CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND OF THE STUDY

There is a number of reasons for a country to be concerned about its

rate of economic growth. Economic growth is desired by both affluent

and non-affluent economies. Economic growth is the desire for higher

levels or real per capital income real output which must grow faster

than the production of the economy in question. Economists policy-

makers public and private sectors work ceaselessly towards attaining

economic growth by the use of development and growth models and

policies. Among the policies used are trade policy (Import and export

policies monetary policy exchange rate policy fiscal policy market

etc). In this study the non-oil exports and economic development in

Nigeria will be examined.

Non-oil exports are the products which are produced within the country

in the agricultural mining and querying and industrial sectors that are

sent outside the country in order to generate revenue for the growth of

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the economy excluding oil products. These non-oil export products are

coal cotton timber groundnut cocoa beans etc.

Today as in the past the growth of Nigerian economy remains partly

dependent upon increasing productivity of the agricultural sector.

Helleiner (2002:124) states that no matter how much development and

structural transformation achieved it will remain its relative dominance

in the economy to many decades to come. Precisely it is from

agricultural exploits that the economy has received its principal stimulus

to economic growth.

Agricultural sector can assist through the exportation of principal

primary commodities which will increase the nation's foreign earnings

and which can be used to finance a variety of development projects.

The growth of the agriculture sector can make a substantial contribution

to the total tax revenue as well as having some implications for inter-

sectional terms of trade. Also in the area of capital formation the

savings generated in this sector can be mobilized in development

purposes while increase in rural income as a result of increasing

agricultural activities can further stimulate the product of the modem

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sector. The needs of the agricultural sector could indirectly influence the

creating of additional infrastructures which are indispensable to rapid

economic development. (Olaloku. 2001:13).

Another non-oil export to be dwelled on is industrial sector. It is the

fastest growing sector in Nigeria economy. It comprises of many

manufacturing and mining. Nigeria has manufacturing base prior to

1960 and shortly after.

The problem was due to lack of modern technology skills managerial

experience of complex organizations and financial back -up. The

problem was further aggravated by the colonialists' merchants

convincing arguments on the goodness of comparative cost advantage.

Nigerians were coaxed into concentrating their efforts in the production

of primary agricultural products and exporting them to the metrological

industries in Europe.

Our industrial sector took off after independent relied on satellite firms

representing British interest. The bank sector which is constellation of

colonial banks branches and some companies that were able to invest

in manufacturing were the multi-national that have access to funds

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technology and managerial expertise. This greatly hindered the

progress of indigenous entrepreneurs.

The Nigerian manufacturing sector has been described by Ikediala

(1983) as consisting of more assembling plants. He says that the

implication of this is that the industries have very little backward linkage

in the economy since the bulk of the inputs is imported thus the

manufacturing sector depends on imported raw-material the extent of

42%. The capacity utilization of manufacturing industry has always

been low in this country. The reasons as put by CBN (1998) are not

unconnected with raw materials scarcity consumers resistance due to

high prices increase in cost of manpower. Others mentioned are

equipment breakdown due to poor technology lack of spare parts. Time

lags between when inputs are ordered for and when they arrive cash

flow problems in industries becomes a permanent features.

The Nigerian Civil war brought about the deterioration of the oil palm

grooves and plantation were abandoned and little if any new planting

was undertaken. As a result of that the output of palm oil and palm

kernel declined drastically. But according to Onwuka (1985) the

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problems of palm products are due to the stagnation in the production

of this commodity which is partly explained by the presence of wild

palm trees which are of low-yield quality and the difficulties

experienced in harvesting them. In addition the old system of pricing

which guarantees low producer prices for palm produce discourage

substantial investment from being made for further production of this

product. Also the problem marketing boards cannot be over looked.

Marketing board is an institution set up by the government with the

exclusive right to buy and sell certain agricultural products.

They purchase some products locally export sales are made through

the Nigerian marketing company which is jointly owned by all state

marketing. One of the functions of the marketing board is to stabilize the

prizes or our cash crops and hence creates stability of income for

farmers and to accumulate funds for development purposes. But the

operation has failed to provide incentives to farmers to increase their

input. Also the producers paid unnecessary tax and they took from the

producers some money which should have gone to them as income.

They thus reduced the amount of capital available to the producers.

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This criticism according to Adenira (1999) made the Federal

Government to reform the Marketing Board System with a view to

increase producers' prices and income. He said that the essential

features of the new reform are the prices which are now fixed by a

single authority while producer taxation (export duty and produce sale

tax) has been abolished. Another major innovation in the system is the

creation of commodity boards with responsibility of marketing specific

products whenever they are produced in the country. These boards are

likely to reduce administrative problems and be more economical

compared with all oil-produced state Marketing Boards previously in

existence.

The major fault of the successive government that are supposed to

sustain this sector through the building of macro-economic structures

and incentives diverted their attention away from agriculture. The result

was sharp in the export/import equation as country started importing

even palm oil that was hitherto imploring from Nigeria. The situation

was becoming worrisome thus by 1975 there were attempts to

recapture the lost of glory of agriculture. General Olusegun Obasanjo's

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operation feed the nations becomes the first real expressed official

attempt in this direction. It was followed by the establishment of two

River Basin Development Authorities in 1977. By 1978/1979 the federal

Government made budgetary provision to establish 4000 hectares of

mechanized farms in each of the 19 states then by 1979 there was a

re-launch of "operation feed the nation" with a new tag "Green

Revolution" with various committees set for its implementation (Oko

1999).

If the efforts of the two leaders-General Olusegun Obasanjo and Alhaji

Shehu Shagari's regimes could have brought vigor to the agricultural

sector the activities of the sic-commodity boards did not assist much..

Oko said that fixing export product prices without recourse to cost

inputs discourages agriculture therefore remained slow because food

demand was growing at the rate of 3.5% per in the 80's while

agricultural output was crawling at 11 %. Between 1990 and 1998 GDP

in agriculture declined to 6.2%. Then the distributions of agriculture

inputs to producers were neglected infrastructure facilities like

motorable feeder roads and irrigation facilities etc made it difficult to

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increase agricultural production. CBN mandate to bank with regard to

bank loans to agriculture as priority sector for preferential leading was

floated.

1.2 STATEMENT OF THE PROBLEM

Nigeria remained a net exporter of agricultural products between 1960

and 1970. Goods exported included palm oil palm kernel cotton

groundnut etc. agriculture through export of non-oil products has a rosy

record contribution up to 80% of the gross domestic product and

providing employment for over 70% of the working population. But

recently that has been a steady decline in terms of agricultural product

to export and an abandonment of sector by a large percentage of the

work force.

But the story of its decline is as pathetic as its impact on industry that

relied heavily on the sector for raw material. Thus the decline come

with surge of revenue from oil (oil export). But the discovery of crude oil

alone cannot be held responsible completely for the misfortunes or

decline of the agricultural sector. The policy instruments put in place by

successive government were more of lip service than concrete action.

The creation of Marketing Board contributes greatly to the decline of

non-oil export since the Board has the dole right to export the

commodities. It is also pertinent to say that fixing of export product

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prices by Marketing Board discourage further private investments in the

sector. Furthermore the sector suffer from inadequate credit facilities

they have no security to back-up their loan applications. Those who are

lucky to be given loans do not make proper use of them. Even

existence services were neglected infrastructure facilities not provided

CBN directives on agricultural loans floated.

1.3 OBJECTIVE OF THE STUDY

This research has a particular focus that aims at examining the causes

of growth in government revenue using non-oil revenue of the

government as an instrument. The non-oil revenue spanning the range

of products as agriculture and manufacturing. The major objectives are

broadly defined as follows:

(a) To evaluate Nigerian's past and present non-oil exports effect in the

promotion of economic growth.

(b) To evaluate government policies or measures towards boosting non-

oil sectors contribution to the economy.

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(c) To evaluate the factors responsible for the decline in the

contributions of non-oil revenue to the economy.

(d) To make recommendations on the ways of improving the non-oil

sector

1.4 SIGNIFICANCE OF THE STUDY

1.4.1 The study of the contributions of non-oil export to the growth of

Nigeria economy is significant and important for this knowledge it will

enable the policy makers to formulate appropriate policies that will aim

at improving on the quote of the total revenue brought about by the non-

oil sectors of the economy. This study is also important and significant

in that it will examine the various ways of improving non - oil outputs.

This study will also evaluate the contributions of non - oil sector towards

raising the living standard of Nigerians with in the period under review

(1984- 2003).

Since not so much works have been done on the contributions of non-

oil exports to Nigerian economic growth this study will be of great

importance.

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1.5 SCOPES AND LIMITATIONS OF THE STUDY

This study is an attempt to evaluate and review agricultural products

and policies in the economy towards economic growth and

development in Nigeria. It intends to cover the periods between 1984

and 2003. It intends to evaluate the contributions of non-oil exports to

Nigerian economic growth and development.

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