International Journal of Economics and Finance; Vol. 7, No. 11; 2015 ISSN 1916-971XE-ISSN 1916-9728 Published by Canadian Center of Science and Education 10 Policy, Institutions and Non-Oil Exports: Evidence from Nigeria Martins Iyoboyi 1 & Abdelrasaq Na-Allah 1 1 Department of Economics and Development Studies, Federal University Dutsinma, Nigeria Correspondence: Martins Iyoboyi, Department of Economics and Development Studies, Federal University Dutsinma, Nigeria. Tel: 234-803-795-4183. E-mail: miyoboyi@fudutsinma.edu.ng; miyoboyi@gmail.com Received: June 11, 2015 Accepted: September 6, 2015 Online Published: October 25, 2015 doi:10.5539/ijef.v7n11p10 URL: http://dx.doi.org/10.5539/ijef.v7n11p10 Abstract In this paper, the impact of policy and institutions on non-oil exports in Nigeria is investigated, using data from secondary sources for the period 1961-2012, and implemented through the autoregressive distributed lag framework. Non-oil exports were found to have a long-run equilibrium relationship with policy and institutional variables. Money supply and exchange rate were found to be positively associated with and statistically significant determinants of non-oil exports in the long and short run. Fiscal deficit, interest rate, „constraints on the executive‟ and openness were found to be inversely related to non-oil exports in both the short and long run. While inflation was found to be negatively related to non-oil exports in the short run, it is the reverse in the long run. An enhanced political institutional framework is required, that is attuned to growth in the non-oil sector of the economy, as a mechanism for improving the country‟s non-oil exports. Keywords: Autoregressive distributed lag model, fiscal policy, institutions, monetary policy, non-oil exports 1. Introduction The primacy of exports is aptly encapsulated in the export-led growth hypothesis which considers increased export earnings as an “engine of economic growth” due to its capacity to induce employment, improve productivity, reduce prices, and improve a country‟s reserves (McCombie & Thirlwall, 1994; Goldstein & Pevehouse, 2008). Due to the high proportions of exports of developing countries comprising natural resources or mining-industry goods, developing the non-oil sector becomes a sure way of combating undesirable consequences such as the Dutch Disease while warranting policies targeted at higher export performance (Sorsa, 1999). For Nigeria, a country rich in mineral resources, a booming oil resource sector has tended to draw capital and labour away from the country‟s agricultural and manufacturing sectors, leading over time to sharp declines in non-oil exports, with the attendant consequences of higher price levels, worsening balance of payments, unemployment and falling living standards. The patterns of Nigeria‟s trade flows between 1980 and 2012 are shown in Figures 1 and 2. 1 2 3 4 5 6 7 8 9 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 Year Percentage Figure 1. Non-oil exports as a percentage of total exports (1981-2012)