EMPIRICAL ANALYSIS OF EXPORT PROMOTION AND NIGERIA’S ECONOMIC GROWTH


THIS PROJECT WORK WAS WRITTEN BY
AND SUBMITTED TO THE DEPARTMENT OF ECONOMICS
DECEMBER 2010

TABLE OF CONTENT


 Title page……………………………….i
Approval page………………………….ii
Dedication………………………………iii
Acknowledgement…………………….iv
Table of content………………………..v
Abstract……………………………….. vi

CHAPTER ONE
INTRODUCTION
1.1             Background of the Study……    
1.2             Statement of Problem………..   
1.3             Objective of the Study……….
1.4             Research Questions …………
1.5             Hypothesis of the Study…….
1.6             Significant of the Study……..
1.7             Scope of the Study ………….
1.8             Limitations of the Study…….
1.9             Methodology………………….

CHAPTER TWO
2.0     LITERATURE REVIEW…..
2.1     Theoretical Literature…………
2.2     Empirical Literature …………
2.3     Export-Led Growth…………..
2.4     Features of Export-Led Growth
2.5     Export Promotion and Nigerian’s Economy
2.6     Benefits of Export Promotion ………………

CHAPTER THREE
3.0      Research methodology…………
3.1     Research Design……………………...
3.2 Model Specification ……………………..
3.3 Model Evaluation…………………………
3.4 Sources of Data…………………………..

CHAPTER FOUR
4.0         PRESENTATION AND ANALYSIS OF RESULT
4.1         Presentation of Data……………………
4.2         Analysis of Result………………………
4.3         Evaluated of Research Hypothesis….
4.4         Implication of Result……………………

CHAPTER FIVE
5.0         SUMMARY, CONCLUSION AND RECOMMENDATION
5.1         Summary of findings…………………
5.2         Conclusion……………………………..
5.3         Recommendation……………………..
Bibliography…………………………………..
Appendix 1…………………………………………
 

ABSTRACT
This research work examined the Empirical Analysis of Export Promotion and Nigeria’s Economic Growth. The objective of the study is to find out whether export Promotion has significant effect on Export as to impact on the level of income in the economy. In this study, the method adopted was the regression analysis based on the Ordinary least square (OLS) technique, F-test, T-test, coefficient of multiple determination (R2), standard error test (S.E) and Durbin Watson statistics were used for the statistical tests. The variables used were one dependent variable (GDP) and the Independent variables are Export rate, Import rate and Exchange rate (EXP, IMP, EXD). The hypothesis formulated to guide the major activities of the study were, export promotion have a significant effect on economic growth of Nigeria and can it be used as an instrument that will help in the growth and development of the economy. Furthermore, data was presented and analysed, the result reveals that export promotion has a significant effect on the Economic growth of Nigeria within the period 1979-2007 which is the period under study. Based on the policy implication, some recommendations were suggested which is provision of enabling environment by government for the manufactures of export goods and diversification of the mono-cultural economy of Nigeria.
  
INTRODUCTION - BACKGROUND TO THE STUDY

The ultimate aim of the government of any country is to achieve a well developed economy which can be depicted by the realization of macroeconomic objectives of equitable income distribution, price stability and economic growth. Consequently, various policies and strategies can be adopted in the realization of these objectives. While some countries prefer inward looking import-substitution model because it enables them to evolve their own styles of development, others believes in the adoption of export oriented strategy.
          Nigeria like many other developing countries had at one time or the other adopted the policy of import replacement under the philosophy of economic nationalism, have switched to export promotion strategy because it was realized that this was more effective than import substitution in achieving a faster growth and structural upgrading of an economy.

          Export promotion strategy is commonly referred to by many scholars as governmental efforts to expand the volume of country’s export through export incentives in form of public subsides, tax exceptions, special credit lines and other kinds of financial and non-financial measures designed to promote a greater level of economic activities in export industries so as to generate more foreign exchange and improve the current account of the balance of payment (Todaro, 2003).
          It has been established that export is an engine of growth. It increases foreign exchange earnings, improves balance of payment position, creates employment and development of export-oriented industries in the manufacturing sector and improves government revenue through taxes, levies and tariffs.

          In the pre and immediate post independence era, during the 50’s and 60’s non-oil products dominated the Nigerian economy. These primary products include such product as cotton, groundnut, palm oil, cocoa and rubber. The Nigerian economy was dependent on export of these agricultural commodities for survival and it accounted for more than 95% of export earning of the country. However, as a result of the setting up of commodity board by the federal government to  act as buying agent, this board went about fixing prices arbitrarily and below market prices, therefore, farmers moved out of the business because they no longer found it profitable. The policy effect was therefore negative development of exports in the agricultural sector. Moreover, available date revealed that the manufacturing sub-sector of the economy had often been making minimal contribution to export. The reason that can be adduced from this had been neglect of the sector by colonial masters before independence in favour of export to industrial raw materials for their domestic industries. Even after independence, poor infrastructure, lack of adequate finance, high cost of production and low market penetration due to poor quality control were factors constraining the development of manufacturing exports.

          The discovery of exploration crude oil in the late 1960’s, Nigerian economy became heavily dependent on the oil sector, as revenue from the oil sector overshadowed that from the agricultural sector. The petroleum exports became the main source of foreign exchange and government revenue. Moreover, in 1970s, oil sector experienced price explosion at the global crude oil market as a result of crisis in the Middle East. The ultimate effect of this was a massive inflow of foreign exchange (Ajakaiye and Ayodele, 2000). Eventually, Nigeria became a mono-cultural economy, over depending on crude oil export for her foreign exchange.

          However, as a result of the protectionist policies of the developed countries and the increases substitution of synthetic for primary products in the technically advanced countries, the world oil market collapsed in mid 1980s, resulting in a sharp drop in crude oil prices in the international markets. Consequently, there was a significant decline in foreign exchange earnings from crude oil. As a result, there was a rapid depletion of Nigeria’s foreign exchange reserve and worsening unfavourable balance of payment position, there was high rate of unemployment as investment rate was low, massive importation of various types of food items as local production was low. The manufacturing sector could no longer produce enough goods and services as essential raw materials were not available. It became clear then, that crude oil export should not be looked upon to guarantee sustained growth of Nigeria’s economy in the long-run (Ojo, 1996). Therefore, additional source of foreign exchange earnings to finance the gap between the demand for and the supply of foreign exchange must be sought. 

          All policy measures designed to improve the situation, including stabilization measures in 1982 as well as the restrictive monetary policy and the stringent exchange control measures in 1984 proved ineffective. Consequently, the Structural Adjustment programme (SAP) was introduced in July 1986. Other policies which includes: The establishment of Nigerian Export-Import Bank (NEXIM), Nigeria Export Promotion Council (NEPC), Nigerian Processing Zone Decree etc which was charged with the main objectives of attaining overall export growth, to diversify export from dependence on crude petroleum through the promotion of non-oil exports and to assist intending exporters in creating conducive environment for the production and exportation of non-oil product.
          Against this background, that this work is aimed at finding out the effect of export promotion on Nigerian economic growth. The work will also give the government the most viable options to current account surplus without depending much on foreign investors or borrowing.

STATEMENT OF PROBLEM
          The problem in Nigeria is that of too much importing without exporting which have placed the economy in balance of payment deficits. As Todaro (1988) rightly pointed out, the overall balance of payments deficits will pose severe strains on an economy and greatly restricts its ability to continue to import needed capital and consumer goods.
          He also contended that the nation has to imports to feed its population and posses very limited stocks of monetary reserves. Balance of payment deficits spell disaster for many millions of people. Measures taking by government to improve the situation are usually aimed at improving export expansion or limiting imports.
          Moreover, it is dishearten that despite export promotion in Nigeria’s economic growth and development scheme, her export performance over the years have been relatively poor and below expectation. This is to say that without the strengthening of her potentials to exports. It is difficult for contemplate bright prospects for rapid economic development.

OBJECTIVE OF THE STUDY
          The main objective of this study is to test and find out the effect of export promotion on Nigerian’s economic growth.
Specific objectives:
1.             To find out the effect of export promotion on export growth in Nigeria.
2.              To give the government the most viable options to current account surplus without depending much on foreign borrowing.

RESEARCH QUESTIONS
          The study wishes to answer some research questions such as:
1.        Why should export expansion and diversification be considered as a major factor in the globalization process and integration of Nigeria into the world markets?
2.        How can the policies for export promotion and tax adjustment be utilized effectively?

HYPOTHESIS OF THE STUDY
          The hypotheses of this study, which are empirical and conditional statements assumed to be tested are as follows:
H0: b1  =  0            Export promotion has no significant effect on Nigeria’s economic growth.
H1: b1 ≠ 0              Export promotion has significant effect on Nigeria’s economic growth.

SIGNIFICANCE OF THE STUDY
          The study can be used to direct future research into the appropriate implementation of export promotion policies in Nigeria.
          The study can act as an incentive to exporters to export more for the economic growth of Nigeria.
          This study can also be used to wave the operation of mono-product as an export problem in Nigeria.

SCOPE OF THE STUDY
          This study is basically concerned with the empirical analysis of export growth through export promotion and income growth while considering the role of imports in income-export relationship in Nigeria’s economic development. It uses a time series data from 1979 to 2007 covering a period of (29) years.
          The data for the study are reports from National Bureau of Statistic (NBS) and Central Bank of Nigeria (CBN) of various years.

LIMITATIONS OF THE STUDY
The following form a setback to the study:
          The time allotted for the study was short to enable extensive research for the study. And also, lack of fund to enable the researcher carryout the research to all levels it required.

METHODOLOGY
          The data for this research work was sourced from secondary sources which include text books, data and literatures collected from Central Bank of Nigeria (CBN), annual reports, central bank of Nigeria quarterly economic review, annual statistical bulletins and internet sources. The ordinary lease square (OLS) method was employed in analysis of data since it is fairly simple with non-excessive requirement. Statistical tools such as R2, F-test, t-test and Durbin Waston were applied in the analysis of the data in this project work.


OKEAGU, CHIAMAKA .N.
EBSU\ECO\2006\37179

BEING A RESEARCH PROJECT SUBMITTED TO THE DEPARTMENT OF ECONOMICS,
IN PARTIAL FULFILLMENT OF THE REQUIREMENT FOR THE AWARD OF BACHELOR OF SCIENCE DEGREE (B.Sc) IN ECONOMICS.

FACULTY OF SOCIAL SCIENCES,

EBONYI STATE UNIVERSITY
ABAKALIKI
DECEMBER 2010
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