. The high forest zone includes mangrove or swamp forest and rain forest, while the Savannah includes grassland and scrub forest.
The country has a vast endowment of primarily exportable mineral resources as well as a variety of neutral goods. Nigeria is endowed with vast and largely untapped natural resources such as petroleum, limestone, tin, columbite kaolin, gold and silver, coal, lead, zinc, gypsum, clay, shale, marble, iron-ore, stone, zircon and natural gas,
as well as an abundance of human resources and the geographical features of the beautiful plateau with steep escarpment, cold, warm springs, vast game reserves, waterfalls, river Sincerely, the aforementioned chances should have naturally placed Nigeria in a vantage position as one of the world’s leading nations.
Despite the foregoing, Nigeria is still trying to recover from the economic downturn caused by political infighting, corruption, poor leadership, ineffective policies, poor planning, economic myopia, and other factors. The era in Nigerian history has arrived when qualified foreign managers and leaders must seek importance and seek desperate ways to bail the country out of its economic quagmire.
The statistical data for today’s developing countries (especially Nigeria) is ambiguous, but it supports the idea that export growth has a significant role in economic growth via increasing demand, encouraging savings, and capital accumulation. Export boosts the economy’s supply potential by increasing its capacity to import.
Historically and in the modern world, trade between different economies has been the engine room of growth. There is almost no country that has sustained a growth rate significantly higher than its growth exports for an extended length of time. It is stated that developing countries’ growth rates since 1950 correlate better with export performance than any other single economic measure.
Developing countries such as Puerto Rico, Japan, and Hong Kong have achieved exceptional development in manufacturing exports. Economic historians agree that in the nineteenth century, export commerce served as a growth accelerator by contributing to the optimal use of resources within countries’ economies of scale and by transmitting growth from one region of the world to another.
The demand for raw materials in Europe, particularly in the United Kingdom, brought prosperity to countries such as Canada, Argentina, and South Africa. As demand for their commodities expanded, so did investment in these countries, and agriculture was mutually advantageous.
In terms of exports and economic growth, Nigeria has progressed from a point where agricultural and crude oil exports contributed approximately 89% and 2.7%, respectively, of our foreign exchange in 1960 to a point where they now account for approximately 2.5% and over 90%, respectively. Prior to the 1970s, agricultural exports were Nigeria’s main source of foreign exchange.
During this time, Nigeria was a major exporter of cocoa, cotton, palm oil, palm kernel, groundnuts, and rubber, with annual output growth rates of 3%-4% for agricultural and food products in the 1950s and 1960s. Taxes on those exports were also important sources of revenue for the government. Thus, the agriculture sector was critical to the current account and budget balances during the time.
However, agricultural exports as a percentage of total exports fell from around 43% to slightly more than 70% between 1970 and 1974. Since the mid-1970s, the average annual growth rate of agricultural exports has been 17% lower. The fundamental cause of this growth was the 1973-1974 and 1979 oil price shocks, which resulted in enormous foreign exchange receipts for Nigeria and neglect of agriculture.
The Nigerian economy was hit by the so-called Dutch sickness as a result of the oil boom. According to Harberger (1983), the petroleum sector has had an increasing and dominant effect in terms of contribution to government revenue, rising from 1% in 1960 to over 90% today.
Because of the commodification of oil, we have now forcefully discovered that the over-reliance on crude oil export at the expense of the previous composite vector of “traditional” primary export, while more lucrative, does not provide secure foundations for pursuing deliberate development policy. (Alli 1994).
Fueled by crude oil exports, the domestic economy officially recovered quickly from civil war instability and maintained an extraordinary rate of GDP expansion until the 1990s. Due to fluctuating oil prices,
there is currently a need to diversify from crude oil export to other areas of the economy. As a result, diversifying exports away from total reliance on crude oil exports is now required to achieve quick economic growth.
1.2 STATEMENT OF THE PROBLEM
Every country will have to achieve a growth rate that is consistent with its balance of payments equilibrium on the current account as well as its overall balance on the current and capital accounts, because trade (with a focus on exports) is the engine of growth.
Over the past year, export diversification has shown to be an effective approach for increasing exports and economic growth in many countries around the world. Most emerging countries, particularly Nigeria, have learned from this. As a result, the question is whether diversification should take place in the oil export sector or in non-oil export areas of the economy. A critical review of the performance of different sectors of the economy through time is required to ascertain this.
1.3 OBJECTIVE OF THE STUDY
Given the importance of export in achieving a country’s desired economic growth, as well as the need of export diversification. The goal of the study is to determine the ideal export diversification to obtain increasing levels of exports, which will contribute to economic growth in Nigeria, as well as to uncover additional areas of the economy that will improve our foreign exchange profits.
1.4 SIGNIFICANCE OF THE STUDY
This study will emphasise the contribution of several exportable commodities to the Nigerian economy’s Gross Domestic Product (GDP) over time. It will also aid in the distribution of the country’s available resources for export objectives. The study’s conclusions will serve as a foundation for Nigeria’s economic progress.
1.5 SCOPE OF THE STUDY
Given the lack of data required for the study’s success, the study has been created to analyse the performance of the oil export and non-oil export sectors. This study will primarily focus on the export diversification strategy for economic growth in Nigeria, with a time frame of 25 years (1980-200%) used for empirical analysis.
1.6 METHODOLOGY OF THE STUDY
The study will make use of secondary data, which will be gathered from various issues of the CBN statistical bulletins as well as other data sources relevant to the subject.
The obtained data will be analysed using the co-integration and error correction model, from which conclusions will be drawn based on the basic of the estimated model. The reason for the adoption of co-integration techniques is based on the existence of non-stationary of most time series data, as well as the flexibility richness and efficient estimates of co-integration for the approach.
1.7 THE STUDY HYPOTHESIS
A hypothesis would be developed and tested to determine the validity of our model.
1. H0 = 0 Export diversification will result in a rise in the economy’s Gross Domestic Product (GDP).
H1 ¹ 0 Export diversification will not result in an increase in the economy’s Gross Domestic Product (GDP).
2. H0 = 0 Non-oil Export diversification will result in a rise in the economy’s Gross Domestic Product (GDP).
H1 ¹ 0 Diversification of non-oil exports will not result in a rise in the economy’s Gross Domestic Product (GDP).
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