IMPACT OF EXPORT EARNINGS ON THE ECONOMIC GROWTH OF NIGERIA (1981-2013).
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IMPACT OF EXPORT EARNINGS ON THE ECONOMIC GROWTH OF NIGERIA (1981-2013).
Chapter one
INTRODUCTION
1.1 Background of the Study
The subject of economic growth cannot be effectively discussed without discussing commerce as a driver of economic expansion, whether domestically or internationally.
The new classical economists, for example, used historical evidence from the nineteenth century to compare trade to a “engine of growth” (Nurske, 1961).
Kravis (1970) also referred to commerce as the “handmaiden of growth”. As a result, every government must now pay close attention to trade issues, particularly how to increase real productivity in the export industry.
Exports are domestically produced goods and services that are purchased by foreigners. Net exports represent the difference between total exports and total imports. According to Afolabi (2011), exports are surplus products and services delivered to other countries for sale.
According to Samuelson and Nordhaus (2010), exports are the mirror image of imports. One country’s export is another’s import. Export, on the other hand, refers to any goods or commodities that are legally moved from one country to another, often for trade purposes (Oluchi, 2007).
Just as the importance of foreign trade has grown, so has the amount of research into the subject. This, however, has resulted in the development of numerous theories to assess the influence of exports on economic growth.
According to Bbaale and Mutenyo (2011), as mentioned in Ugwuegbe and Uruakpa (2013), the current research gives various credible theoretical arguments supporting the notion that exporting activities and total economic growth are favourably related.
On the one hand, exporting implies that a country has access to broader external demand, which boosts domestic output and thus economic growth. Second, it is usually maintained that small domestic markets do not grow indefinitely, and that any good economic shock resulting in domestic market expansion is more likely to erode rapidly.
Large overseas markets, on the other hand, are not always constrained by economies of scale in their growth. However, the relationship between exporting and economic growth is still debated, with some scholars arguing that export growth precedes economic growth, hence supporting the export-led growth (ELG) hypothesis (Arnade et al, 1995; Fosuthornton, 1996).
Others, on the other hand, have produced data in support of the growth-led export hypothesis (GLE), suggesting that economic expansion precedes export growth (Krugman, 1984; Lancester, 1980; Henriques and Sadorsky, 1996; Al-Yousif, 1999; Kernel et al., 2002).
Nigeria, like many other developing countries in Africa, began with a primarily agricultural economy. Nigeria’s principal agricultural products include beans, cassava, cocoa beans, groundnuts, palm oil, rice, rubber, lumber, and yams, among others.
These products accounted for more than half of gross domestic product (GDP) and were the primary source of export earnings and government revenue. Cocoa is the top export earner, followed by rubber.
Agricultural exports (including manufactured food and agricultural products) dropped quantitatively after 1970, which can be ascribed to the low global price of raw commodities.
In 1979, the Nigerian government prohibited the import and export of certain foods (National Encyclopaedia, 2007). Again, the discovery of oil and the subsequent surge in oil earnings in the 1970s pushed agriculture to the background; crude oil now accounts for around 90% of total exports.
However, in 1980, the global oil market crashed. The decline resulted in a drought in oil earnings and budgetary receipts, with no corresponding slowdown in fiscal and external deficits.
To finance the domestic and external deficits, the government borrowed heavily from the banking sector and international financial institutions, depleting external reserves.
The consequent drop in foreign exchange profits precipitated an imperfect economic crisis (Omotor and Jike, 2006).In response to these massive challenges, the structural adjustment programme (SAP) was implemented in the late 1980s.
This was intended to liberalise and diversify the economy. SAP was designed to pay more attention to exports, particularly in the agricultural sector, which has suffered the most neglect.
The implementation of SAP was followed by the development of many export promotion strategies and programmes, particularly for manufacturing exports. These include numerous export incentives, research and development (R&D), the privatisation of state-owned firms, and a slew of additional initiatives.
Given the foregoing, the purpose of this research is to investigate the impact of export earnings changes on Nigeria’s economic growth.
1.2 Statement of the Problem
Nigeria is rich in natural resources like as crude oil, columbite, limestone, cole, lead, iron ore, and tin, as well as a variety of agricultural products including as cocoa, rubber, and lumber.
All of these resources, if effectively utilised, would contribute to Nigeria’s economic growth and development. However, the Nigerian economy has occasionally been hampered by challenges such as corruption, a balance of payment crisis, high debt, inflation, and unemployment.
Despite several blessings, Nigeria remains underdeveloped, however, as Africa’s behemoth, she has a higher chance of becoming one of the world’s top economies.
In the 1960s and 1970s, the Nigerian economy was dominated by agricultural commodity exports such as cocoa, groundnut, cotton, rubber, coffee, beniseed, and palm product, which are basic raw materials for a variety of manufactured goods. In the 1950s and 1960s, agricultural food crops experienced yearly output growth rates of 3% to 4%.
The government’s earnings were likewise primarily dependent on export taxes. As a result, the agriculture sector dominated the current account and budget balances throughout that time.
Until the early 1970s, when dependency was switched to crude oil (Osuntogun et al, 1997). Gani (2011) stated that the oil boom in the mid-1970s resulted in a significant increase in the country’s foreign exchange earnings, which led to stronger economic growth. The time is particularly notable for the government’s high level of investment on capital-intensive projects and administrative costs.
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