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The Economics and Finance Letters

June 2020, Volume 7, 1, pp 13-22

Nexus between Non-Oil Sectoral Contribution and Economic Growth in Nigeria 1981-2018

Akanimo Ernest Usoro

,

Wasiu Akintunde Yusuf

,

Bartholomew O. N. Okafor

Akanimo Ernest Usoro 1

Wasiu Akintunde Yusuf 2 Bartholomew O. N. Okafor 2 

  1. Central Bank of Nigeria (CBN) HQRT, Abuja Nigeria. 1

  2. Economics Department, Nile University of Nigeria, FCT Abuja, Nigeria. 2

Pages: 13-22

DOI: 10.18488/journal.29.2020.71.13.22

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Article History:

Received: 22 October, 2019
Revised: 26 November, 2019
Accepted: 30 December, 2019
Published: 24 February, 2020


Abstract:

Nigeria has the largest economy in Africa and has the potential of rising through the world rankings to be among the top economies in the world. To achieve this however, diversification from over dependence on crude oil is required. Nigeria’s intrinsic potential lies beyond oil; harnessing this potential has become an imperative given the volatility of oil prices. This study identifies the non-oil sector as a priority sector with the most dominant transmission links to the overall economy. This sector in the medium-to-long term is key to boosting employment, reducing poverty and improving domestic food security. Therefore, the nexus between non-oil sector contribution and Nigeria economic growth is investigated, vis-a-vis the effect of government’s increased focus and investment in this sector. The study employed Autoregressive Distributed Lag (ARDL) model and Vector Error Correction Model (VECM). The reason for using this model is that it is simple and can be applied easily without consideration for the stationarity of the variables (at level or at first difference). The results confirmed the short-run relationship between the variables where non-oil revenue immediately impact the GDP growth of Nigeria by 8.49%. The study then conclude that the non-oil sector is crucial to the economic growth of Nigeria and therefore suggested increased government investment in the non-oil sector as well as strengthening of institutions.
Contribution/ Originality
This study provides a better understanding of the non-oil sector and the factors that enhances its ability to function at full capacity as well as the dangers that the over reliance on oil poses to the nation.

Keywords:

ARDL, Non-oil, Stationarity test, VECM.

Reference:

Akande, M. and O.-B. Adeyinka, 2015. Diversification of the Nigerian economy towards a sustainable growth and economic development. International Journal of Economics, Finance and Management Sciencess, 3(2): 107-114.Available at: https://doi.org/10.11648/j.ijefm.20150302.15.

Bahmani-Oskooee, M. and A. Nasir, 2004. ARDL approach to test the productivity bias hypothesis. Review of Development Economics, 8(3): 483-488.Available at: 10:1111/j.1467-9361.2004.00247.x.

Fasanya, I.O. and A.E. Ogundare, 2018. Trivariate analysis of oil revenue, government spending and economic growth in Nigeria. OPEC Energy Review, 42(2): 107-122.Available at: https://doi.org/10.1111/opec.12124.

Manasseh, C.O., F.C. Abada, J. Ogbuabor, O. Okoro, A.E. Egele and K.C. Ozuzu, 2019. Oil price fluctuation, oil revenue and well being in Nigeria. International Journal of Energy Economics and Policy, 9(1): 346-355.

Micheal, A. and S. Gbadebo, 2016. Economic gift source of diversifying Nigerian economy for economic growth and economic development sustainability. Journal of Economics and Sustainable Development, 7(11): 34-42.

Nwankwo, O., 2015. Diversification of non-oil export product as a precondition for accelerated real economic growth in Nigeria. International Journal of Managerial Studies and Research, 3(7): 104-112.

Nwanne, T., 2014. Assessing the relationship between diversification of non-oil export product and economic growth in Nigeria. European Journal of Accounting, Auditing and Finance Research, 2(10): 136-146.

Ogundipe, O., P. Ojeaga and A. Ogundipe, 2014. Oil price and exchange rate volatility in Nigeria. Journal of Economics and Finance (IOSR), 5(4): 01-09.

Okonkwo, I. and N.M.-F. Madueke, 2016. Petroleum revenue and economic development of Nigeria (1980 –2013). IOSR Journal of Polymer and Textile Engineering, 3(2): 39-55.

Omojolaibi, J.A., 2013. Does volatility in crude oil price precipitate macroeconomic performance in Nigeria? International Journal of Energy Economics and Policy, 3(2): 143-152.

Onuorah, A., 2018. Role of non oil exports in the economic growth of Nigeria. Journal of Emerging Trends in Economics and Management Sciences, 9(3): 132-140.

Oriakhi, D. and I.D. Osaze, 2013. Oil price volatility and its consequences on the growth of the Nigerian economy: An examination (1970-2010). Asian economic and Financial Review, 3(5): 683-702.

Peasaran, E.A., 2001. Bound test and ARDL cointegration test. Journal of Applied Econometrics, 16(3): 289-326.

Riti, J.S., H.D. Gubak and D.A. Madina, 2016. Growth of non-oil sectors: A key to diversification and economic performance in Nigeria. Public Policy and Administration Research, 6(3): 64-75.

Uzonwanne, M.C., 2015. Economic diversification in Nigeria in the face of dwindling oil revenue. Journal of Economics and Sustainable Development, 6(4): 61-67.

Statistics:

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Funding:

This study received no specific financial support.

Competing Interests:

The authors declare that they have no competing interests.

Acknowledgement:

All authors contributed equally to the conception and design of the study.

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