The Impact of Macroeconomic Variables on Non-Oil Exports Performance in Nigeria, 1986-2010

Abstract

This study investigated the impact of macroeconomic variables on the performance of the Nigerian economy from 1986-2010. In carrying out the study we employed the ordinary least square (OLS) and co-integration test analysis based on the Engle Grenger (1987) co-integration analysis, in order to establish a long run relationship among the variables employed in this study. The study was guided by four research objectives and hypotheses. Given the influences other variables have on the performance of the Nigerian economy, we discriminately incorporated non-oil export, agricultural sector, manufacturing sub-sector and gross domestic product as the dependent variables while exchange rate, interest rate, government capital expenditure and government recurrent expenditure were the independent variables. The result of our analysis indicates that exchange rate, government capital expenditure and government recurrent expenditure are positively related to non-oil export, agricultural sector, manufacturing sub-sector and gross domestic product, while interest rate is negatively related to non-oil export, agricultural sector, manufacturing sub-sector and gross domestic product. The four formulated null hypotheses were rejected while the alternative hypotheses were accepted. Based on the findings of this study, we therefore recommended that investment should be increased in the areas of non-oil exports, agricultural sector and manufacturing sub sector because our result shows that they are related to the macroeconomic variables used except interest rate. Though government capital and recurrent expenditures, maintained positive relationship with non-oil exports, agricultural sector, manufacturing sub-sector and gross domestic product but had made very, almost insignificant impact on them, therefore government should increase the budget allocation of capital and recurrent expenditures and continue to force down interest rate in order to attract potential investors. Government should increase lending to agricultural sector and manufacturing sub-sector and also place less emphasis on oil sector so as to concentrate more on other aspects of the real sector of the economy. This is because increase in real sector investment, reduction in interest rate, increase budgetary allocation to government capital and recurrent expenditures are ways of improving the performance of the Nigerian economy.

Keywords: Non-Oil Export, Exchange Rate, Interest Rate, Gross Domestic Product Government Capital and Recurrent Expenditure.