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Product Category: Projects
Product Code: 00002169
No of Pages: 44
No of Chapters: 5
File Format: Microsoft Word
Price :
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ABSTRACT
The
decline of non-oil exports has had adverse effect on the economy. Since 1986,
the federal government has formulated policies to enhance non-oil exports, put
in place incentives and institutional support framework effective
implementation.
This
paper examines these policies to investigate the extent to which the exchange
rate can boost non-oil exports especially agricultural, manufactured and mining
exports. This paper is derived from the recognition that the country’s current
economic predicament is partly a product of her over reliance on the oil sector
for foreign exchange earnings. Hence, if non-oil exports can be expanded, it
would no doubt cushion the economy against the undesirable effects of
instability in the world market.
Finally,
improvement in non-oil production and export will occur only if there is
consistency and continuity of policies as well as political stability.
It
is on this note that this project was written.
TABLE OF CONTENTS
TITLE
PAGE
Certification-----------------------------------------------------------------------------------------
iii
Dedication
------------------------------------------------------------------------------------------
iv
Acknowledgement
---------------------------------------------------------------------------------
v
Abstract-----------------------------------------------------------------------------------------------vi
Table of Contents-----------------------------------------------------------------------------------vii
List of Tables
----------------------------------------------------------------------------------------x
CHAPTER ONE:
INTRODUCTION
1.1
Background to
study-------------------------------------------------------------------------1
1.2
Problem Statement
--------------------------------------------------------------------------6
1.3
Scope of the
Study---------------------------------------------------------------------------8
1.4
Objectives of the
Study---------------------------------------------------------------------8
1.5
Justification of
the Study-------------------------------------------------------------------9
1.6
Research
Questions------------------------------------------------------------------------10
1.7
Research
Hypothesis----------------------------------------------------------------------10
1.8
Research
Methodology--------------------------------------------------------------------11
1.9
Sources of
Data----------------------------------------------------------------------------11
1.10
Outline of
Chapters------------------------------------------------------------------------11
CHAPTER
TWO: LITERATURE REVIEW
2.1
Introduction---------------------------------------------------------------------------------13
2.2
Empirical issues---------------------------------------------------------------------------13
2.3
Types of
Exchange
Rate------------------------------------------------------------------16
2.4
Exchange
Rate Management in
2.5
Policy Changes Since 1994 and Non-oil
exports-------------------------------------18
2.6
Other Factors Affecting Non-oil
Exports----------------------------------------------20
2.7
Theoretical
Issues--------------------------------------------------------------------------23
CHAPTER THREE: THEORETICAL FRAMEWORK AND MODEL SPECIFICATION
3.1.
Introduction---------------------------------------------------------------------------------25
3.2.
Theoretical
Framework-------------------------------------------------------------------25
3.3.
Research
Methodology--------------------------------------------------------------------29
3.3.1 Method
Applied----------------------------------------------------------------------------29
3.3.2 Model
Specification-----------------------------------------------------------------------30
3.3.3 Theoretical
Expectation-------------------------------------------------------------------32
CHAPTER
FOUR: EMPIRICAL ANALYSIS
4.1
Introduction---------------------------------------------------------------------------------34
4.2
Presentation
of Regression Result-------------------------------------------------------35
4.3
Data
Analysis and Result-----------------------------------------------------------------36
4.3.1 Analysis of Regression
Result-----------------------------------------------------------36
4.3.2 Hypothesis
Testing------------------------------------------------------------------------37
4.4
Analysis
of the Structure of Non-oil Exports in
CHAPTER
FIVE: SUMMARY AND CONCLUSIONS
5.1
Summary Of
Findings---------------------------------------------------------------------46
5.2
Conclusion
and Recommendations------------------------------------------------------47
5.3
Limitation
to Study-------------------------------------------------------------------------49
5.4
Suggestion
for Further
Study-------------------------------------------------------------49
APPENDICES
1. Bibliography
2. Variables for Regression
Analysis
3. Correlation Matrices
4. Regression Result
LIST OF
TABLES
Title
Page
Table 4.1:
Table 4.2:Structure of
Table 4.3: Share of
CHAPTER ONE
INTRODUCTION
1.1. BACKGROUND OF STUDY
1.1.1. Exchange Rate Policy in
The Nigerian exchange rate policy was
largely a passive one before the inception of the Structural Adjustment
Programme (SAP), dating back to 1959 with the introduction of pounds that year.
Nigerian authorities’ failure to devalue its Nigerian pound in response to
devaluation of dollar in December 1971 resulted in the appreciation of the
Nigerian pound\ dollar exchange rate from $2.80- $3.80 to the naira pound.
The naira replaced
the pounds in 1973 when
During the most of 1973 the anchor currencies,
the dollar and sterling weakened considerably. The sustained weakness brought
into sharp focus the dilemma involved in the method of determining the exchange
rate of the Nigerian currency. This showed that a fixed relationship between
the Naira and any other currency could not be sustained if
1. It
was geared towards equilibrating the balance of payment in the short run
thereby influencing the relative price
structure in the domestic currency terms. This affected resource allocation in
the economy with further effect on the international trade.
2. It
was myopic as it was geared towards having a highly valued exchange rate with
the positive effect on imports and negative effect especially on non-oil
exports, rather than being geared towards long term consideration as long run
balance of payment viability.
The period beginning
from September 1986 marked the second phase of the exchange rate policy in
Thus in 1986, the Naira
was floated and
1.1.2. Non –oil
Exports Before Structural Adjustment Programme (SAP)
The objective of export promotion
efforts before SAP was largely to boost foreign exchange earnings; hence
promotion activities were concentrated mainly on primary commodities including
agricultural and mineral products. Import-substitution policy was pursued
without any well- defined objective of exportation of industrial products. To
worsen matters, as soon as the government began to realize the need for non-oil
export expansion and diversification, crude oil production and export assumed
prominence in the economy. Consequently, the policy of non-oil export promotion
was never taken seriously. These factors encouraged the sustenance of
anti-export bias policies such as overvalued exchange rates. As was officially
acknowledged in the second national development plan (FRN 1970), the government
was committed to expanding the export market base but it has not hitherto done
very much directly to encourage this process. Rather, government continued to
make statements of intentions regarding non-oil export promotion. In the fourth
national development plan (FRN 1981) for example, there is a statement that:
“Conscious efforts will be made
to diversify the economy away from overdependence on the petroleum sector. This
implies a deliberate policy to widen the basis of our public revenue and export
earnings. The export potentials of existing industries such as tyres, coal,
pulp, and paper, etc, and those of traditional exports like cocoa, groundnut,
palm produce, rubber, etc, will be actively exploited during the plan period”.
However, before the
fourth plan was launched, export promotion of major cash crops was done through
various forms including budget provisions, bank credit allocation, storage,
produce, financing, shipment and marketing facilities and setting up of the
Nigerian Export Promotion (NEPC) in 1976 (Uduebo 1993).
Although there were
all along clear statements of intentions to diversify the export structure, a
commitment process was clearly lacking.
1.1.3. Non- oil Exports Under Structural Adjustment Programme (SAP)
Conscious of the
strong need to diversify the sources of foreign exchange earnings and reduce
the excessive dependence of the economy on the export of crude oil, government
in 1986, stepped up the promotion of non-oil exports by instituting a package
of incentives spelt out in 1986 federal budget to aid production for export.
The structural adjustment Programme document stressed, among other things, the
need to diversify and shift emphasis from heavy dependence on the oil sector,
and ensure sustained favorable balance of payments. According to the document:
In
order to reduce dependence on the oil sector as the principal earner of foreign
exchange, the administration is deeply committed to promoting non-oil exports.
Although it is realized that the initial base of the non-oil exports has shrunk
considerably during the past decade, the government believes that the
correction of cost- price distortions through a realistic exchange rate,
combined with other positive export incentives and institutional reforms,
should make it possible for Nigeria to earn at least $1 billion from non-oil
exports by the end of the present decade (1990).
To accomplish the
non-oil export objectives of foreign exchange expansion, as well as product and
market diversification, the government moved in the direction of pursuing a
more consistent and comprehensive export promotion Programme. To this end, it
put in place a number of policy reforms and incentives. Two of these stand out
clearly, namely, the consequent deregulation of commodity prices, and the
establishment of the second tier foreign exchange market (SFEM). The market determination of exchange rates in
the SFEM was expected to produce a depreciation of the nominal exchange rate as
well as the real exchange rate facing exporters with over 90% devaluation of
the nominal exchange rate between 1986- 1992, and nearly similar percentage for
the real exchange rate. The depreciation has been an incentive to cash crop
producers as very high prices of agricultural products followed the spate of
depreciations. The euphoria of high Naira prices of agricultural products,
coupled with the liberalization of export trade and other export trade incentives,
led to the emergence of all sorts of exports with different motives scrambling
to partake in the foreign exchange earnings from export. The apparent romance
with export trade by individuals and firms became obvious three years later
(1989) when export business slumped.
1.2. PROBLEM
STATEMENT
A central goal of
The exchange rate is
the rate at which two national currencies exchange for each other. The non-oil
exports are products that are not identified as oil exports; they include
natural resources, agriculturally produced products, and manufactured products.
Examples are limestone, cocoa, coal, rubber; palm oil etc.
The exchange rate as
a policy plays an important role in international economic transaction for a
developing country that is highly dependent on trade. The price of a foreign
exchange plays a major role in the ability of the economy to attain optimal
productive capacity. Thus the attainment of a realistic exchange rate is an
important macroeconomic policy objective. The exchange rate as a price
incentive could be used to boost the export of non-oil products.
When the exchange
rate policy was adopted, it was to serve as a price incentive to increase the
volume of non-oil exports. When the rate of the domestic currency to the
foreign currency depreciates, this lowers the price of the non-oil exports
making it cheaper, which may increase the volume of the products being export.
The main problem of
interest in this study is to check the impact of the exchange rate policy on
non-oil exports and determine the extent to which the non-oil exports have
increased.
1.3. SCOPE OF THE STUDY
The
study will cover a period 34 years (1970-2004). This is to achieve a
comprehensive analysis of the impact of the exchange rate policy on non-oil
exports. This period witnessed various economic policies by the government such
as the economic stabilization act and the structural adjustment Programme which
has so much impact on the performance of this sector. It also covers the period
when the naira was over valued to the present period where it has been
devalued. Regression analysis will be needed to enable us to determine the
various factors included in the model.
1.4. OBJECTIVES OF THE STUDY
The main objective
of the study is to examine the extent to which the exchange rate policy can
boost non-oil experts especially exports of agriculture, manufactured and
mining products.
This project
aims at investigating or surveying the trends as well as the composition of
The discussion
of all these sections provides the background against which the impact of the
exchange rate policy on the non-oil exports is assessed. The last part will be
the summary and conclusions.
These objectives are further stated
as follows;
1.5. JUSTIFICATION OF THE STUDY
Despite the various
allocations and policies to the development of the non-oil exports sector, it
is yet to perform up to expectation. The volume of foreign exchange being
generated is either not enough or has fallen. This is due to the monoculture
nature of the Nigerian economy. Since the first Nigerian national plan, the
allocation to the non-oil exports like manufacturing sector has been increasing
with little impact being felt in the economic recovery.
There is over
dependence on one sector of the economy which needs diversifying. The desire to
find a realistic exchange rate for the domestic currency is an important macro
economic policy objective for a developing country highly dependent on trade.
Also the non-oil
exports of the economy have featured in the developmental strategies and plans
of many countries and this has been successful e.g. Newly Industrialized
Countries (NIC) or the Asian tigers and this has been very successful, this
necessitates for a study to be done in this area.
Since exchange rate
policy was adopted during the structural adjustment Programme (SAP) to boost
the non-oil exports, there is need to examine the effect of this policy on
non-oil sector. The interest of this study is to examine whether the exchange
policy in
1.6. RESEARCH QUESTIONS
The following are the research questions which
this project will answer.
1.7.
RESEARCH HYPOTHESES
a. Ho: Exchange rate
policy has no impact on non-oil exports
H1: Exchange rate policy has impacts on non-oil
exports
b. Ho: Real Gross Domestic Product, foreign capital inflow, interest
rate and inflation have no impact on non-oil exports.
H1: Real Gross
Domestic Product, foreign capital inflow, interest rate and inflation have impact
on non-oil exports.
1.8. RESEARCH METHODOLOGY
The methodology that will be applied will be
descriptive, analytic and investigatory and will include the use of data.
The econometric
method of ordinary least square estimation was selected because of the
advantage over others. Ordinary Least Square (OLS) estimates are used for the
study based on time series analysis because of its BLUE property. In essence,
the estimates of parameter arising from this technique will best linear
unbiased relative to other estimation techniques.
1.9. SOURCES OF DATA
The sources of data
will be from the Central Bank of
1.10. OUTLINE OF CHAPTERS
Chapter1:
Introduction
Chapter 2:
Literature Review
Chapter 3: Theoretical Framework and Model
Specification
Chapter 4: Empirical Analysis
Chapter 5: Findings, Recommendations and Conclusion
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