Abstract
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 multi-faceted and that the political rights of the population are essential for the realisation of the diversification goal. Keywords: Diversification, Nigeria, GDP, Cointegration. DOI: 10.7176/JESD/11-22-02 Publication date: November 30 th 2020
Highlights
The Nigerian economy is dominated by the oil sector, to a considerable extent
The specific objectives of this study were as follows: [i] To examine the impacts of manufacturing-led diversification on the Nigerian economic growth. [ii] To investigate the linkage between the diversification of the Nigerian economy via the agricultural sector and economic growth. [iii] To determine the implications of the democratic effects, using the political rights of the population, on diversification and long-term economic growth of Nigeria. [iv] To forecast the magnitude and pattern of variation in the manufacturing and agricultural sectors explained by the real gross domestic product (GDP) growth rate and vice versa
This paper examined the relationship between diversification and the growth of the Nigerian economy during the first 20 years of uninterrupted democratic government in Nigeria
Summary
The Nigerian economy is dominated by the oil sector, to a considerable extent. This sector has continued to play pivotal roles throughout the chequered history of Nigeria, since its discovery in 1956. Budgetary allocation and fiscal planning of the Nigerian economy depend on the flow of oil rents to the government income, which has adverse economic effects (Sachs and Warners, 1999; Sevil, 2017; Collier and Hoeffler, 2005; Mehlum et al, 2014). There is considerable debate in the economic literature concerning the impacts of oil rents; evidence suggests that its impacts on Nigeria are not entirely adverse. The change to democratic government resulted from the assumption that the military government lacked the required economic plans to transform the Nigerian economy from an oil-based to a multi-sectoral economy. The military government abstained from any attempt to diversify the Nigerian economy so as not to tamper with the ‘free money’ which the crude oil provided
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