Export Diversification and Economic Growth in Nigeria

Abstract

The main aim of this paper is to establish the relationship between export diversification and economic growth in Nigeria between 1970 and 2019 in order to determine if there was a change in the relationship between export diversification and economic growth in Nigeria as contained in the SAP policies. This period of investigation was divided into two main short run periods - pre SAP and post SAP. The findings of this study reveal that there was a high degree of export concentration on primary items. In reality before the deployment of SAP, the mean index of diversification was 1.001 while Post SAP was 0.963 for the whole 50 year period the average diversification index was around 0.98. The findings also show that the models regressors were statistically significant in explaining the influence of export diversification on Nigerian economic growth. The study discovered that GDP per capita in previous years, non-oil exports natural resource endowments, institutions and real exchange rate had positive and significant effects on economic growth whereas the herfindahl export concentration index and oil exports had negative effects on GDP per capita. The herfindahl index over the whole period was 0.98 showing that the Nigerian economy was heavily reliant on primary exports with the oil and gas sector dominating. Based on the findings, the followings were recommended. There is the need to get some country-wide “horizontal basics” right. This entails good macroeconomic management policies including running a counter-cyclical fiscal policy (low inflation, realistic exchange rate, and low fiscal and external deficits), anti-export bias policies and measures to mitigate adverse social effects of reforms needed to align domestic to international prices. This would help to address the problems of coordination failure.