THE IMPACT OF NON-OIL REVENUE ON ECONOMIC GROWTH IN NIGERIA (2001 – 2015)

ABSTRACT Over the years, the non-oil sector of the Nigerian economy such as agriculture, manufacturing and other businesses which could generate funds in the form of tax revenues have been neglected due to the boom in the oil revenue in the past. The study aimed at examining the impact of non-oil revenue on the economic growth in Nigeria. The objectives of the study are to examine the impact of agricultural revenue, manufacturing revenue and Value Added Tax revenue on the Nigerian Economy for the period 2001 – 2015. The non-oil revenue variables analyzed are agricultural revenue, manufacturing revenue and value added tax revenue which are the independent variables while Real Gross Domestic Product Proxy for economic growth is the dependent variable. Historic descriptive research method was used in this study and data were sourced from Central Bank statistical Bulletin. The hypotheses were tested using Augmented Dickey Fuller (ADF) Unit Root test, Johansen Co-integration test and Ordinary Least Square Method involving regression technique. The result shown that agricultural revenue, manufacturing revenue and Value Added Tax revenue have significant impact on economic growth in Nigeria for the period under study. It was recommended that the government should diversify and sustain its policies on agricultural sector. Also, the government should give tax holiday to manufacturing sector in Nigeria for increased production and finally, government should increase VAT base by incorporating many other items into the VAT net.

Key words: Manufacturing, Agricultural, VAT.     

TABLE OF CONTENTS

Title page                                                              i

Approval page                                                               ii

Dedication                                                             iii

Acknowledgement                                                  iv

Abstract                                                                v

Table of contents                                                    vi

CHAPTER ONE

INTRODUCTION

• Background of the study 1
• Statement of the problem 4
• Objectives of the study 5
• Research questions 6
• Research hypotheses 6
• Scope of the study 7
• Significance of the study 7
• Limitation of the study 9
• Definition of terms 10

CHAPTER TWO

REVIEW OF RELATED LITERATURE

2.1  Historical Background                                       11

2.2  Sources of Government revenue                        16

2.3  The significance of economic growth                  25

2.4  The need for non-oil sector development            29

2.5  Imperative of Non-oil exports in Nigeria’s

Economic growth                                             37

CHAPTER THREE

RESEARCH METHODOLOGY

3.1  Research design                                              41

3.2  Methods of Data Collection                                41

3.3  Techniques of Data Analysis                              42

3.4  Model Specification                                          43

CHAPTER FOUR

PRESENTATION, ANALYSIS AND INTERPRETATION OF DATA 

4.1  Presentation of Data                                        44

4.2  Test of Hypotheses                                                 50

4.3  Discussion of Findings                                      52

CHAPTER FIVE

SUMMARY, CONCLUSION AND RECOMMENDATIONS

5.1  Summary of Findings                                       54

5.2  Conclusion                                                      55

5.3  Recommendations                                           56

References                                                      58

1.1  Background Of The Study

Prior to the discovery of oil in Nigeria, Agriculture was the mainstay of the economy. Agriculture was the highest earner of foreign exchange for the country. Nigeria’s export earnings increased from N339.4 million in 1960 to N14,077 million in the 1980’s (Oladipo, 1998). Nigeria was also largely self-sufficient in the area of food production. Nigeria is well known in the production of cash crops like groundnut, cocoa, rubber, cotton, millet, palm oil etc and there is a readily available market for these products outside the shores of the country. Nigeria is also blessed with fertile land and good climatic conditions which serve as an added advantage over its counterparts, (Okunnu, 2008).

1.2  Statement Of The Problem

The performance of the export sector was not impressive within the period in review. Rather the earnings from the oil sector has an impact on the poor performance of non-oil sector which has resulted to a number of economic problems being faced by the country.

The total oil revenue generated between 2001 and 2009 amounted to N34.2 trillion while non-oil was N7.3 trillion representing 82.36% and 17.64% respectively (CBN statistical bulletin, 2009). This is a clear indication that the dependency on oil is high and therefore caused a neglect of the non-oil sector and then leading to the low level of economic activities. Some of these problems include rising cost of goods and services (inflation), non-payment of salaries of public and civil servants, loss of jobs (unemployment), decayed infrastructure, poor security, poor power supply and others. The study is therefore intended to examine the impact of non-oil revenue on the economic growth in Nigeria.

1.3  Objectives Of The Study

The general objective of the study is to examine the impact of non-oil revenue on the economic growth in Nigeria.

The specific objectives include:

• To find out whether or not there is a significant impact of agricultural revenue on economic growth in Nigeria.
• To determine the impact of manufacturing revenue on economic growth in Nigeria.
• To determine the impact of value Added Tax (VAT) on economic growth in Nigeria.

1.4  Research Questions

The following research questions are formulated as a basis for effective conduct of this research and in line with the objectives of the study;

• To what extent do the earnings from the agricultural sector contribute to economic growth in Nigeria?
• To what extent does manufacturing revenue impact on the economic growth in Nigeria?
• How far does value Added Tax (VAT) revenue impact on economic growth in Nigeria?

1.5  Research Hypotheses

In line with the objectives of the study, the following hypotheses are formulated:

Ho:  Agricultural revenue has no significant impact on economic growth in Nigeria.

Hi:   Agricultural revenue has a significant impact on economic growth in Nigeria.

Ho:  Manufacturing Revenue has no significant impact on economic growth in Nigeria.

Hi:   Manufacturing Revenue has a significant impact on economic growth in Nigeria.

Ho:  Value Added Tax (VAT) has no significant impact on economic growth in Nigeria.

Hi:   Value Added Tax (VAT) has a significant impact on economic growth in Nigeria.

1.6  Scope And Limitations Of The Study

The study covers the period of 2001 – 2015. It intends to examine the impact of non-oil revenue on the economic growth in Nigeria for the period of 15 years.

1.7  Significance Of The Study

This study is so important that it cannot be ignored.

• It will add more knowledge to government on the impact of non-oil revenue on the economic growth in Nigeria.
• The study itself is giving an assurance that it is not meant to create problems rather to solve them.
• The use of this study will add more value to the government and as well make them understand the risk in depending mainly in oil revenue.
• It will enlighten the public more and as well make them understand the role non-oil revenue plays in the growth of the economy of Nigeria.
• The researcher himself will gain knowledge from this work. The study is also a best for the award of the higher national Diploma in Banking Finance Department of Abia State polytechnic, Aba.

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