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IMPACT OF NON-OIL EXPORT ON THE ECONOMIC GROWTH OF NIGERIA (1986-2014)

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CHAPTER ONE

INTRODUCTION

  • BACKGROUND OF THE STUDY

Historically, Nigeria is largely an agrarian society; non-oil export (Agriculture) was the mainstay of the economy during the pre-colonial and colonial periods. Despite lack of modern farm implements which undermined the potential for large scale production, the sector was encouraging. Nigeria emerged in her first decade of her independence as a leading exporter of non-oil commodities like palm kernel, coal, tin ore, groundnut and the largest producer and exporter of palm oil. Nigeria was also the second largest producer of cocoa in the world. During that period, subsistence farmers collectively produced over 90% of the food needs and 70% of Nigeria’s export earnings which have a dominant share of the country’s GDP.

However, with the discovery of crude oil in a commercial quantity, this paved way for the gradual neglect of Agriculture by successive governments especially in the 1970’s oil boom. Crude oil became the dominant source of revenue while agricultural production nose-dived considerably. From over 60% in the late 1960s, the contribution of non-oil exports to the GDP plummeted to 22.2% in the 1980s. Recently many farmers engage in farming at subsistence level only. This in turn has contributed to food insufficiency and subsequently has led to importation of food to supplement local production.

Nigeria has also lost its place in non-oil exports even in areas it once dominated. In palm oil supply for example, Nigeria now produces a meager 1.7% of total world production which is inadequate for local consumption that is put at about 2.7%. Malaysia, a country Nigeria gave palm oil seedlings, has overtaken her as one of the largest producers and leading exporter of palm oil. Malaysia and Indonesia produce now over 83% of total world palm oil (Ayodele, 2010).

According to Ogunkola, Bankole and Adewuyi (2006) and Okoh (2004), the situation later changed, crude oil now constitutes 96% of total exports as against 4% for non-oil exports in Nigeria (a negative trend). The performance of the non-oil sector leaves little or nothing to be desired Crude oil is the major export because of huge revenue it generates which has led the    economy to focus on petroleum sector while ignoring the other sectors that funded the oil sector at its discovery, as well as the potential revenue they can generate. Nigeria since the 1970s has been a mono –cultural economy relying heavily on oil as its major income. The implication is that the sustainability of the economy is at the mercy of the oil revenue, which for most part, has been volatile, Enoma and Mustafa (2011) cited by Onodugo, Ikpe and Anowor (2013). The major fallout of this fragile structure of financing Nigerian economy is situation where the economy has been growing without creating jobs nor, reducing poverty (Onodugo, 2013). An  explanation to this economic paradox is that the oil sector which produces over 90% of the export earnings in Nigeria are in the hands of less than 1% of the Nigerian population dominated by expatriates and members of the political class who control production and proceeds respectively (Onodugo, Ikpe and Anowor 2013).

This research is aimed at determining if the contribution of non-oil exports is significant to the Gross Domestic Product (GDP) of the economy and to what extent, now that there is a decline in price of crude oil globally.

 

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