Growth of Non-Oil Sectors: A Key to Diversification and Economic Performance in Nigeria

Abstract

Informed by the monolithic economy since 1980’s which has been persistently threatened by the instability in crude oil prices in the international market , government has come to terms with the growing need for economic diversification. This paper examined the growth of Non-oil sector to act as a key to diversification and performance of the economy. To achieve this objective, we employ the tool of Auto-regressive Distributed Lag (ARDL) and VECM Granger causality model to estimate the short run and the long run parameters as well as the direction of causation of the variables. The data for the analysis were sourced from Central Bank of Nigeria (CBN) statistical bulletin, National Bureau of Statistics and World Development Indicators CD Rom. The Ng-Perron unit root test confirmed that the variables have a combination of I(0) and I(1) which justifies the reason for adopting ARDL. The results confirmed the existence of cointegration among the variables. The granger causality results showed that agricultural component, manufacturing component and telecommunication component are statistically significant and Granger-caused economic growth at 5 percent significance level. The long run parameters indicated that agriculture and telecommunication components are positively contributing to GDP, manufacturing components turned out negative though significant. This is an indication of un-explorative nature and the neglect of the sector. The Error Correction Mechanism which shows the speed of adjustment from short to long run is negative, statistically significant and hovered around144.6%. In order to attain the path of growth of the economy, we recommend that the government should realise effective macro-economic policies along with momentous improvements in the structure and functioning systems of governance for stabilising economic growth along with the diversification of the economy and economic reforms towards the development of the non-oil sectors.

Keywords: Economic performance, Non-oil sector, Diversification, Oil sector, GDP