Economic Globalization: Its Impact on the Growth of Non-Oil Supply in Nigeria

Abstract

The study examined the impact of economic globalization on the growth of non oil supply in Nigeria.  Specifically, it sought to find out how economic globalization has impacted on changing the structure of domestic production in favour of non oil supply in Nigeria in the period 1970-2011. The study employed ordinary least square (OLS) and Vector Error Correction Model (VEC) in a bid to delineate the long run relationship between growth of non-oil supply (NOX), economic globalization (proxied by index of openness) (OPN), relative prices (RP), gross domestic product (GDP), capital goods import (CG), world income (WI), exchange rate (EXR) and oil export (OX).  The results show that a 1% increase in economic globalization will grow non-oil supply by 36% but t-statistics of 1.115 is indicative of an insignificant impact both in the long run and short run.  Equally, a 1% increase each in GDP, RP, CG, and EXR will grow NOX by 108%, 012%, 004% and 08% respectively, while a 1% increase in WI and OX will depress the NOX by 149% and 02% respectively. The depressing effect of WI on NOX is indicative that WI elasticity for Nigerian NOX is negative, that is, as WI grows tastes and preferences change in favour of non Nigerian NOX.  The weak impact of CG in explaining the contemporaneous changes in the growth of NOX implies that the latter may increase in the short run without necessarily increasing the importation of the former – a good case for dependency driven Nigerian economy. Though diversification and increased openness are recommended, improving on the quality, packaging and marketing of Nigeria’s NOX is imperative in order to reverse the WI growth-Nigerian NOX demand relation and so gain from greater integration and trade.

Keywords: Globalization, Non-oil supply, oil export, openness, GDP