CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
There is a number of reasons for a country to be concerned about its
rate of economic growth. Economic growth is desired by both affluent
and non-affluent economies. Economic growth is the desire for higher
levels or real per capital income, real output which must grow faster
than the production of the economy in question. Economists, policymakers,
public and private sectors work ceaselessly towards attaining
economic growth by the use of development and growth models and
policies. Among the policies used are trade policy (Import and export
policies, monetary policy, exchange rate policy, fiscal policy, market
etc). In this study, the non-oil exports and economic development in
Nigeria will be examined.
Non-oil exports are the products, which are produced within the country
in the agricultural, mining and querying and industrial sectors that are
sent outside the country in order to generate revenue for the growth of
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the economy excluding oil products. These non-oil export products are
coal, cotton, timber, groundnut, cocoa, beans etc.
Today, as in the past, the growth of Nigerian economy remains partly
dependent upon increasing productivity of the agricultural sector.
Helleiner (2002:124) states that no matter how much development and
structural transformation achieved, it will remain its relative dominance
in the economy to many decades to come. Precisely, it is from
agricultural exploits that the economy has received its principal stimulus
to economic growth.
Agricultural sector can assist through the exportation of principal
primary commodities which will increase the nation’s foreign earnings
and which can be used to finance a variety of development projects.
The growth of the agriculture sector can make a substantial contribution
to the total tax revenue, as well as having some implications for intersectional
terms of trade. Also in the area of capital formation, the
savings generated in this sector can be mobilized in development
purposes, while increase in rural income as a result of increasing
agricultural activities can further stimulate the product of the modem
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sector. The needs of the agricultural sector could indirectly influence the
creating of additional infrastructures which are indispensable to rapid
economic development. (Olaloku. 2001:13).
Another non-oil export to be dwelled on, is industrial sector. It is the
fastest growing sector in Nigeria economy. It comprises of many
manufacturing and mining. Nigeria has manufacturing base prior to
1960 and shortly after.
The problem was due to lack of modern technology skills, managerial
experience of complex organizations and financial back -up. The
problem was further aggravated by the colonialists’ merchants
convincing arguments on the goodness of comparative cost advantage.
Nigerians were coaxed into concentrating their efforts in the production
of primary agricultural products and exporting them to the metrological
industries in Europe.
Our industrial sector took off after independent relied on satellite firms
representing British interest. The bank sector, which is constellation of
colonial banks branches and some companies that were able to invest
in manufacturing were the multi-national that have access to funds,
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technology and managerial expertise. This greatly hindered the
progress of indigenous entrepreneurs.
The Nigerian manufacturing sector has been described by Ikediala
(1983) as consisting of more assembling plants. He says that the
implication of this is that the industries have very little backward linkage
in the economy, since the bulk of the inputs is imported, thus the
manufacturing sector depends on imported raw-material the extent of
42%. The capacity utilization of manufacturing industry has always
been low in this country. The reasons as put by CBN (1998) are not
unconnected with raw materials scarcity, consumers resistance due to
high prices, increase in cost of manpower. Others mentioned are
equipment breakdown due to poor technology, lack of spare parts. Time
lags between, when inputs are ordered for and when they arrive, cash
flow problems in industries becomes a permanent features.
The Nigerian Civil war brought about the deterioration of the oil palm
grooves and plantation were abandoned and little if any new planting
was undertaken. As a result of that, the output of palm oil and palm
kernel declined drastically. But according to Onwuka (1985), the
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problems of palm products are due to the stagnation in the production
of this commodity, which is partly explained by the presence of wild
palm trees, which are of low-yield quality, and the difficulties
experienced in harvesting them. In addition, the old system of pricing
which guarantees low producer prices for palm produce discourage
substantial investment from being made for further production of this
product. Also, the problem marketing boards cannot be over looked.
Marketing board is an institution set up by the government with the
exclusive right to buy and sell certain agricultural products.
They purchase some products locally export sales are made through
the Nigerian marketing company, which is jointly owned by all state,
marketing. One of the functions of the marketing board is to stabilize the
prizes or our cash crops and hence creates stability of income for
farmers and to accumulate funds for development purposes. But the
operation has failed to provide incentives to farmers to increase their
input. Also, the producers paid unnecessary tax and they took from the
producers some money, which should have gone to them as income.
They thus reduced the amount of capital available to the producers.
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This criticism, according to Adenira (1999) made the Federal
Government to reform the Marketing Board System with a view to
increase producers’ prices and income. He said that the essential
features of the new reform are the prices, which are now fixed by a
single authority while producer taxation (export duty and produce sale
tax) has been abolished. Another major innovation in the system is the
creation of commodity boards with responsibility of marketing specific
products whenever they are produced in the country. These boards are
likely to reduce administrative problems and be more economical
compared with all oil-produced state Marketing Boards previously in
existence.
The major fault of the successive government that are supposed to
sustain this sector through the building of macro-economic structures
and incentives diverted their attention away from agriculture. The result
was sharp in the export/import equation as country started importing
even palm oil that was hitherto imploring from Nigeria. The situation
was becoming worrisome thus by 1975 there were attempts to
recapture the lost of glory of agriculture. General Olusegun Obasanjo’s
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operation feed the nations becomes the first real expressed official
attempt in this direction. It was followed by the establishment of two
River Basin Development Authorities in 1977. By 1978/1979, the federal
Government made budgetary provision to establish 4,000 hectares of
mechanized farms in each of the 19 states then, by 1979, there was a
re-launch of “operation feed the nation” with a new tag “Green
Revolution” with various committees set for its implementation (Oko,
1999).
If the efforts of the two leaders-General Olusegun Obasanjo and Alhaji
Shehu Shagari’s regimes could have brought vigor to the agricultural
sector, the activities of the sic-commodity boards did not assist much..
Oko said that fixing export product prices without recourse to cost
inputs discourages agriculture therefore remained slow because food
demand was growing at the rate of 3.5% per in the 80’s while
agricultural output was crawling at 11 %. Between 1990 and 1998 GDP
in agriculture declined to 6.2%. Then the distributions of agriculture
inputs to producers were neglected, infrastructure facilities like
motorable feeder roads, and irrigation facilities etc, made it difficult to
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increase agricultural production. CBN mandate to bank with regard to
bank loans to agriculture as priority sector for preferential leading was
floated.
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THE TABLE BELOW SHOWS YEARLY PALM PRODUCTS
PRODUCTION AND COCOA PRODUCTS PRODUCTION IN TONES,
WHICH COVER FROM 1990-2004.
Year Palm Products Cocoa Products
1990 730 1190
1991 760 1363
1992 792 1321
4191993 825 419
1995 837 503
1995 871 403
1996 920 591
1997 938 635
1998 992 683
1999 1003 721
2000 1411 832
2001 1603 925
2002 114 1160
2003 1701 1165
2004 1770 1200
Source: CBN Annual Report and Statement of Account 2004