Analytical Study of the Impact of Export Compositions on the Economic Growth of Nigeria (1975-2015)

Abstract

The paper examines the dynamic impact of the broad binary compositions of exports in Nigeria, that is, oil and non-oil exports using VAR based approach. Time series data set for the period 1975-2015 is put to empirical testing. Time series data from 1975 to 2015 was used in the paper. The variables used include: GDP, Oil exports, Non-oil exports, Gross fixed capital formation and Trade openness. The annual data were collected from the Central bank of Nigeria statistical bulletins of 2004, 2013 and 2015. Both the oil and non-oil exports variables were measured in monetary values of the commodities exported in a given year. In order to investigate the long-run relationship and the short run dynamics of oil exports and non-oil exports compositions, a restricted VAR approach, namely, the Vector Error Correction Model (VECM) has been used. However, the choice is premised on the outcome of the unit root test and cointegration analysis. It is therefore justified to impose restrictions on the cointegrating ranks found in the test. Findings from the paper indicate that the oil export composition has significantly greater impact on the Nigeria economic growth in the short run, while non-oil export composition has significantly positive long-run impact on the economy. Also, external shocks to both oil and non-oil compositions evoke positive response from the GDP. It is concluded that the nature of the export compositions matters in attaining the long run stability of Nigerian economy. Efforts towards diversifying the exports through non-oil exports promotion and trade liberalization policies are therefore recommended.