ECONOMIC DEVELOPMENT IN NIGERIA THROUGH THE AGRICULTURAL, MANUFACTURING AND MINING SECTORS: AN ECONOMETRIC APPROACH

By

CHIEKWEIRO

Presented To

Department of Agriculture

ABSTRACT 

In the 1960s, Nigeria was on a par, in terms of aspirations to attain a very high level of economic growth and development, with its fellow-oil producing and exporting countries such as Malaysia and Indonesia, but has since failed to keep pace with them. Nigeria’s agricultural, manufacturing and mining and quarrying sectors have played a continuous and significant role in the development of the country’s economy. The approval of the millennium development goals (MGDs) by the United Nations General Assembly therefore raises three pivotal questions for Nigeria. 1) Why is Nigeria still an underdeveloped and lowincome country? 2) What should the country do to make rapid economic and social progress? and 3) How can it attain a high level of economic development and growth?. This is the background of this study, which is an empirical investigation into the factors affecting Nigeria’s bid to achieve sustainable economic growth and development with particular reference to such sectors as agriculture, manufacturing and mining and quarrying (solid minerals) over the period of 1970-2005. This involves the analysis of the relevance of the health care and education sectors and examination of impediments to past economic development, a development model applicable to Nigeria, the efforts made and the challenges facing the country in achieving the MDGs, and the role of foreign development partners in complementing Nigeria’s development efforts. 
TABLE OF CONTENTS
ACKNOWLEDGEMENTS-  -  -  -  - iv
ABSTRACT -  -  -  -  -  - v
LIST OF TABLES -  -  -  -  - - - - xiii
LIST OF FIGURES -  -  -  -  - - - xv
LIST OF ABBREVIATIONS AND ACRONYMS -  -  - - - xvi
CHAPTER ONE: INTRODUCTION-  -  -  - - - - 1
 1 1 Introduction -  -  -  -  - - - - 1
 1 2 Background to the problem -  -  - - - - - - - - - - 3
 1 3 Problem statement -  -  -  -  - - 12
 1 4 Objectives of the study -  -  -  -  - - 13
 1 5 Contribution and justification for the study -  -  -  - 15
 1 6 Outline of the study -  -  -  -  - - - 16
CHAPTER TWO: LITERATURE REVIEW OF ECONOMIC DEVELOPMENT:
 CONTEMPORAY ISSUES AND THEIR RELEVANCE TO NIGERIA’S
 ECONOMY-  -  -  -  -  - 18

 21 Introduction -  -  -  -  -  - 18
 22 Overview of economic development -  -  -  -  - 19
 221 The concept and relevance of economic development - - - - -  -  19
 222 Economic development: the perspective of human development
 index (HDI)-  -  -  -  - - - 20
 223 Economic development lesson for the developing countries -  - - - 22
 23 Overview of the Nigerian economy -  -  -  -  28
 231 Undiversified economic base of Nigeria -  -  -  - - - 31
 232 Weak manufacturing sector (industry)-  -  -  - - - 31
 233 The growing incidence of poverty in the Nigerian economy -  - - 32
 234 The impact of external debt burden on Nigerian economy -  -  32
 235 Evidence of corruption in the Nigerian economy -  -  - - - - - 32
 24 Development prospects of Nigeria -  -  -  - - - 34
 2 41 Liberalisation of the economy -  -  -  -  - - 34
 242 Restructuring and privatisation programmes in the Nigerian economy -  35
 243 Financial sector liberalisation and policy reforms -  -  - 36
 244 Attraction of foreign private investment into the agricultural sector -  - 37 

245 Industrialisation policy and incentives for small, medium
 and large-scale Enterprises -  -  -  -  - - - - - 37
 246 Social and environmental services reforms in Nigerian economy-  - - - 38
 25 Evidence from development models in Asian countries-  -  39
 25 1 The adoption of special economic zones -  -  - - - - - 39
 252 Encouragement of private entrepreneurs and institutions -  - - - - 40
 253 Adoption of sound macroeconomic policy management -  -  40
 254 Adoption of a labour intensive manufacturing strategy -  -  - 41
 255 Adoption of strategies to develop human capital -  -  - - - - 41
 256 Increased productivity and rise in real wages -  -  - - - 42
 257 Mitigation of corruption in the economies -  -  -  - - 42
 26 Overview and lessons from a Malaysian development model -  - - - - - 42
 27 Development model applicable to Nigeria -  -  -  - - - - 46
 271 Efficient utilisation of agricultural potentials in the development process- - - - 46
 272 Adoption of attractive manufacturing (industrial) incentives -  - - - - 48
 273 Attraction of FDI into the economy -  -  -  - - 48
 274 Outwardly-oriented or export-led development strategies through
 trade and regional integration -  -  -  - - - 49
 275 Private-entrepreneur driven development process -  -  - - - - - 50
 276 A need for a professional civil service -  -  -  - - 50
 277 Human resources development -  -  -  - - 51
 278 Information technology driven economy -  -  - - - - - 52
28 Summary of the review findings and conclusions -  -  - - - 52
CHAPTER THREE: POLICY FRAMEWORK TO ACHIEVE THE MILLENNIUM
 DEVELOPMENT GOALS IN NIGERIA-  -  -  - 56
 31 Introduction -  -  -  -  -  - - - - - 56
 32 Policy framework of the MDGs -  -  -  - - - - 57
 33 The MDGs: efforts, progress and challenges in Nigeria -  -  - - - - 59
 34 General appraisal and challenges facing the country in meeting the MDGs - - - - - 64
 35 The role of foreign partners in achieving the MDGs in Nigeria -  -  66
 351 Official Development Assistance (ODA) -  -  -  - - - 66
 352 Trade and development -  -  -  -  - - - 68
 353 Foreign Direct Investment (FDI) in Nigeria-  -  - - - - - 72
 354 External debt relief -  -  -  -  -  74 
36 Summary of the main findings and conclusions -  -  - - - - - 78
CHAPTER FOUR: THE RELEVANCE OF GROWTH IN NIGERIA’S SUPPORT
 SECTORS FOR ECONOMIC DEVELOPMENT-  -  - - - - 80
41 Introduction -  -  -  -  -  - - 80
42 Relevance of the agricultural sector in Nigeria -  -  -  - 82
 421 Provision of food security -  -  -  -  - - 82
 422 Provision of raw materials for domestic industries -  -  - - 85
 423 Provision of foreign exchange from exports -  -  -  85
 424 Structural transformation in Nigeria -  -  -  - 87
 425 Provision of employment opportunities -  -  -  - - - 87
 426 Provision of large markets for industrial products -  -  - - - - - 87
 43 The relevance of the manufacturing sector in economic growth and
 development in Nigeria -  -  -  -  - - 88
 431 Historical association with development -  -  -  - 89
 432 Inability to harness the potential in agriculture -  -  -  - 89
 433 Developing countries as agricultural societies -  -  - - - - 89
 434 Manufacturing sector as complement to other sectors in job creation -  - 89
 435 Manufacturing as a relevant development strategy because of its
 efficient use of land resources -  -  - - -  - 90
 436 Industrialisation promoting national integration -  -  - - - - 90
 437 The manufacturing sector providing additional income -  - - - - - 90
 438 Industrialisation inducing technological development -  - - - - - 91
 439 Highly industrialised nations and the status of superpower -  - - - - 91
 44 Relevance of mining and quarrying (solid minerals) in economic growth and
 development of Nigeria -  -  -  -  - 92
 45 Relevance of the growth support sectors, education and health, in achieving
 economic development in Nigeria -  -  -  - - - 98
 451 Education as condition and support sector for MDGs in Nigeria -  - - - 98
 452 The importance of health care service as growth support sector for
 attaining the MDGs in Nigeria -  -  -  - - - 105
 4 6 Summary of the main findings and conclusions -  -  - - - 107
CHAPTER FIVE: THEORETICAL AND ANALYTICAL FRAMEWORK -  109
51 Introduction -  -  -  -  - - - - - 109
52 The concept of cointegration and error-correction (ECM) econometrics
 methodology-  -  -  -  - - - - - 111
53 Structure of the model -  -  -  -  - 115 
54 Model for agriculture -  -  -  -  - - - 116
55 Basic hypotheses, assumptions and expectations for each variable in the
 cointegration agricultural model -  -  -  - - - 117
56 Model for the manufacturing sector -  -  -  - - - 119
57 Basic hypotheses, assumptions and expectations for each variable in the
 cointegration manufacturing model -  -  -  - - 120
 5 8 Model for the mining and quarrying sector -  -  - - - - - 121
 59 Hypotheses and basic expectations for each of the variables included in the
 mining and quarrying (solid minerals) model-  -  - - - - 122
510 Summary of the main findings and conclusions -  -  - - - 122
CHAPTER SIX: EMPIRICAL ANALYSIS AND PRESENTATION OF
 ESTIMATED RESULTS -  -  -  -  - 124
 61 Introduction -  -  - - - -  -  - - 124
 62 The model for agriculture -  -  -  - - - - - 125
 621 Estimation results of long-run cointegration equation -  -  - - 125
 622 Estimation results of the error correction model (ECM) -  -  - 126
 623 Diagnostic statistical testing-  -  -  - - - 127
 624 Cointegration correction and adjusted coefficients -  -  127
 625 Analysis of the results of the estimated models for agriculture
 and their implications -  - - -  -  -  - 130
 63 The model for manufacturing -  -  -  -  131
 631 Estimation results for long-run cointegration equation -  -  - - 131
 632 Estimation results of the error correction model (ECM)-  -  - - 132
 633 Diagnostic statistical testing -  -  -  - - - 134
 634 Cointegration correction and adjusted coefficients -  -  - - 134
 635 Analysis of the results of the estimated manufacturing model and
 their implications -  -  -  -  -  - - - 137
64 Model for the mining and quarrying sector-  -  -  - 137
 641 Estimation results of long-run cointegration equation-  -  138
 642 Estimation results of the error correction model (ECM)-  - - - - - 139
 643 Diagnostic statistical testing -  -  -  - - - - 140
 644 Cointegration correction and adjusted coefficients -  -  - 141
65 Dynamic simulation and response property of the model-  -  - - 144
 651 Policy shocks -  -  -  -  -  145
 652 Forecasts-  -  - - - -  -  - - - - 149 
66 Dynamic simulation of the results and the policy-scenarios-  - - - - - 153
67 Summary of the main findings and conclusion-  -  - - - - 155
CHAPTER SEVEN: SUMMARY OF MAJOR FINDINGS AND POLICY
IMPLICATIONS, CONLUDING REMARKS, LIMITATIONS,
RECOMMENDATIONS AND SUGGESTIONS FOR FURTHER WORK-  158
71 Summary of major findings and policy implications -  -  - - - - - 158
72 Concluding remarks -  -  -  -  - - 163
73 Limitation of the study -  -  -  -  - - - - 164
74 Policy recommendations -  -  -  -  - 164
75 Suggestions for further work -  -  -  -  - 166
BIBLIOGRAPHY -  -  -  -  - - - - - 167
APPENDICES -  -  -  -  -  186
 Appendix 1 List of variables-  -  -  -   - 186
 Appendix 2 Stochastic functions-  -  -  - - - - 187
 Appendix 3 Graphical representation of the data-  -  - - - - - 188
 Appendix 4 Augmented Dickey-Fuller tests for non-stationarity,
 levels, 1970-2003 -  -  -  -  - - - 194
 Appendix 5 Augmented Dickey-Fuller tests for non-stationarity,
 First differences, 1970-2003 -  -  -  -  195 

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