Research Journal of Finance and Accounting www.iiste.org ISSN 2222-1697 (Paper) ISSN 2222-2847 (Online) Vol.4, No.19, 2013 144 Can Non-Oil Exports boost Agriculture Sector Performance in Nigeria? A Tale for Oil Independency Mustapha, Saidi Atanda 1 , Akinkuotu Oluwayemisi 2 , Shiro Abass Akanni 3 and Yusuf Ismaila Akanni 4 1. Mustapha, Saidi Atanda is a PhD Candidate in the Department of Economics and Statistics, University of Benin, Nigeria. 2. Akinkuotu Oluwayemisi is a PhD Candidate in the Department of Economics and Statistics, University of Benin, Nigeria. 3. Shiro, Abass Akanni is a seasoned Lecturer at the Department of Finance, University of Lagos, Nigeria. 4. Yusuf, Ismaila Akanni is a Senior Consultant at Access Global Consult, Palmgrove-Lagos, Nigeria. Abstract The study examines the effect of non-oil export on the agricultural sector performance in Nigerian economy using empirical evidence and modern research analysis. The bulk of non- oil export of Nigeria comes from agriculture and pre-processed products. Hence, non-oil export from perspective of efficiency-seeking indicates that non-oil export always aim at taking advantage of poor-efficient production condition and boost the productive edge of resources. There is a general believe that non-oil exports commodities has nothing to do with sectoral growth in Nigeria, this role is therefore the major focus of this study. Modern econometric analysis is used to validate if there is any relationship between non-oil export and sectoral performance, we also conducted unit root test to detect the risk of non stationarity of any of the variables involve in the model specified. Having tested for unit root, the paper also considers cointegration test and a parsimonious result of the least square estimate is presented. Lastly, a causality analysis of the relevant variables was undertaken in order to verify the relevance of non-oil export on growth in Nigeria. Interestingly, non-oil export commodities fail to enhance growth of the economy in recent findings, while agriculture, openness and exports promote growth in both the short and long run in our dear country. 1. Introduction Export earnings assume vital importance not only for developing, but also for developed countries. Developed countries mainly export capital and final goods, while the main part of export of developing countries consists of mining-industry goods especially natural resources. According to export-led growth hypothesis increased export can perform the role of “engine of economic growth” because it can increase employment, create profit, trigger greater productivity and lead to rise in accumulation of reserves allowing a country to balance their finances (Emilio (2001), Goldstein and Pevehouse (2008), Gibson and Michael (1992), McCombie and Thirlwall (1994)). In this context there are some challenges for countries with natural resource abundance such as oil in comparison with other countries. The main point is that in parallel with windfall of oil revenues these countries have to pay more attention to the development of the non-oil sector as well as its export performance (Sorsa, 1999)). Because in most of the cases, oil driven economic development leads to some undesirable consequences such as Dutch Disease in the oil rich countries like Nigeria. In this regard Dutch Disease concept provides certain link between the real exchange rate and non-oil export. According to this concept the appreciation of a country’s real exchange rate caused by the sharp rise in export of a booming resource sector draws capital and labour away from a country’s manufacturing and agricultural sectors, which can lead to a decline in exports of agricultural and manufactured goods and inflate the price of non-tradable goods (Corden (1982) and Corden and Nearly (1984)). If we divide overall export of oil rich countries into oil and non-oil exports appreciation of real exchange rate which is specific for these countries negatively affects non-oil exports while export revenues of oil sector mainly depends on oil price in the world markets. Above stated problem is also specific for Nigeria, one of the oil rich countries. According to official statistics the volume of non-oil export has decreased by 26.5 percent between 2004 and 2008 while appreciation of the real effective exchange rate has approximately doubled in the same period 3 . On the other hand, the share of non-oil export in the total export has decreased from 52.5 percent in 2004 to 4.7 percent in 2008. These facts indicate the worsening of non-oil export performance and urgency for its promotion. The performance of the Nigerian non-oil export sector, as pointed out by the relevant statistics, has however been relatively impressive in recent times. Illustratively, the International Monetary Fund (IMF) 2008 is of the view that the robust non-oil sector growth in the 2007 fiscal year had offset the drag from a decline in oil production in the Niger Delta, thus boosting growth in the Nigerian economy. 3 Statistical bulletin of Central Bank of Nigeria, 2008 brought to you by CORE View metadata, citation and similar papers at core.ac.uk provided by International Institute for Science, Technology and Education (IISTE): E-Journals