Impact of Export Diversification on Economic Growth in Nigeria

Abstract

The main objective of this study is to examine the impact of export diversification on economic growth in Nigeria. Annual time series data on GDP per capita, Theil export diversification index, gross fixed capital formation (for domestic investment), exchange rate and openness of the economy were the variables collected for the analysis for the period 1980-2017. Dummy variable for democracy was also constructed to test for the impact of governance on economic growth in Nigeria. To estimate the data, Autoregressive Distributed lag model, applying bounds test was adopted. The empirical results show that export diversification has positive but insignificant impact on economic growth in Nigeria both in the short run and long run. Similarly, domestic investment has positive impact on economic growth both in the short run and long run. However, its impact is significant only in the short run. Exchange rate has negative impact on economic growth in the short run but its impact in the long run is positive, showing instability in the exchange rate movements in Nigeria. Openness of the economy has negative impact on economic growth both in the short run and long run. However, its impact is significant only in the long run. Democracy dummy has positive but insignificant impact on economic growth both in the e short run and long run. Based on the findings,, it is recommended that the earnings from the oil sector should be channeled to the development of non-oil sectors such as agriculture and manufacturing in order to diversify the export base of the economy.