EXPORT MARKET PENETRATION OF NIGERIAN PRODUCTS: THE MYTHS AND REALITIES

CHAPTER ONE

BACKGROUND OF THE STUDY

1.1     INTRODUCTION

The ultimate aim of the government of any country is to achieve a well-developed economy which can be depicted by the realization of macroeconomic objectives of equitable income distribution, prices stability and economic growth. Consequently, various policies and strategies can be adopted in the realization of these objectives. While some countries prefer inward looking import substitution model because it enables them to evolve their own styles of development and become master of their own fate, others believes in the adoption of export oriented strategy. Nigeria like many other developing countries had at one time or the other adopted the policy of import replacement under the philosophy of economic nationalism, have now switched to export promotion strategy because it was realized that this was more effective than import substitution in achieving a faster growth and structural upgrading of an economy. Export promotion strategy is commonly referred to by many scholars as governmental efforts to expand the volume of country's export through export incentives in form of public subsidies, tax rebates, special credit lines and other kinds of financial and non-financial-measures designed to promote a greater level of economicactivities in export industries so as to generate more foreign exchange and improve the current account of the balance of payments Todaro, (2003). It has been established in the literature that export trade is an engine of growth. It increases foreign exchange earnings, improves balance of payment position, creates employment and development of export oriented industries in the manufacturing sector and improves government revenue through taxes, levies and tariffs. These benefits will eventually transform into better living condition for the nationals of the exporting economy since foreign exchange derived would contribute to meeting their needs for some essential goods and services. However, before these benefits can be fully realized, the structure and direction of these exports must be carefully tailored such that the economy will not depend on only one sector for the supply of needed foreign exchange. In the years immediately after independence, the Nigerian economy was dependent on export of agricultural commodities for survival. However, as a result of the setting up of commodity board by the federal government to act as buying agent, this board went about fixing prices arbitrarily and below market prices, therefore, farmers moved out of the business because they no longer found it profitable. The policy effect was therefore negative development of exports in the agricultural sector. Moreover, available data revealed that the manufacturing sub sector of the economy had often been making minimal contribution to export. The reason that can be adduced for this had been neglect of the sector by colonial masters before independence in favour of export of industrial· raw-materials for their domestic industries. Even after independence, poor infrastructure, lack of adequate finance, high cost of production, and low market penetration due to poor quality control were factors constraining the development of manufacturing exports.

1.2    STATEMENT OF THE PROBLEMS/BACKGROUND OF STUDY

The Nigerian economy remains under developed and backward. The situation is particularly disturbing given the country's abundance of human and natural resources. In the 1960's and early 1970s, Nigeria, Malaysia, Indonesia, Taiwan, Singapore and South Korea had similar per capital income, Gross Domestic product (GOP) growth rate, and under developed political structures. Today, the "Asian Tigers" (as the South East Asian countries are popularly know I have escaped under-development and poverty partly because of the way in which their economies have been managed (EKPO, 2003).The Nigerian economy on the other hand has experienced all the phases of typical business cycle; decline, depression and/ or recession, recovery and boom. However, none of the booms associated with agriculture, oil and financial sector has resulted in any significant restructuring or transformation of the economy as they were linked to the real sector. The result is that; Nigeria has been unable to maximize the benefits associated with economic booms.

Currently, the government of Nigeria is vigorously pursuing a market-determined interest rateregime/ system but not undermining the importance of export, a policy which does not permit a direct state intervention in the general interest of the economy. Therefore, the central macroeconomics issues in the Nigerian economy thus, have to do with the problems of persistent unemployment, high rates of inflation, sluggish growth in output. exchange rate, instability, low capacity utilization, debt burden, large fiscal deficits and interest rate fluctuations.

Given the serious concerned expressed by all stakeholders and Federal Government, there is the pressing need to conduct an empirical investigation of macroeconomic and real interest rate spread in Nigeria in order to ascertain the cause as well as proffer some policy suggestions. In the light of the above, every country would have to achieve a growth rate that is consistent with her balance of payments equilibrium on current account, and with its overall balance on the current and capital account. Since trade (with emphasis on export) is the major engine of economic growth, then, export promotions must therefore, be the focus of any country that intends to achieve a desirable level of economic growth of many countries in the world. This has been a lesson for most developing countries particularly, Nigeria. Therefore, the issue is whether diversification should be undertaken in the oil export sector or non-export sector of the economy. To determine this, a critical analysis of the export penetration will absolutely necessary,

1.3    AIM AND OBJECTIVES OF THE STUDY

The main aim of the study is to examine the impact of export penetration on Nigeria economic, while the specific objective are follows;

1. To examine the impact of infrastructural support put in place by the government to promote export programmes in Nigeria

ii.  To identified the penetration of Nigeria Products In International market

iii.  To investigate the challenges faced by exports programme In Nigeria

iv.To examine the impact of export on the value of the' country's output

1.4    JUSTIFICATION OF THE STUDY

This study is important because adequate understanding of importance of export market penetration will enhance economic growth and this will help the government relate policy thrust, geared towards prioritizing export promotion in their objectives, so that necessary economic development will be enhanced. Findings in this study will also help other economic thinkers, scholars in having a clear cut idea as to what constraint does export market causes in the economy.

1.5     RESEARCH QUESTIONS

The following are the research questions:

i.       Does export market penetration enhance the development of agricultural sector in Nigeria?

ii.  Does export promotion improve the level of economic development in Nigeria?

iii.Does exports market stimulate exchange rate in Nigeria

iv  Does financial sector impact positively on exports in Nigeria?

1.6     STATEMENT OF HYPOTHESES

In pursuance of the objectives of the study, the following hypothesis are imperative.

Ho:     There is no significant relationship between export market penetration and economic development

Hi:    There is significant relationship between export market penetration and economic develop

Ho:     There is no significant relationship between exchange rate, index of agricultural output, index of manufactural output, 'bank loans and exports.

Hi:     There is significant relationship between exchange rate, index of agricultural output, index of manufactural output, bank Loans and exports

1.7    METHODOLOGY OF THE STUDY

The methodology adapted in this partly comprises of theoretical and quantitative techniques. Data requirements for the study shall be obtained purely through secondary data. Such data include the various publications of the Central Bank of Nigeria (CBN), federal office of statistics (FOS), conference paper, journals etc. The data abstained through the secondary data would be analyzed using an econometric techniques, precisely regression analysis.

1.8 SCOPE OF THE STUDY

This study covers a period between 1990 - 2007. The choice of this

period is informed based on the structural transformation polices out in place by the government during the periods.

1.9     ORGANIZATION OF THE STUDY

This study is divided into five(5) chapters. Chapter one contains the introduction of the study while Chapter two is the review of relevant literature, chapter three examines the structure of export in Nigeria, while chapter four entails the research methodology, presentation and analysis of results. Chapter five summarizes the entire study and also brings out policy recommendations