Investigating the Role of Diversification on Economic Growth in Nigeria; New Evidence from SVARs (original) (raw)

Diversification and Economic Growth in Nigeria (1981-2016): An Econometric Approach Based on Ordinary Least Squares (OLS

Economic diversification has been the glamour of successive administrations in Nigeria, especially amidst the dwindling oil-revenue in recent years, which has resulted from the fluctuations in world crude oil prices. This study aims at investigating the impact of diversifying the economy on the economic growth in Nigeria. Secondary data on GDP growth rate as a proxy for economic growth, non-oil GDP as a proxy for GDP diversification, non-oil export as a proxy for export diversification, investment and exchange rate, between 1981 and 2016, were adopted in the study. An econometric approach of Ordinary Least Squares (OLS) was adopted to empirically analyze the collected data and the result revealed that non-oil gross domestic product impacted positively and significantly on economic growth while exchange rate had an inverse but significant nexus on economic growth in Nigeria, within the period covered in the study. However, non-oil export and investment impacted positively but insignificantly on economic growth in Nigeria. The study recommends the encouragement of increased productivity in the real sector as well as the adoption of stable and favourable exchange rate policies by the government in order to accelerate economic growth in Nigeria.

economic diversification and economic growth: evidence from nigeria

In this work, the researchers examine and attempt an answer to the big question; to what extent can Nigeria gain from diversifying the economy? In doing this, the researcher employed time series data spanning about thirtyone years' period (1980 -2011). Using the error correction mechanism (ECM), the result points to the fact that, Nigeria could tap from her largely untapped trade potentials for sustained gains, both in the short run and long run. Our findings indicate the fact that this can greatly be achieved through conscious efforts at diversifying the economy, encouraging large-scale industrialization of the non-oil (real) sector of the economy, emphasizing deepening technology in every trade and investment discourse, sustaining the recent improvements in the agricultural sub-sector, amongst other factors. JEL Classification: B10, C33 F43, F10, L81, L98

ASSESSING THE RELATIONSHIP BETWEEN DIVERSIFICATION OF NON-OIL EXPORT PRODUCT AND ECONOMIC GROWTH IN NIGERIA

The study investigates the relationship between diversification of non-oil export products and economic growth in Nigeria from 1981 and. The study examines the significant role of non-oil export product on real economic growth which the previous studies might have ignored and the aggregate non-oil exports product data used by them might bias their conclusions. In achieving the objectives of the study, Ordinary Least Square Methods involving Error correction mechanism, co-integration, over-parametization and parsimonious were adopted. Johansen Co integration test reveals that the variables are cointegrated which confirms the existence of long-run equilibrium relationship between the variables. Thus, this suggests that all the variables tend to move together in the long run. The study reveals that the there is significant relationship between diversification of non-oil export and economic growth in Nigeria during the period. This was evident in the study that the policies on non-oil products during the period in Nigerian do not sufficiently encourage non-oil export, thus reduce their contributions to growth. This is because the study reveals that agricultural and manufacturing components of non-oil export has positive and significant relationship with economic growth while solid minerals components has negative and insignificant relationship with economic growth in Nigeria. This study therefore recommend that government should enforce non-oil export policies towards resuscitating the failing non-oil export industry. The study among other things encourages the government to strengthen the legislative and supervisory framework of the non-oil products in Nigeria and diversify the economy to ensure maximum contributions from all faces of the subsectors to economic growth of Nigeria.

Did Diversification Impact Economic Growth in Nigeria in the Last 20 Years of Democratic Government (1999-2019)? A Vector Error Correction Model

Journal of Economics and Sustainable Development, 2020

Diversification of the Nigerian economy from oil-based to other non-oil sectors has become a recurrent economic solution to the growing challenges associated with the Nigerian economy. For the past 20 years of uninterrupted democratic government in Nigeria, the successive federal governments have focused on the development of the agricultural sector as a credible option for diversification, partly for the past positive roles of the agricultural sector in the Nigerian economy before the discovery of oil. Using the multivariate vector autoregressive (VAR) model on the data obtained from 1999 to 2019, this study applied the vector error correction (VEC) model to determine the impacts of diversification of the Nigerian economy on economic growth, focusing on the manufacturing and the agricultural sectors. To determine the underlying impact of the democratic experience in Nigeria with diversification, we utilised the political rights of the population as a proxy variable. The empirical results showed that there exists cointegration among the variables used to represent the manufacturing and the agricultural sectors, political rights, and per capita gross domestic product (GDP) growth rate within the Nigerian economy. The manufacturing sector has a positive impact on the growth of the Nigerian economy; however, the agricultural sector and the political rights of the Nigerian people have adverse effects on the real GDP growth rate, in the short run. The Granger Causality tests found no evidence of causality among the variables. This study concludes that the diversification policy of the Nigerian government should be multifaceted and that the political rights of the population are essential for the realisation of the diversification goal.

Identifying Domestic Macroeconomic Drivers for Economic Diversification in Nigeria

DRY Journal of Economics and Finance, 4(1), 1-8, 2019

Evidences in the literature show that Nigeria's consumptionist nature as well as its heavy dependence on crude oil income streams, have created room for growing unemployment, inflation and poverty rates as well as the recent shrink in its GDP growth rate. More so, the unpredictable movements in global oil price demonstrate the need for Nigeria to diversify its revenue streams in order to remain relevant and ranked amongst the vigorous economies of Africa. Based on the United Nations Industrial Organization (UNIDO)/World Bank success yardsticks and with its theoretical framework rooted in the endogenous growth model, this paper interrogated the domestic macroeconomic drivers of economic diversification in Nigeria. Employing time series for the period 1981 to 2016 data from the World Development Indicators, the study found that the drivers of economic diversification were improved infrastructure, increased credit from financial sector, reduction in lending rate and increased domestic investment while deterrents of diversification were over dependence on natural resources, trade openness, school enrollment, exchange rate depreciation and the size of the economy. We recommended deliberate and conscious policies to reduce the over dependence of the economy. These include fiscal federalism (aimed at eliminating non-inclusive growth) and increased transparency in the extractive industry. We also recommended increased investment in infrastructure (aimed at reducing transmission and distribution losses) and developments in the financial sector (so as to make cheap credit facilities available to domestic investors).

EXPORT DIVERSIFICATION AND ECONOMIC GROWTH IN NIGERIA: AN EMPIRICAL ANALYSIS

This study examined the short-run and long-run relationship between export diversification and economic growth in Nigeria using an augmented Cobb-Douglas Production function using time-series data from 1981 – 2014. The results reveal that labour force participation rate has a negative but significant relationship with economic growth. The ratio of oil exports to total exports also has a negative and insignificant relationship with economic growth. It is also seen that gross fixed capital formation has a positive and significant relationship with economic growth whilst export diversification index has a positive but insignificant relationship with economic growth. In terms of elasticity, it was seen that on average, ceteris paribus, a percentage rise in the ratio of oil exports to total exports results in a 0.83% fall in per-capita GDP. This could be as a result of ineffective value chains linking the oil and gas industry to the real economy. Hence this suggests that the exports from the oil sector is not linked to economic growth in the country. Hence policy efforts should be driven at improving the linkages between the oil sector and the economy. The results also suggest that export diversification (horizontal and vertical) plays an important role in economic growth of Nigeria. Hence this study recommends promoting both horizontal and vertical export diversification. In terms of horizontal exports diversification, exports from processed sectors such as agriculture, manufacturing, textile as well as minerals and steel should be encouraged. In terms of vertical export diversification, this paper also recommends that the government should look within the oil sector itself and vertically restructure it by harnessing the numerous by-products (over 6,000) accruable from crude oil and gas.

Diversification of Non-Oil Export Product as a Precondition for Acceraleted Real Economic Growth in Nigeria

The study investigates the diversification of non-oil export products as a precondition for acceraleted real economic growth in Nigeria 1981 and 2014. The study examines the significant role of non-oil export product on real economic growth which the previous studies might have ignored and the aggregate non-oil exports product data used by them might bias their conclusions. In achieving the objectives of the study, Ordinary Least Square Methods involving Error correction mechanism, co-integration, over-parametization and parsimonious were adopted. In testing for the time series properties, the evidence from estimated economic models suggests that all the variables examined are stationary at first difference I(I) using the Augmented Dickey-Fuller (ADF) and Phillips-Perron. Besides, Johansen Co integration test reveals that the variables are co integrated which confirms the existence of long-run equilibrium relationship between the variables. Thus, this suggests that all the variables tend to move together in the long run. The study reveals that the implication of diversification of non-oil export product on the economic growth was moderate and not all that heartening as a unit increase in non-oil export product impacted positively by 38% on the productive capacity of goods and services in Nigeria during the period. This was evident in the study that the policies on non-oil products during the period in Nigerian do not sufficiently encourage non-oil export, thus reduce their contributions to growth. This study therefore predicts an imminent collapse of the Nigerian non-oil sector in the nearest future if immediate remedial measures are not taken to strengthen the sector. The study among other things encourages the government to strengthen the legislative and supervisory framework of the non-oil products in Nigeria and diversify the economy to ensure maximum contributions from all faces of the sectors to economic growth of Nigeria.

Diversification and Economic Development in Emerging Economies: The Nigerian Experience

INTERNATIONAL JOURNAL OF ECONOMICS AND FINANCIAL MANAGEMENT

This study seeks to investigate the relationship between diversification and economic development in emerging market economies, using the Nigerian scenario. The study employed annual time series data sourced from the Central Bank of Nigeria and World Development Indicators. Economic diversification was represented by diversification index while economic development was proxy by per capita GDP. Autoregressive Distributive Lag (ARDL) and granger causality estimation techniques were used for the analysis. It was revealed that long run relationship exists among the variables in the estimated model. The granger causality results showed that no bidirectional causality was found between diversification index and per capita GDP. The bound test results showed that a long run relationship exists among the variables in the estimated equation. This signifies the relevance of these variables in promoting economic development in Nigeria. The study recommends that; the government should diversify ...

Economic Diversification: Imperative for Trade and Industrial Policies in Nigeria

Timisoara Journal of Economics and Business

The sharp and continuous decline in crude oil prices since the mid-2014, along with the lackluster efforts at diversifying the sources of revenue and foreign exchange in the economy, incontrovertibly led to the recession that greeted Nigeria in the second quarter of 2016 as manifested by fiscal crisis. Hence this study examines the imperative of economic diversification in trade and industrial policies in Nigeria. In order to characterize the pattern of trade and industrial transformation in the diversification process, we adopted the augmented version of Kaldor’s first law which establishes a link between manufacturing output and economic growth. Based on annualized secondary time series, spanning from 1970 to 2015, obtained from the CBN statistical bulletin of various years, the study employed the contemporary econometric techniques of cointegration and error correction mechanism, within the framework of the Autoregressive Distributed Lag (ARDL) model as proposed by Pesaran et al ...

Economic diversification in Nigeria: The Role of Agriculture and Manufacturing Sector

INTERNATIONAL JOURNAL OF RESEARCH IN ELECTRONICS AND COMPUTER ENGINEERING A UNIT OF I2OR, 2019

Economic diversification has been regarded as a major tool for sustainable growth and development in developing countries which suffers from low domestic investment. This is particularly essential in country like Nigeria that depends solely on oil revenue or oil export as the major source of foreign exchange earnings. Thus, this research investigated the role of agriculture and manufacturing sector as a tool for economic diversification and sustenance in Nigeria, with emphasis on how rising investment in agriculture sector and modernization of the sector can improve the economic growth of Nigeria. To achieve the objectives of the study, the study employed Auto Distributed Lag Model (ARDL) to investigate the impact of non-oil export on Nigeria economic growth, role of investment in agriculture sector and credit availability in the manufacturing sector in driving economic growth both in the short-run and long-run. The result of the time series revealed that non-oil export have positive significant impact on Nigeria economic growth in both the shortrun and longrun. The implication for the findings is that there is urgent need for massive mobilization of local financing and creation of institutions that are transparent enough to encourage large scale investment in the agricultural sector. The sector can be strengthened through provision of soft loans, subsidized costs of inputs and machines and strengthening farmers' capacity on marketing and exportation of their outputs.