This paper provides empirical evidence linking exports and foreign aid to international reserve accumulation. Country-specific data spanning from 1981-2015 on oil and non-oil exports and foreign aid in Nigeria were sourced from Central Bank of Nigeria Statistical Bulletin and analyzed using error correction mechanism (ECM) in addition to unit root and cointegration tests. As observed from the Augmented Dickey-Fuller test unit root, the variables are mixed integrated. Long run relationship was established amongst the series from the Johansen cointegration test result. The parsimonious ECM that lagged values of oil exports impact positively on foreign reserve holding. 1 percent increase in lag two of oil exports leads to 0.367 percent in the external reserve. Similarly, the first lag of non-oil exports is positively linked to external reserve. With 1 percent increase in non-oil exports, international reserve increases by 0.499 percent. The error correction estimate (-0.5099) indicates that the model is well behaved as any short run disequilibrium in the system is reconciled at the speed of 50.9 percent to achieve long run equilibrium position. On the basis of the findings, it is concluded that exports are helpful in boosting the foreign reserve holding in Nigeria. Thus, this paper recommends for the diversification of the export base in order to keep the foreign reserve holding on the path of rapid and sustainable growth.
Exchange Rate Variation and Non-Oil Exports in Nigeria: An Autoregressive Distributed Lag Approach (Published)
The paper examined the impact of exchange rate variation on the competitiveness of Nigerian non-oil exports using the Autoregressive Distributed Lag (ARDL) model after the diagnostic tests reveal that variables were integrated of different orders. The ARDL estimation showed the presence of a long run relationship between the variables in the model. The results revealed that a 1% increase in exchange rate variation, degree of openness and bilateral exchange rate (RER) which measured the competitiveness of the nation’s exports will cause a 14.67%, 63.21% and 7.49% reductions respectively in the volume of non-oil exports in the long run. The short run dynamics revealed that the variables above exerted a negative effect on the volume of non-oil exports from Nigeria. The GDP showed positive impacts on the volume of trade both in the short and long run. The study therefore recommended the vigorous pursuance of exchange rate stabilization policies in order to minimize variation in rates and improve the competitiveness of the nation’s non-oil exports as well as the imposition of slight restrictions on non-capital imports and consumables to reduce the effect of openness on the Economy.
Economic Integration, Incentives and Non-Oil Export Dynamics in Nigeria: An Empirical Evidence (Published)
This study is a response to the under-performing trend in the non-oil sector of Nigeria which is supposedly a catalyst for massive industrialization and rapid development concerns in a less developed country such as Nigeria. Arguments bordering on the perceived plausibility of trade liberalization and government incentives vis-à-vis non-oil export performance were empirically tested using contemporary econometric techniques of unit root test, co-integration test and error-correction mechanism. Results from the tests conducted revealed a one year positive lag relationship between variables such as foreign private investment, exchange rate, gross domestic product and non-oil export growth. Contrary to theoretical expectation, an inverse relationship was found to exist between a one year lag in agricultural credit guarantee scheme fund and non-oil export performance while, world gross domestic product exerted no significant relationship with non-oil export growth in Nigeria. However, the error correction model revealed a slow speed of dynamic adjustment from short-run to long-run equilibrium and as such, the study recommended among others, a re-examination of the agricultural credit guarantee scheme fund to ensure a positive contribution to non-oil sector development, increasing incentives that stimulate non-oil investment and also maintaining a favourable exchange rate. These policies, if implemented, will assist in unlocking the existing potentials in the Nigerian non-oil sector.