Interface of Services Sector and Economic Growth in Nigeria: An Empirical Investigation (1981-2017)

Abstract

This study empirically explored economic growth implications of services sector in Nigeria. Time series data for the period 1981 to 2017 were extracted from the Central Bank of Nigeria (CBN) Statistical Bulletins and National Bureau of Statistics (NBS). Data were analyzed using Augumented Dickey Fuller (ADF) unit root test, Phillips-Perron (PP) unit root test, Johansen Cointegration test  and Ordinary Least Square (OLS) multiple regression analysis. Empirical findings from the study revealed that financial services (FINS), real estate services (REES)), utilities (UTS), professional, scientific and technical services (PSTS) and information and communication services (IACS) have statistically significant positive relationships with economic growth (RGDP) in Nigeria. A one percent increment in FINS, REES, UTS, PSTS and IACS would cause economic growth to increase by 50.57, 31.76, 22.58, 81.79 and 31.06 percent respectively. The results further showed that education services (EDUCS), human health and social services (HHSS) and inflation rate (INFR) have statistically significant negative correlation with economic growth. A one percent upward adjustment in EDUCS, HHSS and INFR would bring about 0.077, 38.71 and 13.61 percent reductions in economic growth. Based on the findings, government at all levels should offer tariff and tax reduction for investment projects in many services sub-sectors like hotels and restaurants, hospitals, shipping, railways, tourism, telecommunications, distribution and others; public and private policies should be directed towards the adoption of an overall reforming plan where capital and knowledge intensive services should play a prominent role in order to enhance the productivity in the services sector; and there should be creation of enabling environment for services sector to thrive by the various tiers of government through the provision of key infrastructural amenities such as uninterrupted power supply, good roads network and regular water supply. Finally, most services’ subsectors, and especially distribution services should invest much more heavily in knowledge and information and communication technology within their supply chain in order to accelerate the rate of economic growth.

Keywords: Services sector, Economic growth, Ordinary least square, Unit root test, Johansen Cointegration test, Nigeria

DOI: 10.7176/JPID/49-06

Publication date: April 30^th 2019