Project materials empirical analysis on the impact of oil and non-oil exports on Nigeria’s economy
Abstract
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This research focuses on the impact of oil and non-oil exports on Nigeria’s economy from 1981 to 2012. Data on gross domestic product, oil export and non-oil export were used. The ordinary least square (OLS) was used to estimate the parameters.
The research results from econometrics analysis revealed that oil and non-oil exports have significant impact on Nigeria’s economy. The unit root test was conducted using the Augmented Dickey- Fuller and Phillip Perron unit root test and all the variables were integrated at order one.
The cointegration test was also conducted using the Johansen cointegration test technique and the results shows that the variables under study have no long run equilibrium relationship. Other test conducted includes the Granger causality test and the autocorrelation test.
The Granger causality test was conducted to determine the direction of causality.
The study recommends as part of Nigeria’s strategy for achieving rapid and sustainable economic growth the fashioning of right policies such as bringing expert personnel that will be in charge of the Administration of the export promotion council because the national export promotion council remains the major vehicle for conveying the export policies of government specifically on non-oil exports.
TABLE OF CONTENT
TITLE
PAGE
APPROVAL PAGE
DEDICATION
ACKNOWLEDGEMENT
ABSTRACT
CHAPTER ONE
INTRODUCTION
BACKGROUND OF THE STUDY
STATEMENT OF PROBLEM
OBJECTIVES OF THE STUDY
STATEMENT OF HYPOTHESIS
SIGNIFICANCE OF THE STUDY
SCOPE AND LIMITATIONS OF THE STUDY
CHAPTER TWO
2.0 LITERATURE REVIEW
2.1 THEORETICAL LITERATURE
MEANING OF OIL AND NON-OIL EXPORTS
OIL ACTIIVITIES IN NIGERIA
STRUCTURE OF EXPORT IN NIGERIA
NIGERIA OIL AND NON-OIL EXPORT PERFORMANCE
EXPORT AND ECONOMIC GROWTH
EXPORT-LED GROWTH
EMPIRICAL LITERATURE
LIMITATIONS OF PREVIOUS STUDIES
CHAPTER THREE
RESEARCH DESIGN AND METHODOLOGY
METHODOLOGY
MODEL SPECIFICATION
METHOD OF
EVALUATION
TEST BASED ON STATISTICAL CRITERIA
TEST BASED ON ECONOMETRIC CRITERIA
DATA REQUIRED AND SOURCES
CHAPTER FOUR
PRESENTATION AND ANALYSIS OF RESULTS:
EMPIRICAL RESULT
EXAMINATION OF THE PARAMETER SIGN OF THE PARAMETER ESTIMATES
STATISTICAL TEST OF SIGNIFICANCE
ECONOMETRIC TEST OF SIGNIFICANCE
AUTO CORRELATION TEST
UNIT ROOT TEST (STATIONARITY TEST)
COINTEGRATION TEST
GRANGER CAUSALITY TEST
EVALUATION OF THE WORKING HYPOTHESIS
IMPLICATION OF THE RESULT
CHAPTER FIVE
SUMMARY OF FINDING, CONCLUSION AND RECOMMENDATION:
SUMMARY OF
FINDINGS
CONCLUSION OF THE STUDY
RECOMMENDATION
58 BIBLIOGRA
CHAPTER ONE
INTRODUCTION
1.1 Background of the study
Nigeria Economy is practically an open economy with international transactions taking an important fraction of her overall economic activities over the years. Before Nigeria gained her independence in 1960, agriculture was the dominant sector in the economy, which provided both cash crops and food crops to the economy and accounted for the largest part of the foreign exchange of the country.
However, the discovery of crude oil production in commercial quantities changed the structure of the Nigerian economy. This crude oil was first discovered by shell-BP in oloibiri in Bayelsa state in the year 1956.
This discovery led to the neglect of agricultural product, making the Nigerian economy depend heavily on crude oil production and exportation to other nations.
In 1959, the sole concession rights over the whole country granted to shell-BP had to be reviewed (Attamah, 2000). Consequently, exploration rights were extended to companies of other nationalities in line with the policy of increasing the pace of exploration, while at the same time ensuring that the country was not overtly dependent on one company or nation (Attamah, 2000)
In
the year 2000, crude oil export accounted for more than 98% of total export and
about 83% of federal government revenue (Odularu, 2008). Furthermore, the
United States of America (U.S.A) remains
Nigeria’s largest customer for crude oil export accounting for about 40% of the country total oil exports, provided about 10% of overall United State oil imports and ranked as the fifty-largest source for United State imported oil. (Odularu 2008)
According to CBN bullion publication authored by Odularu (2008) on the contribution of agricultural and oil sector on gross domestic product in Nigeria, the structure and trend of the Nigerian export sector has remained the same since the end of colonialism till date.
This is seen from the dominance of one export commodity which is crude oil. Before independence in 1960 and into the mid-1970’s, Nigeria was a major exporter of agricultural commodities. On the average, agriculture contributed more than 60% to our GDP in the early 1960’s.
By the turn of the 1960’s, the percentage contribution of agriculture had fallen below 50%. It continue to decline in the year 1970’s reaching an
all time low level of 23% in 1980 showing that the role of agriculture in terms of its contribution to the GDP of Nigeria has been declining.
With the discovery of petroleum in large commercial quantities in 1956 and the oil boom of 1973 – 1974 and 1979, Nigeria became a major exporter of crude oil till today from which it derived substantial foreign exchange earnings (in the past one decade, from 2003 to 2011, the government has been steadily building up its reserves owing largely to improve oil export earning).
The gains from crude oil export was so great that attention was shifted from agricultural commodities with the consequences that earnings from the agricultural sector (non-oil sector) declined and the economy became entirely dependent on earnings from crude oil exports.
The place of oil in the mind of the average Nigeria has become more profound since the initiation of deregulation of downstream sector of the Nigeria oil industry in 2003 and 2012.
The recent rise in crude oil price at the global market makes the Nigeria economy to earn more revenue from the export of crude oil but also increased the expense burden on imported refined petroleum products. At present, Nigeria has four refineries with a
combined refining capacity of 2.5million barrels per day. There are the first Port Harcourt refinery which was commissioned in 1965 (with an installed capacity of 210,000 barrels per day), the Warri refinery which was commissioned in 1978 (with an installed capacity of 125,000 barrels per day),
the Kaduna refinery which was commissioned in 1980 (with an installed capacity of 110,000 barrels per day) and the second Port Harcourt refinery which was commissioned in 1989 (with an installed capacity of 150,000 barrels per day).( Attamah, 2000).These refineries were designed to supply the domestic market and export its surplus.
The refineries are operating far below their installed capacity as they were or less abandoned during the military era. The performance of the oil and non-oil sectors can be assessed by looking at the boom period of crude oil/petroleum product.
Boom period: After independence in 1960, Agriculture (non-oil) was the dominant sector ofNigeria’s economy. Agriculture provided the high level of employment for the economy and the needs of the household. According to (CBN Bullion publication, volume 32 no. 2, April-June 2008) the proportion of GDP accounted by agriculture was 67% and petroleum accounted for 0.6%. By 1970, petroleum stood at 23.4% and agriculture was 45.5% of GDP.
While in 1980, there was a decline to both sectors (oil and non-oil sectors), proportion of agriculture was 15.5% and petroleum was 28% of GDP. In 1990, agriculture was 30% and petroleum was 12.8% of GDP. In 2000, agriculture stood at 24.6% and petroleum stood at 51% of GDP.
In 2006, agriculture was 50.78%, petroleum was 66.21% of GDP. Since the early 1990’s, the economy had depended solely on oil export earnings, neglecting the non-oil sector of the economy, which leads to the declined contribution of the non-oil sector to GDP despite the increase in prices of oil over the years in the international oil market.
Nevertheless, crude oil and non-oil exports have really impacted on Nigeria’s economy in no small way in terms of huge foreign exchange earnings.
1.2 Statement of problem
Oil and non-oil products are major export of Nigeria and the proceeds which are received from or after exporting these oil and non-oil products in particular is vital to economic growth. These proceeds directly contribute to investment, which in turn constitutes the motor of economic expansion. Thus, this study shall examine and address the following research questions:
What is the impact of oil export on real gross domestic product (RGDP) in Nigeria?
What is the impact of non-oil export on real gross domestic product (RGDP) in Nigeria? What is the direction of causality between oil and non-oil exports and real gross domestic
product (RGDP) in Nigeria?
- Objectives of the study
The objectives of this research work are as follows:
To ascertain the role of oil and non-oil exports on Nigeria’s economy.
To determine the magnitude of the effect of oil and non-oil export on real gross domestic product (RGDP).
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