Investigating the Role of Diversification on Economic Growth in Nigeria; New Evidence from SVARs

Authors

  • Ozdeser Huseyin Department of Economics, Near East University, Near East Boulevard, 99138 Nicosia, North Cyprus, Mersin 10 Turkey.
  • Mohammed Usman A. M Department of Economics, Near East University, Near East Boulevard, 99138 Nicosia, North Cyprus, Mersin 10 Turkey.
  • Umar Aliyu Shuaibu Department of Economics, Near East University, Near East Boulevard, 99138 Nicosia, North Cyprus, Mersin 10 Turkey.

Keywords:

Nigeria, Diversification, Economic growth, Cointegration Agriculture

Abstract

Fluctuations in oil prices have caused economic contractions and challenges to oil-exporting economies. In particular, Nigeria suffers both the previous and current global oil price shocks and this has raised concerns among policymakers, governments, and economic analysts because of the impact of oil and oil prices in Nigeria’s macroeconomic development. However, this paper investigates the role of diversification on economic growth in Nigeria using annual data from 1986 to 2018. The techniques applied showed that only remittances and official development assistance have affected economic growth in the short run. However, the coefficients of one period lagged indicated that the system is capable of adjusting to its long-run equilibrium condition after some shocks in the system.  The findings from variance decomposition indicated that diversification plays a positive role on economic growth in both the short and long-run horizons. By overall implication, the study concludes that diversification has a positive role on Nigeria’s economic growth. Therefore, the study recommends the need for the government to provide active and inclusive policies such as soft loans and commercial agricultural programs to improve its export of agricultural output competitiveness, improve supervisory and regulatory frameworks in the financial sector to ease remittances inflow. For these reasons, diversifying the economy from oil revenue is the ultimate goal for achieving sustainable economic growth and development goals or targets by the year 2030.

References

. T. Bowler, “Falling oil prices: Who are the winners and losers? - BBC News,” BBC News Bus., no. May 2009, pp. 1–21, 2015, [Online]. Available: http://www.bbc.com/news/business-29643612.

. V. Alekhina and N. Yoshino, “Impact of World Oil Prices on an Energy Exporting Economy Including Monetary Policy,” Asian Dev. Bank Institute, Work. Pap., no. 828, 2018, [Online]. Available: www.adbi.org.

. M. A. Nasir, A. A. Al-Emadi, M. Shahbaz, and S. Hammoudeh, “Importance of oil shocks and the GCC macroeconomy: A structural VAR analysis,” Resour. Policy, vol. 61, no. November 2018, pp. 166–179, 2019, doi: 10.1016/j.resourpol.2019.01.019.

. M. Danladi and A. Wambai, “Shocks effects of macroeconomic variables on natural gas consumption in Nigeria : Structural VAR with sign restrictions,” Energy Policy, vol. 125, no. October 2018, pp. 135–144, 2019, doi: 10.1016/j.enpol.2018.10.021.

. OPEC, “OPEC Annual Statical bulletin,” Organ. Pet. Export. Ctries., p. 128, 2016, [Online]. Available: http://www.opec.org/opec_web/static_files_project/media/downloads/publications/ASB2016.pdf.

. National Bureau of Statistics, “Labor Force Statistics: Unemployment and Underemployment Report,” Labor Force Stat. Unempl. Underemployment Rep., vol. 1, no. December, pp. 1–88, 2018, [Online]. Available: https://www.proshareng.com/news/Nigeria Economy/Unemployment-Rate-Rises-to-18.8Percent-i/37757.

. U. E. Chigbu, “The case of Agriculture As The Only Seviour To Nigeria’s Deing Economy,” J. Appl. Phys., vol. 1991, pp. 1–5, 2005.

. L. . Ekechukwu, “Pathways for Harnessing The Tourism Potential Of Natural And Cultural Sites And Features On The Nsukka Okigwe Cuesta,” Int. J. Res. Arts Soc. Sci., vol. 1, p. 273, 2009.

. G. C. Creaco, Salvo; Querini, “The role of tourism in sustainable economic development,” econstor Make Your Publ. Visible., 2003, [Online]. Available: http://hdl.handle.net/10419/115956%0AStandard-Nutzungsbedingungen:

. B. O. Adeleke, “Residents’ perception of tourism impact on the physical environment of Redemption Camp, Ogun State, Nigeria,” Qual. - Access to Success, vol. 15, no. June, pp. 24–34, 2014.

. J. S. Daniel, “Economic impacts of tourism,” Routledge Handb. Tour. Impacts Theor. Appl. Perspect., pp. 95–108, 2019, doi: 10.4324/9781351025102-8.

. M. A. LATHA C M, “Role of Service Sector in Economic Development,” Dr. Thesis Submitt. to Dep. Econ. Co-operation, Univ. Mysore, Fulfillment Requir. Degree, p. 570005, 2016, [Online]. Available: https://www.ukessays.com/essays/economics/role-service-sector-economic-8066.php.

. J. H. Cohen, “Remittance outcomes and migration: Theoretical contests, real opportunities,” Stud. Comp. Int. Dev., vol. 40, no. 1, pp. 88–112, 2005, doi: 10.1007/BF02686290.

. S. Mohapatra and D. R. Editors, Remittance Markets in Africa. 2011.

. Suberu O. J., Ajala O. A., Akande M. O., Olure-Bank Adeyinka, “Diversification of the Nigerian Economy towards a Sustainable Growth and Economic Development,” Int. J. Econ. Financ. Manag. Sci., 2015, doi: 10.11648/j.ijefm.20150302.15.

. R. Boschma and K. Frenken, “Papers in Evolutionary Economic Geography,” Econ. Geogr., pp. 120–136, 2009, doi: 10.1093/jeg/lbs010.

. H. Lei and J. Zhang, “Capabilities’ substitutability and the ‘s’ curve of export diversity,” Epl, vol. 105, no. 6, 2014, doi: 10.1209/0295-5075/105/68003.

. N. P. Bueno, W. Brian Arthur - The Nature of Technology – What it is and how it evolves, vol. 8, no. 2. 2010.

. R. Hausmann and C. A. Hidalgo, “The network structure of economic output,” J. Econ. Growth, vol. 16, no. 4, pp. 309–342, 2011, doi: 10.1007/s10887-011-9071-4.

. P. A. Balland, R. Boschma, and K. Frenken, “Proximity and Innovation: From Statics to Dynamics,” Reg. Stud., vol. 49, no. 6, pp. 907–920, 2015, doi: 10.1080/00343404.2014.883598.

. C. Freire, “Working Paper Series diversification in poorer countries,” no. 31, 2017.

. E. Report and O. N. Africa, Africa ’ S Industrialization. 2016.

. UNECA, Economic Report on Africa 2015 | United Nations Economic Commission for Africa. 2015.

. C. S. Hendrix, “Kicking a crude habit: diversifying away from oil and gas in the twenty-first century,” Int. Rev. Appl. Econ., vol. 33, no. 2, pp. 188–208, 2019, doi: 10.1080/02692171.2017.1389862.

. “Review Reviewed Work ( s ): Economic Backwardness in Historical Perspective : A Book of Essays by A . Gershenkron Review by : Doreen Warriner Source : The Slavonic and East European Review , Vol . 43 , No . 100 ( Dec ., 1964 ), pp . 235-240 Published by :,” vol. 43, no. 100, pp. 235–240, 2020.

. G. Dosi and R. R. Nelson, “Technological Paradigms and Technological Trajectories,” Palgrave Encycl. Strateg. Manag., vol. 1982, pp. 1–12, 2016, doi: 10.1057/978-1-349-94848-2_733-1.

. C. Freire, “Economic Diversification : Explaining the pattern of diversification in the global economy and its implications for fostering diversification in poorer countries,” DESA Work. Pap., vol. ST/ESA/201, no. 150, 2017.

. E. W. Djimeu and L. Désiré, “Oil windfalls and export diversi fi cation in oil-producing countries : Evidence from oil booms,” Energy Econ., vol. 78, pp. 494–507, 2019, doi: 10.1016/j.eneco.2018.11.033.

. M. Hvidt, “Economic diversification in GCC countries: Past record and future trends,” London Sch. Econ. Polit. Sci., no. 27, pp. 1–55, 2013, [Online]. Available: http://www.lse.ac.uk/government/research/resgroups/kuwait/documents/Economic-diversification-in-the-GCC-countries.pdf.

. G. E. Esu and U. Udonwa, “Economic diversification and economic growth : Evidence from Nigeria,” J. Econ. Sustain. Dev., vol. 6, no. 16, pp. 56–69, 2015.

. M. A. Yusuff and M. A. Akinde, “Tourism development and economic growth nexus:Nigeria’s experience,” Eur. J. Hosp. Tour. Res., 2015, doi: 10.1377/hlthaff.2013.0625.

. T. biau Lin and Y. wing Sung, “Tourism and economic diversification in Hong Kong,” Ann. Tour. Res., vol. 11, no. 2, pp. 231–247, 1984, doi: 10.1016/0160-7383(84)90072-0.

. O. I. Oji, “Analysis of the Contribution of Agricultural Sector on the Nigerian Economic Development,” World Rev. Bus. Res., vol. vol 1, no. January 2011, pp. 191–200, 2011.

. T. Lawal and A. Oluwatoyin, “National development in Nigeria : Issues , challenges and prospects,” Public Adm., vol. 3, no. November, pp. 237–241, 2011, doi: 10.5897/JPAPR11.012.

. M. Zortuk, “Economic impact of tourism on turkey’s economy: Evidence from cointegration tests,” Int. Res. J. Financ. Econ., vol. 1, no. 25, pp. 231–239, 2009.

. F. M. M. Kreishan, “Tourism and economic growth: The case of Jordan,” Eur. J. Soc. Sci., vol. 15, no. 2, pp. 63–68, 2010.

. K. Paul, “Increasing Returns and Economic Geography,” Journal of Political Economy, vol. 99, no. 3. pp. 483–499, 1991.

. Luigi L. Pasinetti and Robert and Solow, “Economic Growth and the Structure of Long-Term Development: Proceedings of the IEA Conference held in Varenna, Italy.,” Econ. J., vol. Vol. 107, no. No. 444, pp. 1572–1575, 1994, [Online]. Available: url: https://www.jstor.org/stable/2957758%0AAccessed: 21-08-2020 22:36 UTC.

. T. G. Andersen, T. Bollerslev, F. X. Diebold, and P. Labys, “The distribution of realized exchange rate volatility,” J. Am. Stat. Assoc., vol. 96, no. 453, pp. 42–55, 2001, doi: 10.1198/016214501750332965.

. F. Duchin, “A world trade model based on comparative advantage with m regions, n goods, and k factors,” Econ. Syst. Res., vol. 17, no. 2, pp. 141–162, 2005, doi: 10.1080/09535310500114903.

. D. Gualerzi, “Towards a Theory of the Consumption-Growth Relationship,” Rev. Polit. Econ., vol. 24, no. 1, pp. 33–50, 2012, doi: 10.1080/09538259.2011.636607.

. R. Plassard, “Clower’s About-Face Regarding the Keynesian Revolutionn,” SSRN Electron. J., 2015, doi: 10.2139/ssrn.2675245.

. C. Gershenson, “Reinventing the Sacred: A New View of Science, Reason, and Religion. Stuart A. Kauffman. (2008, Basic Books.) $27. ,” Artif. Life, 2009, doi: 10.1162/artl.2009.gershenson.b6.

. A. Charles and O. Darné, “Trends and random walks in macroeconomic time series: A reappraisal,” J. Macroecon., vol. 34, no. 1, pp. 167–180, 2012, doi: 10.1016/j.jmacro.2011.10.001.

. R. F. Engle, C. W. J. Granger, B. Y. R. F. Engle, and C. W. J. Grangeri, “Co-Integration and Error Correction : Representation , Estimation , and Testing Published by : The Econometric Society Stable URL : http://www.jstor.com/stable/1913236 REFERENCES Linked references are available on JSTOR for this article : reference # refe,” vol. 55, no. 2, pp. 251–276, 1987.

. R. L. Brown, J. Durbin, and J. M. Evans, “Techniques for Testing the Constancy of Regression Relationships Over Time,” J. R. Stat. Soc. Ser. B, 1975, doi: 10.1111/j.2517-6161.1975.tb01532.x.

Downloads

Published

2020-10-03

How to Cite

Huseyin , O. ., A. M , M. U. ., & Shuaibu , U. A. . (2020). Investigating the Role of Diversification on Economic Growth in Nigeria; New Evidence from SVARs. American Academic Scientific Research Journal for Engineering, Technology, and Sciences, 72(1), 230–250. Retrieved from https://asrjetsjournal.org/index.php/American_Scientific_Journal/article/view/6300

Issue

Section

Articles