The impact of non-oil export on economic growth in nigeria (1986-2010)

Thesis Overview

<p> INTRODUCTION<br>1.1 BACKGROUND OF THE STUDY<br>There is a number of reasons for a country to be concerned about its<br>rate of economic growth. Economic growth is desired by both affluent<br>and non-affluent economies. Economic growth is the desire for higher<br>levels or real per capital income, real output which must grow faster<br>than the production of the economy in question. Economists, policymakers,<br>public and private sectors work ceaselessly towards attaining<br>economic growth by the use of development and growth models and<br>policies. Among the policies used are trade policy (Import and export<br>policies, monetary policy, exchange rate policy, fiscal policy, market<br>etc). In this study, the non-oil exports and economic development in<br>Nigeria will be examined.<br>Non-oil exports are the products, which are produced within the country<br>in the agricultural, mining and querying and industrial sectors that are<br>sent outside the country in order to generate revenue for the growth of<br>11<br>the economy excluding oil products. These non-oil export products are<br>coal, cotton, timber, groundnut, cocoa, beans etc.<br>Today, as in the past, the growth of Nigerian economy remains partly<br>dependent upon increasing productivity of the agricultural sector.<br>Helleiner (2002:124) states that no matter how much development and<br>structural transformation achieved, it will remain its relative dominance<br>in the economy to many decades to come. Precisely, it is from<br>agricultural exploits that the economy has received its principal stimulus<br>to economic growth.<br>Agricultural sector can assist through the exportation of principal<br>primary commodities which will increase the nation’s foreign earnings<br>and which can be used to finance a variety of development projects.<br>The growth of the agriculture sector can make a substantial contribution<br>to the total tax revenue, as well as having some implications for intersectional<br>terms of trade. Also in the area of capital formation, the<br>savings generated in this sector can be mobilized in development<br>purposes, while increase in rural income as a result of increasing<br>agricultural activities can further stimulate the product of the modem<br>12<br>sector. The needs of the agricultural sector could indirectly influence the<br>creating of additional infrastructures which are indispensable to rapid<br>economic development. (Olaloku. 2001:13).<br>Another non-oil export to be dwelled on, is industrial sector. It is the<br>fastest growing sector in Nigeria economy. It comprises of many<br>manufacturing and mining. Nigeria has manufacturing base prior to<br>1960 and shortly after.<br>The problem was due to lack of modern technology skills, managerial<br>experience of complex organizations and financial back -up. The<br>problem was further aggravated by the colonialists’ merchants<br>convincing arguments on the goodness of comparative cost advantage.<br>Nigerians were coaxed into concentrating their efforts in the production<br>of primary agricultural products and exporting them to the metrological<br>industries in Europe.<br>Our industrial sector took off after independent relied on satellite firms<br>representing British interest. The bank sector, which is constellation of<br>colonial banks branches and some companies that were able to invest<br>in manufacturing were the multi-national that have access to funds,<br>13<br>technology and managerial expertise. This greatly hindered the<br>progress of indigenous entrepreneurs.<br>The Nigerian manufacturing sector has been described by Ikediala<br>(1983) as consisting of more assembling plants. He says that the<br>implication of this is that the industries have very little backward linkage<br>in the economy, since the bulk of the inputs is imported, thus the<br>manufacturing sector depends on imported raw-material the extent of<br>42%. The capacity utilization of manufacturing industry has always<br>been low in this country. The reasons as put by CBN (1998) are not<br>unconnected with raw materials scarcity, consumers resistance due to<br>high prices, increase in cost of manpower. Others mentioned are<br>equipment breakdown due to poor technology, lack of spare parts. Time<br>lags between, when inputs are ordered for and when they arrive, cash<br>flow problems in industries becomes a permanent features.<br>The Nigerian Civil war brought about the deterioration of the oil palm<br>grooves and plantation were abandoned and little if any new planting<br>was undertaken. As a result of that, the output of palm oil and palm<br>kernel declined drastically. But according to Onwuka (1985), the<br>14<br>problems of palm products are due to the stagnation in the production<br>of this commodity, which is partly explained by the presence of wild<br>palm trees, which are of low-yield quality, and the difficulties<br>experienced in harvesting them. In addition, the old system of pricing<br>which guarantees low producer prices for palm produce discourage<br>substantial investment from being made for further production of this<br>product. Also, the problem marketing boards cannot be over looked.<br>Marketing board is an institution set up by the government with the<br>exclusive right to buy and sell certain agricultural products.<br>They purchase some products locally export sales are made through<br>the Nigerian marketing company, which is jointly owned by all state,<br>marketing. One of the functions of the marketing board is to stabilize the<br>prizes or our cash crops and hence creates stability of income for<br>farmers and to accumulate funds for development purposes. But the<br>operation has failed to provide incentives to farmers to increase their<br>input. Also, the producers paid unnecessary tax and they took from the<br>producers some money, which should have gone to them as income.<br>They thus reduced the amount of capital available to the producers.<br>15<br>This criticism, according to Adenira (1999) made the Federal<br>Government to reform the Marketing Board System with a view to<br>increase producers’ prices and income. He said that the essential<br>features of the new reform are the prices, which are now fixed by a<br>single authority while producer taxation (export duty and produce sale<br>tax) has been abolished. Another major innovation in the system is the<br>creation of commodity boards with responsibility of marketing specific<br>products whenever they are produced in the country. These boards are<br>likely to reduce administrative problems and be more economical<br>compared with all oil-produced state Marketing Boards previously in<br>existence.<br>The major fault of the successive government that are supposed to<br>sustain this sector through the building of macro-economic structures<br>and incentives diverted their attention away from agriculture. The result<br>was sharp in the export/import equation as country started importing<br>even palm oil that was hitherto imploring from Nigeria. The situation<br>was becoming worrisome thus by 1975 there were attempts to<br>recapture the lost of glory of agriculture. General Olusegun Obasanjo’s<br>16<br>operation feed the nations becomes the first real expressed official<br>attempt in this direction. It was followed by the establishment of two<br>River Basin Development Authorities in 1977. By 1978/1979, the federal<br>Government made budgetary provision to establish 4,000 hectares of<br>mechanized farms in each of the 19 states then, by 1979, there was a<br>re-launch of “operation feed the nation” with a new tag “Green<br>Revolution” with various committees set for its implementation (Oko,<br>1999).<br>If the efforts of the two leaders-General Olusegun Obasanjo and Alhaji<br>Shehu Shagari’s regimes could have brought vigor to the agricultural<br>sector, the activities of the sic-commodity boards did not assist much..<br>Oko said that fixing export product prices without recourse to cost<br>inputs discourages agriculture therefore remained slow because food<br>demand was growing at the rate of 3.5% per in the 80’s while<br>agricultural output was crawling at 11 %. Between 1990 and 1998 GDP<br>in agriculture declined to 6.2%. Then the distributions of agriculture<br>inputs to producers were neglected, infrastructure facilities like<br>motorable feeder roads, and irrigation facilities etc, made it difficult to<br>17<br>increase agricultural production. CBN mandate to bank with regard to<br>bank loans to agriculture as priority sector for preferential leading was<br>floated.<br>18<br>THE TABLE BELOW SHOWS YEARLY PALM PRODUCTS<br>PRODUCTION AND COCOA PRODUCTS PRODUCTION IN TONES,<br>WHICH COVER FROM 1990-2004.<br>Year Palm Products Cocoa Products<br>1990 730 1190<br>1991 760 1363<br>1992 792 1321<br>4191993 825 419<br>1995 837 503<br>1995 871 403<br>1996 920 591<br>1997 938 635<br>1998 992 683<br>1999 1003 721<br>2000 1411 832<br>2001 1603 925<br>2002 114 1160<br>2003 1701 1165<br>2004 1770 1200<br>Source: CBN Annual Report and Statement of Account 2004 <br></p>