Export Earnings Instability and Economic Growth in Nigeria (1981-2014)

Abstract

This paper investigates the impact of export earnings instability on economic growth in Nigeria through the application of regression analysis. The study describes the trend of oil and non-oil export in Nigeria, examines the impact of export earnings instability on economic growth and identifies adequate policy measures and suggestions based on the research findings, towards reducing the undesirable effects of export instability in Nigeria. Secondary data from various sources were used in the study. Augmented Dickey-Fuller technique was adopted in testing Unit root property of the series. Using the Ordinary Least Squares regression method, the study first examines the impact of export earnings instability on economic growth with the aid of aggregated and disaggregated models. It further uses the Granger causality test to examine the direction of causality between GDP and export earnings (using the same aggregated and disaggregated models). From the result obtained in the regression of the disaggregated model, R 2 is 0.954. This indicates that oil and non-oil exports actually account for 95.4% of the total variation in economic growth during the years under study. A percentage increase in oil export will cause about 4% economic growth (0.042785), which is statistically significant at all levels. A percentage increase in non-oil export will cause an economic growth of about 10.4%, at 10 per cent level of significance. Also, with a positive and significant value of the intercept, the result indicates that GDP does not only depend on oil and non-oil export, as other variables affect the GDP. The F- Statistics 316.9, which is a measure of the joint significance of the explanatory variables, is found to be statistically significant as indicated by the corresponding probability value 0.0000, and the Durbin-Watson statistics of 1.90, which is in the neighborhood of 2 indicates that there is no autocorrelation. The Granger Causality test of the disaggregated model shows that both Oil and non-oil exports actually granger causes GDP. It also show that non-oil exports granger cause Oil exports. It was found that of all export earnings in Nigeria, oil export has stronger grasp in terms of economic growth compared with the non-oil exports. It was also found that export earnings, from both oil and the non-oil sectors, affects economic growth in Nigeria, and not otherwise. Thus policies geared towards the development of the oil and non-oil sectors will have a positive effect on the economy and thereby resulting to an increase in the gross domestic