IMPACT OF OIL EXPORT ON ECONOMIC GROWTH IN NIGERIA FROM 1970-2006. By AFOLABI KHADIJAT DECEMBER, 2011

CHAPTER ONE
INTRODUCTION
1.0 PREAMBLE
Nigeria economy is basically an open economy with international transactions constituting an important proportion of her aggregate economic activities. Over the years, the degree of openness of the economy has grown considerably.
Before Nigeria gain her political independence in 1960, agriculture was the dominant sector in the economy, which provides both cash crops and food crops to the economy and accounted for the largest part of the foreign exchange of the country. But, the discovery of crude oil production in commercial quantities changed the structure of the Nigerian economy. This led to the neglect of agricultural product, making the economy to depend heavily on production of crude oil. In 2000, oil and gas export accounted for more than 98% of export and about 83% of federal Government Revenue. (Odularu 2008). Nigeria’s proven oil reserves are estimated to 35billion barrels, Natural gas reserves are 1000 trillion fti (2,800kmi) and its crude oil production was around 2.2million barrels (350,000mi) per day. (Odularu 2008).
Furthermore, the oil and natural gas export generated huge revenue to the government and have a surplus balance of payment over the years. It was reported that 80% of Nigeria’s revenue goes to the government, 16% spent on administrative expenses and 4% go to investors. The huge revenue from oil export only benefit 1% of the population due to corruption in Nigeria. ( Odularu 2008). Mismanagement over the years back hindered economic reforms from achieving its full economic potentials.
However, Nigeria Gross Domestic Product at purchasing power parity became more than doubled from $170.7billion in 2005 to $374.3billion in 2010, with informal sector putting the actual numbers greater than $374billion. The Gross domestic Product per capita doubled from $1,200 per person in 2005 to an estimated $2,500 per person in 2009, with the informal sector included, the Gross Domestic Product per capita was estimated around $3,500 per person. (Nigeria economy).
Furthermore, the united states remains Nigeria’s largest customer for crude oil export accounting for 40% of the country total oil exports, providing about 10% of overall united state oil imports and ranked as the fifty-largest source for united state imported oil.(Odularu 2008).
1.1 STATEMENT OF THE PROBLEM.
Owing to both external and internal factors, the growth performance of the Nigeria economy has been less than satisfactorily during the past three decades. Since the first oil price shock of 1974, oil has annually produced over 90% of Nigeria’s export income from 1970 to 1999, oil generated almost $231 billion in rents for the Nigeria economy and these rents have constituted between 21% and 48% of Gross Domestic Product, but yet these rents have failed to raise Nigeria incomes and done little to reduced poverty. Since 1970, Nigeria’s per capita income has fallen by about 4% in constant dollars.
Also, since early 1970, the government has annually received over half of its revenues from oil sectors which are about 85%. These oil revenues are not only large but highly volatile and causing the size of government programs to fluctuate accordingly. From 1972 to 1975, government spending rose from 8.4% to 22.6% of GDP, by 1978, it dropped back to 14.2% of the economy. This fluctuation has made the government unable to adhere to wise fiscal policies during the 1970s and 1980s, when oil prices fluctuated sharply, the ability of these governments to spend their funds wisely, and limit corruption has been low.
Although large proceeds are obtained from the domestic sales and export of petroleum products, its effect on the growth of the Nigeria economy as regards returns and productivity is still questionable, hence there is a need to evaluate the relative impact of oil export on economic growth in Nigeria.
1.2 OBJECTIVES OF THE STUDY.
The objectives of this study are spelt out into two, i. e. general objective and specific objectives. The general objective of this study is to examine the impact of oil export on economic growth in Nigeria. While the specific objectives are:
1.To examine the relationship between oil export growth and economic growth.
2.To find out if fluctuations in oil revenue also causes a fluctuation in economic growth.
1.3 SIGNIFICANCE OF THE STUDY.
Going by the research conducted by some scholars or economists such as Akanni (2007), Idowu (2005), Hadi et. al., (2009), Mohammed and Amirahi (2010), Odularu (2008), and Samad (2011), for instance, provides an sight on the contributions of exports to economic growth in the country. These studies also shaded light on the policies that have been taken to reform the economy and the challenges faced by the export sectors.
However, in view of this, I tried to research on how oil export sector have contributed to economic growth in Nigeria by knowing the rate of real growth domestic product compared to the volume of oil export. By using multiple linear method and a sample size of 36years ranging from 1970-2008, which is different from the study mentioned above.
1.4 HYPOTHESES OF THE STUDY.
This study is designed to investigate the impact of oil export on economic growth in Nigeria. The hypothesis is therefore postulated as follow:
Ho: There is no statistically significant relationship between oil export and economic growth in Nigeria.
Hi: There is statistically significant relationship between oil export and economic growth in Nigeria.
1.5 METHODOLOGY.
In this research work, the econometric technique used is ordinary least square (OLS) in form of multiple linear regressions. The data used are purely obtained from secondary sources. The main source is Central Bank of Nigeria Statistical Bulletins (CBN), 2007,volume 18.
1.6 ORGANISATION OF THE STUDY.
This research work has been divided into six chapters as follows:
Chapter one which is the general introduction of the entire study comprises of the statement of problem, objectives of the study, significance of the study, hypothesis of the study, methodology and organization of the study.
Chapter two gives a detail the background information on the study which includes the historical background of oil sector, performances of oil export sector, its contributions, challangences faced by the oil sector and other related issues to oil sector.
Chapter three is the literature reviews, which covers conceptual, theoretical and empirical literature as well as the theoretical framework.
Chapter four consists of the research methodology which shows the model specification, sources of data, econometrics techniques and sampling techniques.
Chapter five presents the data and show the analysis and interpretation of findings which as well as hypothesis testing and discussion of results.
Chapter six which is the last chapter deals with the summary of findings, conclusions and recommendations.
CHAPTER TWO
BACKGROUND OF THE STUDY.

2.1 HISTORY OF CRUDE OIL IN NIGERIA
Oil was first discovered in Nigeria in 1956 at Olobiri in Niger Delta, after half century of exploration. The discovery was made by shell-BP. The Nigeria joined the oil producer in 1958 and produce 5100bdp. After 1960, exporation rights in onshore and off shore areas adjoining the Niger Delta were extended to other foreign companies. In 1965, the EA was discovered by shell in shallow water south east of warri.
In 1970, the end of the Biafran war coupled with the rise in world oil price, made Nigeria rich from its oil production. Nigeria joined the Organization of Petroleum Exporting Counties (OPEC) in 1971 and established the Nigeria National Petroleum Company (NNPC) in 1977 a state owned and controlled company which is a major player in both the upstream and downstream sectors.
Production started in 1958 from the oil field in olobiri in the Eastern Niger Delta. By Sixties, and early seventies. Nigeria had produce over 2million barrels of Crude oil a day. The production Figure dropped in eighties due to economic Slump, 2004 regain the oil Production figure back to 2.5million barrels per day. Current development strategies are aimed at increasing Production to 4million barrels per day in 2010. The production of oil had pushed the initial export sector and major source of government revenue which is agriculture of the country in the early fifties and sixties to the background. (Odularu 2008).
2.2 THE PERFORMANCE OF OIL SECTOR TO GDP IN NIGERIA.
There are three main oil sectors in Nigeria namely: upstream sector, downstream sector and gas sector. The downstream sector is the most problematic because it is the distributor and connector to the final consumers of refined petroleum products in the domestic economy. In 2003, government took a decision of deregulating the downstream sector for efficient production and reduction in price of oil. Meanwhile, the way of its implementation has been controversial because it ignores the economic realities in Nigeria.
The oil production by the JOINT VENTURE (JV) companies accounted for about 95% of Nigeria’s crude oil production. One of the joint venture is shell with 55% government interest through Nigeria National Petroleum Corporation (NNPC) produces about 50% of Nigeria crude oil. Others like Exoon mobile, chevron, Texaco, ENI/Agip and totalfinal operate the others JV’s, in which the NNPC has 60% stake.
However, as a member of the Organization of Petroleum Exporting Countries (OPEC), Nigerian oil attracts very huge buyers in the international market because the oil is of high quality and mostly environmentally friendly relative to oil from other countries. Nigeria’s export blends are light, sweet crude’s and have low surplur contents of 0.05 to 0.2%.
The place of oil in the mind of the average Nigerian as becomes more profound since the initiation of deregulation of downstream segment of the Nigeria oil industry in 2003. The recent rise in crude oil prices at the global markets makes the country to earn more but also increased the expense burden on imported refined petroleum products. At present, Nigeria had four refineries with a combined installed refining capacity of 445,000 barrels per day. These are:
1. The first Port Harcourt refinery was commissioned in 1965 with an installed capacity of 35,000bpd and increased to 125,000bpd in 1986.
2. The Warri refinery was commissioned in 1978 with an installed refining capacity 100,000bpd, and upgraded to 125,000bpd in 1986.
3. The Kaduna refinery was commissioned in 1980 with an installed refining capacity of 100,000bpd, and upgraded to 110,000bpd in 1986.
4. The second Port Harcourt refinery was commissioned in 1989 with 150,000bpd processing capacity. It was designed to supply the domestic market and exporting its surplus.
The combined capacities of these refineries exceed the domestic consumption of refined products, chief of which is premium motor spirit (Gasoline) whose demand is estimated at 33million litres daily. The refineries are operating far below their installed capacities as they were more or less abandoned during the military era. To assess the performance of oil sector in Nigeria we will underscore two periods which are discussed below.
2.2.1 THE BOOM PERIOD
After independence in 1960, agriculture was the dominate sector of Nigeria economy. Agriculture provided the high level of employment for the economy and the needs of the household. The proportion of GDP accounted by agriculture was 67.0% and petroleum accounted for 0.6%. By 1970, petroleum stood at 23.4% and agriculture stood at 45.5% of GDP while in 1980, there was a declined to both sectors, proportion of agriculture was 15.5% and petroleum was 28.0% of GDP. In 1990, agriculture was 30% and petroleum was 12.8% of GDP. In 2000, agriculture stood at 24.6% and petroleum at 51% of GDP. In 2006, agriculture was 50.78%, petroleum was 66.21% of GDP. (Bullion publication of CBN, volume 32, No.2, April-June 2008). This is illustrated in the diagram below. The shaded box represents agriculture and the unshaded box represents petroleum.

Source: Bullion publication of CBN, volume 32, No.2, April-June 2008).
Figure 1: Contribution of agricultural and oil sector to gross domestic product (1960-2006).

In fig.2 below since the early 1990s, the economy had depended solely on oil earnings, neglecting the non oil sector of the economy, which leads to the declined contribution of the non oil sector to gross domestic product despite the increase in prices of oil over the years. In 1973, the price of crude oil was $20 per barrel and risen to $36.6 per barrel in 1980. In 2005, the price rose to $55.4 and by 2007, the price had risen to $135.00 per barrel. This rise in oil prices was as a result of the Arab-Israeli war and energy crisis and depression in the industrial countries, resulted in increased oil revenue and boom for Nigeria and other oil exporting countries.
The enormous increase in the oil revenue created unplanned wealth for Nigeria. As a result of this, government embarked on elephant task projects which were not productive to the economy. They invested in socio-economic infrastructure across the country especially in urban areas and services sector grew. The relative attractiveness of the urban center made youths in Nigeria to migrate from rural to urban areas leaving their farmland so as to partake in the growing and prosperous oil driven. This created social problems such as congestion, pollution of the environment and air, unemployment and crimes.

OIL PRICE IN US DOLLARS
Figure 2:

Source: (Bullion publication of CBN, volume 32, No.2, April-June 2008)
2.2.2. THE NON-BOOM PERIOD AND POLICIES RESPONSES.
The oil boom of the 1970s led to the neglect of the agricultural sector since the nation had access to cheap money to import all sorts of things including foodstuffs, raw materials and manufactured goods. The economy witnessed structural changes in the 1980s which was attributed to a slow growth of the output in all sectors of the economy. The manufacturing sector suffered from the declined of output mostly as a result of a drastic reduction in capacity utilization due to shortage of raw materials. By 1986, the overall average capacity utilization of the Nigerian manufacturing sector, an index of economic performance in the sector stood at 38.8% as against 77.4% ten years back. However, with the remarkable reforms in the 1999s, capacity utilization has increased to 57.8% in 2005.
The over-reliant on petroleum oil is clear in the external sector trends. The desire for imports reflects in the current account balanced, whose oil component expanded by an annual average of 57.7% during 1971 to 1980, 43.0% in 1981-1990 and 40.3% in 1991-1998. (Bullion publication of CBN, volume 32, No.2, April-June, 2008).
The current account balance grew with the oil revenue trends reflecting import expansion as oil earnings grew. In 1982, showing the crash in oil earnings and the tight rein on international trade through the stabilization act implementation, current account balances dropped by 22.7% in 1982 and further by 14-6% in 1983. ( Bullion publication of CBN, volume 32, No.2, April-June, 2008).
Another critical economic issue was the foreign exchange crisis. As a result of dwindling foreign exchange earnings from crude oil, the nation had experienced shortfall in foreign exchange. This manifests in terms of balance of payments problems, rising external debt and debt servicing burden as well as the inability of the nation to import crucial capital and intermediate goods to execute her development projects. The inability of the country to pay for its import and the dwindling foreign reserves, the country accumulated trade arrears during the period 1980 and 1986, coupled with external borrowing leading to a mounting external debt and debt servicing burden.
The 1980’s saw Nigeria plagued by the twin problems of high inflation rate and high unemployment rate. During this period, both high inflation rate and high unemployment rates co-existed giving rise to stagflation. The high inflation was particularly caused by under-valuation of the naira due to the operation of the foreign exchange market. The government has to introduce some measures to tackle the problems which include the followings:
1. Economic stabilization measures of April 1982. In 1982, the external reserves fell to the lowest level that it could hardly finance one month’s importation. In order to correct the balance of payment and revamp the economy, the government introduced the economic stabilization act which aimed at rationalizing overall balance and equilibrium in the external sector. These measures were implemented through administrative controls which included a strong import controls, imposition of exchange restrictions on international transactions substantial increases in customs tariffs, introduction of an advance import deposit scheme and ceilings on total central bank foreign exchange disbursements. The increase in oil price at that time was belief to solve the economic problem but the oil price did not recover the economic problem as soon as expected.
2. The Structural Adjustment Programmed of 1986. Another alternative to reform the economy was the programme SAP introduced in 1986. The aim of the SAP was to effectively alter and restructure the consumption and production patterns of the economy as well as eliminate price distortions and heavy dependence on the export of crude oil and imports of consumer and producer goods. The SAP was intended to last for two years but later extended.
3. National Economic Empowerment Development Strategy (NEEDS) is another attempt to chart a sustainable growth path for the economy. The primary objectives of NEEDS agenda was to reinvigorate the economy and return it to the path of sustainable growth, development and poverty reduction. It focuses on people, job creation and employment for the private sector to generate job opportunities. It is also meant to enable Nigeria turn around and adopt aboard based market oriented economy that is private sector-led and in which people can be empowered to afford the basic needs of life. Thus, it is a pro-poor development strategy which in line with the new focus of both the International Monetary Fund (IMF) and World Bank.
However, the disappointing results of the adjustment effort were linked to two major factors: product of misguided policies under the SAP and incoherent implementation of SAP policies.
2.4. CONTRIBUTION OF OIL INDUSTRY.
About two decades now, the oil sector had contributed in a numerous ways to the growth of Nigeria economy. These are:
1. Creation of employment opportunities: The first area of contribution by the oil sector is job opportunity. In the construction of the refineries, Nigerian were employed for such job like building of roads and bridges, the clearing of drilling sites, transportation of materials and equipment, building of staff housing and recreational facilities. Also, there were employments for seismic and drilling operations, supervisory and managerial function.
2. Contribution to gross domestic product: The gross output of the petroleum sector consists of the proceeds from oil exports, local sales of natural gas. GDP less factor payments made abroad. The industry’ value added can be obtained by adding together the various payments to the government in form of rents, royalties, profit taxes, harbor dues, the wages and salaries of employees paid locally and any net retained earnings.
3. Contribution to government revenue: Huge amount of money paid to the government by the oil sector serves as a major source of income to the economy. The increase in government receipts from the crude oil production is as a result of three factors which are: increased in crude oil prices and the more favorable fiscal arrangements obtained as a result of improvement bargaining position over the years.
4. Contribution to foreign exchange reserves: The oil industry had contributed a lot to the foreign exchange reserves. the oil has substantial foreign exchange reserves and is in the healthy position of being able to finance the foreign exchange cost of her development programmes.
5. Contribution to energy supply: Another achievement of the oil sector to the Nigeria economy is the provision of cheap and readily available source of energy for industry and commerce through the operations of the local refinery and the utilization of locally discovered natural gas.
2.5 CHALLENGES IN THE OIL SECTOR.
Despite the numerous contributions of oil sector to the economy. There are some problems facing the sector, they includes:
1. Public control and bureaucracy: The Nigeria National Petroleum Corporation (NNPC) is controlled by the ministry of petroleum resources. It lacks autonomy, the NNPC is characterized by inefficiency distribution and marketing.
2. Poor funding of investments: the federal government’s delays in the payment of cash calls for its joint ventures operations in the upstream sub-sector, focusing more on maintenance rather than growth.
3. Communal disturbances: from the area which the oil is extracted.
4. Smuggling and diversion of petroleum product: smuggling of petroleum products across the boarders in quest for foreign exchange and to take undue advantage of the lower domestic prices from neighboring countries prices.
5. Fraudulent domestic marketing practices: some marketers hoard products in periods of scarcity in order to sell in the black market at higher prices.
6. Relatively low level of investments in the sector compared to its potentials.
7. High technical cost of production: Due to low level of domestic technological development.
8. Restrictions imposed by crisis and production disruptions caused by host communities.
9. Environmental degradation due to the flaring of associated gas.
2.6 NIGERIA’S EXPORTS PERFORMANCE.
Nigeria’s economy was mainly an agrarian economy which the majority part of its foreign exchange comes from the sales of cash crops such as cocoa, groundnut, coffee, cotton, solid minerals and palm produce. Due to the oil boom of 1970s, crude oil then took over from agricultural as the major foreign exchange earner to the country it to 96.8%, while by 2000; it got to 99% (Kareem 2004).
However, the share of non-oil exports in total exports declined from 7.0% in the period 1970-1985 to about 4 between 1986 and 1988.The decline recorded in the non-oil export was due to the problems being encountered by the agricultural sector which was worsened by inappropriate pricing policies, and the deat of farm labor caused by rural-urban migration, as well as infrastructural inadequate in the rural areas. The government made efforts to restore the non-oil sector of the economy during the structural Adjustment Programme era. Despite all the measure that were put in place, the performance of the non-oil export sector has remained encouraging as crude oil still remains the major Nigeria’s export.
Furthermore, on the trends of the structure of Nigerian economy, her trade exports makes it unlikely that the country will be able to take the advantage of increased liberalization and openness of the economy to achieve trade induced growth. The border of the country had been thrown open since the independence in 1960 with 32% level of openness, which later rose to 48% in 1977 during the import substitution era. It got to 68% in 1992 during the Structural Adjustment Programme period and later increased to its peak of 92% in 2000 due to the oil imports and exports.
2.7 CONTRIBUTION OF EXPORTS TO ECONOMIC GROWTH.
Exports positively contribute to economic growth through various ways:
1. An increase in exports could promote specialization in the production of export commodities that in turn may increase the productivity of the export sector.
2. Export expansion may result in efficient resource allocation since it brings incentives for domestic resource allocation closer to international opportunity costs.
3. Exports that are based on comparative advantage would allow the exploitation of economies of scale that are external in the non-export sector, but internal to the overall economy.
4. Exports expansion benefitted from international market also allow greater capacity utilization exploiting increasing foreign demand in world markets.
5. Export may also give access to advanced technological improvement in the economy due to foreign market competition.
CHAPTER THREE
LITERATURE REVIEW

3.1 CONCEPTUAL LITERATURE.
3.1.1 EXPORT: can be defined as surplus goods and services of a country that are sent to other countries in the world for sale.
TYPES OF EXPORT
There are two types of export: visible export and invisible export.
Visible export: consists of commodities that are tangible and can be seen and touched. They appear in a country balance of trade. Such as crude oil, coal, tin, columbite, palm oil, cotton, rubbar etc.
Invisible export: consists of intangible commodities that can not be seen or touch, such as services. The services are calculated in terms of money. They are insurance, civil aviation, banking services, and tourism, audio-visua services e.t.c.
3.1.2 CRUDE OIL EXPORT: Can be defined as the surplus of crude oil of a country that are sent to other countries in the world.
TYPES OF CRUDE OIL EXPORT IN NIGERIA
1. Bonny light oil
2. Farcodos crude oil
3. Quaibo crude oil
4. Brass river crude oil.
3.1.3 ECONOMIC GROWTH: can be defined as an increase in value of goods and services produced in a country. Growth implies an increase in real GNP per unit of labor input. This refers to changes in labor productivity over time. Economic Growth is conventionally measured as the rate of increase in Gross Domestic Product (GDP).Growth is usually calculated in real terms (netting out the effect of inflation on the price of the goods and services product). Growth improved the standard of living of the people in that particular country.
3.2.1. TYPES OF GROWTH
Growth in output can be divided into two major categories:
1. Growth through increased input .i.e. labor and capital inputs cannot be increased indefinitely without encountering diminishing marginal returns.
2. Growth through improvements in productivity. I.e. technological progress is needed to increase the standard of living in the long-run.
3.2.2. GROWTH DOMESTIC PRODUCT: Can be defined as all products that are produce in a country irrespective of the nationals that produce it. For example, all goods and services produced in Nigeria regardless of the nationality. If a Ghanian based in Nigeria produced output it is usually included in the GDP of Nigeria. GDP is calculated without deductions for depreciation.
3.2.3. TYPES OF GROSS DOMESTIC PRODUCT.
1. NOMINAL GDP: (GDP at current factor cost) equal GDP at current market price less indirect taxes net or subsidies.
2. REAL GDP or GDP at 1990 constant prices equals GDP at 1990 market prices less indirect taxes net of subsidies. It measures the performance of a country and it take care of inflation.
3. GDP at current market prices equals GDP at current factor cost plus indirect taxes net of subsidies. This is GDP valued at the market prices which purchasers pay for the goods and services they require or use.
4. GDP at 1990 market prices equal 1990 factor cost plus indirect taxes net of subsides.
5. OIL RENT; is defined as the price of crude oil in the international market multiplied by the quantities of oil.
6. RENTIER STATES; are economics that derive a large portion of their of revenues from external rents. Such rents accrue directly to the state and its leaders. (Beblawi and Luciani 1987).
3.2.4. THEORTICAL LITERATURE.
EXPORT AND ECONOMIC GROWTH
The relationship between export performance and economic growth is an area that has been gives much attention by development economists. This has broadly classified economists into two: i.e. those that support the hypothesis that export growth has a positive impact on economic growth and those that reject the hypothesis that there is no positive impact on the economic growth. Exports are engine of growth.
Awokuse (2008) argued that an increase in foreign demand for domestic exportable products can cause an overall growth in output via an increase employment and income in the exportable sectors.
Balassa (1978), Esfahani (1991),Rodrik (1999), exports can provide foreign exchange which is critical to imports capital and intermediate goods that in turn raise capital formation beneficial for meeting expansion of domestic production and thus stimulate output growth.
According to (Helpman, Krugman, (1985), Boomstorm (1986)) international trade promotes specialization in production of export products which in turn boosts the productivity level, and causes the general level of skills to rise in the export sector.
According to (Feder (1982), Lucus (1988), Edwards(1992)), export leads to re-allocation of resources from the inefficient non-trade sector to the trade sector and dissemination of the new management styles and production techniques through the whole economy.
{Giles,Williams, (2000a, 2000b)}, the entire economy would benefit due to the dynamic spillover of the export sector growth.
Chenery, Strout (1996), an increase in exports improves the balance of payment and enlarges the foreign monetary reserves, which enables the increase of investment goods import and facilities necessary for the domestic production growth.
Jung and marshal (1985), argue that growth in real exports tends to cause growth in real gross national product (GNP) for three reasons: first, export growth may represent an increase in the demand for the country’s output and thus serve to increase real GNP. Second, an increase in exports may loosen a binding foreign exchange constraint and allow increases in productivity intermediate imports and hence result in the growth of output. Third, export growth may result in enhanced efficiency and thus may lead to greater output.
3.2.5. EXPORT LED ECONOMIC GROWTH.
The notion of trade as an engine of growth is given much emphasis by many economists. The ideal that international trade brings economic growth increases the welfare of a nation started during the 17th century by a group of merchants, government officials and philosophers who advocated on economic philosophy known as mercantilism. For a nation to become and powerful, it has to export more than it imports where the resulting export surplus is used to purchase precious metals like gold and silver. The government in its power has control imports and stimulates the nation’s exports.
Adam Smith attacked the main mercantilist’s views and proposed the classical theory of international trade based on the concept of absolute advantage model. According to him, stock of human, man-made and natural resources rather than stock of precious metals were the true wealth of a nation and argued that the wealth of a nation can be expanded if the government would abandon mercantilist controls. In addition, he showed that trade can make a nation better off without making another worse off.( Debel 2002).
A model of comparative advantage was later articulated by David Ricardo to replace the principle of absolute advantage. According to this model, a country will specialized in the production of which it’s had in abundant and export the commodity. I.e. the commodity that it can produce at the lowest relative cost.
Also, J.S. Mill formulated a theory, the principle pf reciprocal demand and later developed by Edgeworth and Marshall. Both demand and supply conditions which determine the terms of trade and hence trade between countries.
The proponents of the traditional theory of trade argues that trade can contribute largely to the development of primary exporting countries. However, other economists strongly believe that the accrual of the gains from international trade is biased in favour of the advanced industrial countries and that foreign trade has inhibited industrial development in poor nations. These economists contend that international trade as being irrelevant for developing nations and the development process.
There are two policies adopted by many developing countries namely, import substitution and export promotion.
Propents of the view that trade brings development policies encourage outward looking development policies (Export promotion). According to Todaro (1994), the outward looking development policies “encourage not only free trade but also free movement of capital, workers, enterprises and students, the multinational enterprises, and open system of communication”.
In contrast, opponents of the traditional view advocate an inward-looking development policy. This policy stresses the need for less developed countries to implement their own styles of development and adopt indigenous technologies appropriate to their resource endowment.
The factor endowment theory of Eli Hecksher andBerti Ohlin (H-O), of external trade evolved. According to this theory, different relative proportions and countries have different endowments of factors of production. Some countries have large amounts of capital (capital abundant) while others have little capital and much labour (labour abundant). This theory argued that each country has a comparative advantage in that commodity which uses the country’s abundant factor. Capital abundant countries should specialize in the production and export of capital-intensive goods while labour abundant countries should specialize in the production and export of labour-intensive commodities. This theory encouraged third world countries to focus on their labour and land intensive primary product exports.
However, it was argued that by exchanging these primary products for manufactured goods of the developed countries, third world nations could realize enormous benefits obtained from trade with the richer nations. (Debel 2002)
3.2.6 ECONOMIC GROWTH THEORY
Economic growth is generally regarded as a necessary component of any development strategy and given population growth, economic growth is necessary just to maintain the material quality of life at existing levels.
Harrod-domar theory is used to explain economic growth which is the main essential features of economically growing without a corresponding economic development. The theory shows that there is a positive relationship between saving and growth while there is a negative relationship between growth capital/output ratio. Growth can be mathematically expressed as G =s/k, where k=incremental capital output, s = the average propensity to save.
Also, Solow’s theory of economic growth shows that growth is based on output, i.e. the combination of labor and capital. When inputs is doubled, then there will be increase in production too. It can be mathematically written as y= af (l,k). The solow growth model assumes that the marginal product of capital decreases with the amount of capital in the economy. In long run, when an economy accumulates more capital, the capital stock (gk) approaches zero and the growth rate is determined by technical progress and growth in the labor force. While in the short-run, an economy that accumulates capital faster will enjoy a higher level of output.
Furthermore, the traditional neoclassical growth theory assumes that output growth occurs from three factors namely: first, increase in labor quality and quantity i.e. through population growth and education. Second, increase in capital i.e. through saving and investment. Third, improvement in technology (Odularu 2010).
3.3 EMPIRICAL LITERATURE
The contribution of export growth to economic growth has been tested by different economists using different econometric techniques.
Akanni (2007), examines if oil exporting countries grows as their earnings on oil rents increases, using PC-GIVE10, (ordinary least squares regression). The result shows that there is a positive and significant relationship between investment and economic growth and also on oil rents. In conclusion, oil rents in most rich oil developing countries in Africa do not promote economic growth.
Idowu (2005), a causality approach examines that there is a relationship between exports and economic growth in Nigeria. Using Johansens multivariate co-integration technique. The result shows that there is stationary relationship between exports and gross domestic product (GDP). There is feedback causality between exports and economic growth.
Hadi, etal (2009), investigate the impact of income generated from oil exports on economic growth in Iran. Using cobb-douglas production function, the economy of Iran adjusts fast to shocks and there is progress in technology in Iran. Oil exports contribute to real income through real capital accumulation.
Mohammed and Amirahi (2010), examines if factors such as oil price, world oil supply and demand, production capacities enhanced export growth in Iran using Error Correction Version of ARDL. It was found that there is an inverse relationship between oil products consumption and oil export revenues. Iran had a significant positive growth in its oil revenues.
Odularu (2010), used Harrod-Domar theory and solow’s theory of economic growth used Ordinary Least Square regression and cobb-douglas production function were employed to test the impact of crude oil on Nigeria economic performance. The result shows that crude oil production contributed to economic growth but have no significant improvement on economy growth of Nigeria.
Samad (2011), tested the hypothesis that there exist relationship between exports and economic growth in Algeria, using VEC Granger causality and block exogeneity Wald test. Augmented Dickey-Fuller test was used to run the regression. The result shows that the variables are non-stationary. It was concluded that there is causal relationship between economic growth, exports and imports.
Khaled, etal (2010), tested if export enhanced economic growth in Libya Arab. Using co-integration with granger causality. The results show that income, exports, and relative prices are co integrated. It was concluded that both export and growth are related to each other.
Muhammad, Sampata(1997), investigate if there is clear proved that exports led to economic growth, through the use of granger(1969)causality, ADF is used test for co-integration. The result shows that unidirectional causality from exports to GDP with positive relationship between the two variables are found.
Rahmaddi (2011), examine the exports and economic growth nexus in Indonesia employing vector autoregressive (VAR) model. The findings indicate the significance of both exports and economic growth to economy of Indonesia as indicated in GIRF analysis. It was concluded that exports and economic growth exhibits bidirectional causal structure, which is Export Led Growth in long-run and Growth Led Export in short-run.
Gemechu (2002), using co integration and error correction approaches in the regression analysis examine the policies and test for the relationship between exports and economic growth. The result shows that export significantly affected economic growth in the short-run. There is causality runs from exports to economic growth.
3.4. THEORETICAL FRAMEWORK.
From the theoretical and empirical literature, reviewed on the impact of oil export on the Nigeria economic growth, the theoretical framework for this research work was established based on the reviews of these authors such as (odularu 2008), (Odularu, Chinedu 2009),(Debel 2002), the models are specified as follows:
(Odularu 2008) specified the model as follows:
RGDP= F(L, K, DC,E)
RGDP= Real Gross Domestic Product.
L= Labour
K=Capital
DC=Domestic Consumption of Crude oil
E= Crude oil export.
Also, (Odularu,Chinedu 2009), specified the model as follows:
Y= F(K, L, E)
Where:
Y = Output
K = Gross Fixed Capital Formation.
L = Labour force.
E = Energy.
In Debel (2002), the model was specified as:
Yt = F (Lt, Kt, Xt)
Where:
Y= Aggregate output.
Lt= Conventional labour.
Kt = Capital inputs.
Xt = Real exports (which is introduced as additional input).
According to Izani (2002), the model was specified as:
X = G (Ki,Li).
Where:
X = output in the domestic export sector.
Ki = capital stock in sector.
Li = Labour force in sector.
F= conventional production functions describing the sector.
However, in relation to this study of examining growth in Nigeria, the model shall be specified in the next chapter in line with the review and theoretical framework established above.
CHAPTER FOUR
4.0 INTRODUCTION
For any research work to be conducted in a scientific way, it is necessary to have a method through which information will be obtained or collected and variables will be analysed and measured. Therefore, this chapter seeks to explain the sample size, the procedures and method employed in data analysis of the study.

4.1 MODEL SPECIFICATION
The model employed in this study is multiple regression models. The model is expressed as follows:
RGDP = f (L, k, DC, EX, P).
Where;
L = Labour
DC = Domestic consumption of crude oil
EX = Crude oil export
TP = Total production of crude oil
The dependent variable is Real Gross Domestic Product (RGDP) and independent variables are: Labour (L), Capital (K), and Domestic Consumption of crude oil (DC), crude oil export (EX), Total Production of crude oil (TP). RGDP at constant prices 1974 to 1980 using 1977/78 constant basic prices and 1981 to 2006 constant basic prices. DC, EX, TP are in barrels.
Rewriting the above model in linear form include RGDP = β0 + β1L + β2k + β3DC + β4EX + βTP + µt.
Where:β0 = Intercept
Β1 – β5 = coefficients
µ = stochastic term or error term at time t.
Priori expectation: the expected signs of the coefficients of the explanatory variables are: β1>0, β2>0, β3>0, β4>0, β5>0.
RGDP is used as a measure of GDP because it takes care of inflation and it has been used by other authors such as (Odularu, 2008), (Odularu, Chinedu 2009), and there is easy access to RGDP data in Nigeria. Since real GDP grows over time, it is important to measure the growth rate. The following formular has been used to calculate the growth rate of real GDP
EG = RGDP of current yr – RGDP of Previous yr x 100.
RGDP of Previous yr
EG – represent Economic Growth.
4.2 SOURCES OF DATA
The data used for both dependent variable and independents variables are obtained from the Central Bank of Nigeria Statistical Bulletin Volume 18, 2007 which is a time series data.
4.3 ECONOMETRICS TECHNIQUES
The econometrics techniques employed in this study is ordinary least square in form of multiple linear regression to the relative regression coefficients.
4.4 SAMPLING TECHNIQUE
The sampling method employed for this study is sampling. The sample size of 36years has been drawn from 1970 – 2008.
CHAPTER FIVE
DATA PRESENTATION AND INTERPRETATION OF RESULTS

The table below represent data for labour, capital, RGDP, Economic growth rate, Domestic Consumption of crude oil, crude oil exports and total production of crude oil in Nigeria, from 1970 – 2008.
Year L K RGDP DC EX TP EG
1970 20.39 17126 4, 219.000 12, 234 383, 455 395, 689
1971 20.85 22437 4, 715.500 16, 44 542, 542 558, 689 11.79%
1972 21.32 23221 4, 892.800 14, 655 650, 640 665, 295 3.76%
1973 21.82 22775 5, 310.00 23, 752 695, 627 719, 379 8.53%
1974 22.36 22708 15, 919.700 27, 610 795, 710 823, 320 199.81%
1975 22.96 37802 27, 172.00 32, 570 627, 638 660, 148 70.68%
1976 23.61 53153 29, 148.500 21, 236 736, 822 758, 058 7.27%
1977 24.31 63145 31, 528.300 50, 815 715, 240 766, 055 8.16%
1978 25.05 60609 29, 212.400 22, 199 674, 125 696, 324 – 7.359%
1979 25.78 48476 29, 948.000 37, 778 807, 685 845, 463 5.52%
1980 26.50 60428 31, 545.00 103, 857 656, 260 760, 117 5.33%
1981 27.17 75597 205, 222.100 56, 196 496, 095 525, 291 550.57%
1982 27.83 59068 199, 688.300 68, 980 401, 658 470, 638 – 2.70%
1983 28.48 32811 165, 593.000 58, 930 392, 031 450, 580 – 17.07%
1984 29.15 17790 183, 563.000 56, 907 450, 580 507, 487 10.85%
1985 29.87 18022 201, 036.300 60, 508 486, 580 547, 088 9.52%
1986 30.63 25582 205, 971.400 49, 345 486, 584 535, 929 2.45%
1987 31.42 24601 206, 805.500 92, 755 390, 514 483, 269 0.40%
1988 32.26 22929 219, 375.600 93, 805 435, 797 529, 602 6.08%
1989 33.11 22392 236, 729.600 103, 427 522, 481 625, 908 7.91%
1990 33.98 37411 267, 500.000 112, 310 548, 249 660,559 13.02%
1991 35.03 38289 265, 379.100 104, 012 585, 838 689, 850 – 0.81%
1992 36.10 39464 271, 365.500 107, 040 604, 300 711, 340 2.26%
1993 37.20 45715 274, 833.300 127, 786 563, 614 691, 400 1.28%
1994 38.32 35437 275, 450.000 118, 146 578, 044 696, 190 0.22%
1995 39.46 30903 281, 407.400 98, 500 616, 900 715, 400 2.16%
1996 40.63 33872 293, 745.400 91, 500 648, 690 715, 400 4.38%
1997 41.83 48570 302, 022.500 86, 370 673, 340 740, 190 2.82%
1998 43.04 39380 310, 690.10 88, 620 687, 390 759, 710 2.94%
1999 44.26 41613 312, 183.5 112, 410 666, 490 776, 010 0.42%
2000 45.49 43797 329, 178.7 109, 800 688, 080 778, 900 5.44%
2001 46.84 34470 356, 994.3 142, 220 674, 950 817, 150 8.45%
2002 48.19 42793 433, 203.5 164, 250 490, 810 655, 060 21.35%
2003 49.56 69841 477, 533.0 164, 250 736, 400 900, 600 10.23%
2004 50.94 105239 527.578 164, 250 490, 810 655, 060 10.48%
2005 50.94 134164 561.931.4 73, 105.90 846, 179 919, 285 6.03%
2006 51.49 143164 595, 821.6 164, 200 656, 090 813, 950 6.45%
2007 52.86 161123 634.251 – – – 6.45%
Sources: CBN Statistical Bulletin. Volume 18, 2007.

5.2 INTERPRETATION & DISCUSSION OF RESULTS
The estimated ordinary least square (OLS) regression equation is shown below:
RGDP = β0 + β1 2 + β2k + β3 DC + β4 EX + β5 TP + μt.
RGDP = 218.47 – 9.25 + .001 + .010 + .008 – .008 + µt.
T – Values = 2.67 – 2.84, 1.64, 4.07, .008 + µt.
The detailed results are presented in the appendix from the regression results, the multiple R is .671 shows that the degree of association between the (dependent variable) and (independent variable) is about 67.1% (strong association), again the R2 is 0.450, this shows that 45% of the changes in RGDP are explained jointly by variation of the explanatory variables (labour, capital, domestic consumption, export of crude oil, total production ) in the model, the remaining 55% accounted for shows other external factors which are not capture in the model
Furthermore, the f – statistics is 4.906 and is significant at 5% level, indicating that the model is adequate, from the regression results obtained; we can see that there is a negative relationship between Labor, total production and RGDP. This is because the coefficients of the explanatory variable are said to be negative which are -9.25 and -008 respectively. But the relationships are significance at 5% level of significance i.e. .008 and.000
Also, there exists a positive relationship between capital, Domestic consumption, Export of crude oil and Real Gross Domestic Consumption, because of the positive signs of the regression coefficient, which are .001, .010, .008 respectively. However, the relationships are significance, except for capital which is insignificant.
5.2 HYPOTHESIS TESTING
Hypothesis is tested in order to confirm the impact of oil export on economic growth in Nigeria. To test the relationship between labour, capital, oil export, domestic consumption, total production and Real Gross Domestic Product. The empirical results on which the analysis was based are presented in the table 5.2 below, having regressed the computed data in 5.1 above; the notable items in the regression can be seen in the table 5.2 below.
Table 5.2, Regression
variable Co – efficient T – Statistics Significance
Constant 218.47 2.668 – 0.12
Labour -9.25 – -2.842 .008
Capital .001 1.644 .111
Domestic Consumption .010 4.069 .000
Export of crude oil .008 4.216 .000
Total production – .008 – -4.281 .000
Source: Computer output.

R = .671, R2 = .450, Adjusted R2 = .358
F = 4.91 (.002), significant at 5%
From the table above, the co – efficient of Labour, Capital, Domestic Consumption, export of Crude oil, total production are – 9.25, .001, 010, .008 and – .008 respectively while the T – values are -2.84, 1.64, 4.07, 4.22 and -4.28 respectively and the co-efficient of determination (R2) is 0.450. The significant t values of the co-efficient of labour, Capital Domestic Consumption, export of crude oil and total Production are .008, .111, .000, .000 consequently, which indicates that the co-efficient .008, .000, .000 are statistically significant at 1%. Also the f – ratio and f significant ratio are 4.91 and .002 respectively, suggesting the adequacy of the model.
The test hypothesis comprises the null (H0) and the alternative (Hi). The null hypothesis (Ho) states that : “There is no statistical significally relationship between oil export and economic growth in Nigeria”. While the alternative hypothesis (Hi) state that: “There is statistical significant relationship between oil export and economic growth in Nigeria”. From the result, labour, domestic consumption, export crude oil and total production are statistically significant and positive except for labour which has a negative co-efficient. Capital is statistically insignificant.
From the analysis the research show that there is significant relationship between oil export and economic growth in Nigeria. Therefore, we accept the alternative hypothesis (Hi) which state that there is statistical significant relationship between oil export and economic growth in Nigeria, and reject null hypothesis (Ho) which state that there is no statistical significant relationship between oil export and economic growth in Nigeria.
It is possible to measure the proportion of the total variation in the RGDP that has been explained by the influence of Labour, Capital, Domestic consumption, export crude oil and total production of independent variables. This is estimated by analyzing the value of R2 (co-efficient of determination) which is .045; this means that, the variation in the RGDP can be explained by 45%. Thus the remaining variations of 55% that determine RGDP are outside the model i.e. exogenous factors to the model regressed.
It is obvious that there is significant relationship between oil export and economic growth as can be seen from the result obtained and the variables respectively. This is in the line with the literature reviewed in chapter three. For example [(Help man), Krugman, (1985), Boom storm (1986)], argues that international trade promotes specialization in production of export products which in turn boosts the productivity level, and causes the general level of skills to rise in the export sector. Jung and marshal (1985), argue that growth in real exports tend to cause growth in real gross national product (GNP) for three reasons: (i) export growth may represent an in increase in the demand for the country’s output and thus serve to increase real GNP (ii) An increase in exports may loosen a binding foreign exchange constraint and allow increases in productivity intermediate imports and hence results in the growth of output. (iii) Export growth may result in enhanced efficiency and thus may lead to greater output.
Harrod-Domar theory shows that there is a positive relationship between saving and growth while there is a negative relationship between growth and capital output ratio. The traditional neoclassical growth theory assumes that output growth occurs from three factors namely. (1) Increase in labour quality and quantity i.e. through population growth and Education. (2) Increase in capital i.e. through saving and investment. (3) Improvement in technology. Also, according to (Odularu, 2008), oil production brings improvement on economy growth of Nigeria.

CHAPTER SIX
SUMMARY OF FINDINGS, CONCLUSIONS AND RECOMMENDATIONS

6.1 SUMMARY OF FINDINGS
A sample size of thirty – six years (36) that ranged from 1970 to 2006 had been used in this study to examine the impact of oil export on economic in Nigeria. The method of ordinary least square (OLS) regression has been adopted in carrying out the research work. It was found that there is positive relationship between domestic consumption, capital export of crude oil and RGDP and negative relationship between labour total production and RGDP. All of them are significant except for capital which is insignificant.. It is clear that 45% variation in RGDP can be explained by labour, capital, domestic consumption, oil export and total production, while the total remaining 55% are determined by other variables outside the model. There is about 67% degree of association between all the variables which indicate a strong relation.

6.2 CONCLUSION
Drawing from the empirical investigation into the impact of oil export on economic growth in Nigeria using RGDP as the dependent variable and Labour, Capital Domestic Consumption, oil export and Total Production as independent variables from 1970 – 2006, it emerged from the study that there is significant relationship between labour, domestic consumption, oil export total production and RGDP. In addition, there exist negative relationship between labour, total production and RGDP, also there exist positive relationship between domestic consumption, capital and RGDP
Finally, oil export has significant impact on economic growth in Nigeria.
6.3 RECOMMENDATIONS
Based on the findings of this study, it is important to provide a set of policy recommendation that would be applicable to the Nigerian economy.
1. The Nigerian National Petroleum Corporation (NNPC) should diversify its export baskets through downstream production; this will enhance the refined petroleum for exports.
2. The government should encourage more private company participation so that better equipped refineries can be built and the cost of refining crude oil will reduce.
3. Security should be boosted on the high sea where crude oil products are being smuggled. This will help reduce the loss from illegal export of crude oil products.
4. Government should give immediate attention to the indigenous of the region where crude oil is being extracted from. This will reduce the unrest in the region.
5. Government should establish an institution that will ensure that the multinational companies are socially responsible to their host company.
6. Government should improve on fighting corruption, arrest and prosecute corrupt public office holders.
REFERENCES
Acha. J “The Role of oil in Nigerian Economy”. http://Ezine Articles. Com/? Expert= AchaJoy.

Adedipe. B. (2004), “The Impact of Oil on Nigeria’s Economic Policy Formulation”.

Akanni, O.P (2004) “Oil Wealth and Economic Growth in Oil Exporting African countries”. AERC Research paper 170.

Answer .S.M, R.K. Sampath (1997) “Exports and Economic Growth” Presented at Western Agricultural Economics Association Annual meeting. July.

Bullion publication of CBN, vol.32, No.2, April-June, 2008.

Central Bank of Nigeria Statistical Bulletin, vol. 18, December 2007.

Chukwu and etal (2010) “Oil Price Distortions and their short and Long-Run impacts on the Nigerian Economy”. MPRA paper No. 24434, August.

Debel .G. (2002), “Exports and Economic Growth in Ethiopia”. An Empirical Investigation.

Ehanmo .J. N. (2002), “Is sustainable Development Compatible with Economic Growth in An Oil Dominated developing economy?” A case study of Nigeria.

Elbeydi and etal (2010), “The relationship between Export and Economic Growth in Libya Arab Jamairiya”.Theoretical and Applied Economics, vol. xv11,No.1(542), pp. 67-76.

Esfahani K., M.H Pesaran (2009) “Oil Exports and the Iranian Economy”. IZA Discussion paper No. 4537 October.

Odularu, .G.O (2008), “Crude oil and Nigerian Economic Performance”.

Odularu, .G.O., C. Okonkwo, (2009), “Does Energy Consumption Contribute to the Economic Performance?” Empirical Evidence from Nigeria.

Rahmadi .R. (2011) “Exports and Economic Growth in Indonesian”A causality approach based on Multi-Vitiate Error Correction Model.Journal of International Development and Cooperation, vol.17, No.2, pp.53-73.

Samad .A. (2011) “Exploring Exports and Economic Growth Causality in Algeria”. Journal of Economic and Behavioural Studies, Vol. 2. No 3, Pp, 92 – 96. March.

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