Contributions of Shipping Industry to the Development of Nigerian Economy
Chapter One
Aim and Objectives of Study
The aim of the study is to appraise shipping industry influence on economic development in Nigeria while its objectives are to:
- examine the trend of shipping trade in Nigeria and
- determine the influence of the economic variables (shipping trade, external debts and external reserves) on gross domestic product.
CHAPTER TWO
LITERATURE REVIEW
Economic growth from the early period of economic history engaged the attention of man and his governments. As far back as 17th and 18th centuries writers like Adam Smith, David Richardo, John Stuart Mill, as well as Karl Marx, Friedrich List, Karl Bucher, W. Rostow, and neoclassical economists such as Arthur Lewis (1978) have been preoccupied with the quest for economic growth.
The term economic growth is described as the positive and sustained increase in aggregate goods and services produced in an economy within a given time period. When measured with the population of a given country, then economic growth can be stated in terms of per capital income according to which the aggregate production of goods and services in a given year is divided by the population of the country in the given period. The framework for understanding growth over the long-term is rooted in two main theories that relates to possible sources of growth. These are the growth theory and the growth accounting theory. Growth theory is concerned with the theoretical modelling of the interactions among growth of factor supplies, savings, and capital formation, while growth accounting theory addresses the qualification of the contribution of the different determinants of growth.
Three waves of interest have currently emerged in studying economic growth. The first wave is associated with the work of Harrods (1900-1978) and Domar (1914-1997) in what was termed the “Harrods – Domar Model”. The theory presupposed that growth depends on a country’s saving rate, capital / output ratio, and capital
depreciation. This theory has been criticised for three reasons. Firstly, it centers on the assumption of exogenecity for all key parameters. Secondly, it ignores technical change and lastly, it does not allow for diminishing returns when one factor expands relative to another (Woodford 2000) and (Essien 2002).
The second began with the neoclassical (Solow) model, which contained the thinking that growth reflected technical progress and key inputs, (Labour and capital). It allowed for diminishing returns, perfect competition but not externalities. In the neoclassical growth process, savings were needed to increase capital stock, capital accumulation had limits to ensure diminishing marginal returns and capital per unit of labour was limited. It postulates that growth also depended on population growth rate and that growth rate amongst countries was supposed to converge to a steady state in the long-run. Despite the modification, the basic problems associated with the neoclassical thinking are that it hardly explains the sources of technical change (Essien and Bawa, 2007). The third is the newer alternative growth theory, which entrances a diverse body of theoretical and empirical work that emerged in the 1980s. This is “endogenous” growth theory. This theory distinguished itself from the neo classical growth model by emphasizing that economic growth was an outcome of an economic system and not the result of forces that impinged from outside. Its central idea was that the proximate causes of economic growth were the effort to economize, the accumulation of knowledge, and the accumulation of capital. According to this theory, anything that enhances economic efficiency is also good for growth. It entails capacity building which has an effect on policy formulation and implementation. Examining the future of Nigeria maritime industry, Nigeria requires a well-articulated maritime law and policy formulated to encourage and foster economic growth and development. Nigeria is on a global level which provides a horde of opportunities for investment to stimulate import and export trade by way of providing surface transport through which goods are moved by sea on a massive scale. Maritime business has helped the process of diversification of Nigerian’s economy and has continued to provide employment opportunities to Nigerians as crew staff, mariners and dock workers in addition to various practitioners among which are freight forwarders. The economic status of any shipping operation will be determined by the relative levels of costs (capital and operating) and revenues. The demand and freight rates which determine revenues are presently increased in all shipping sectors thereby given the global nature of the shipping business that changes in market which tends to affect all operators.
CHAPTER THREE
METHODOLOGY
Type of Data and Sources
This study employed secondary sources of data which were obtained from the following sources: Central Bank of Nigeria (CBN Publications and Statistical Bulletin- Annual reports and statement of Accounts, Economic and financial reviews); Research Seminar papers and National Bureau of Statistics-Annual Abstract of Statistics.
Methods of Data Analysis
The hypothesis formulated was analysed using cointegration regression and trend analysis. This is in view of multiple explanatory variables (shipping trade, external debts and external reserves) involved in each of the hypothesis of the study while long-run variance was used to determine the variability in the explanatory variables over the dependent variable.
CHAPTER FOUR
RESULTS AND DISCUSSION
The Sectors in GDP
Study revealed that four out of the Five (5) sectors in GDP that were considered in the study remained constant without rising between 1981 to 1993 while Construction remained constant to somewhere around 2007. Shipping trade is one of the major capitals and/or Inland water trade which has tremendous impact on the nation’s economy and this is considered as the major aspect of gross domestic product. Figure 5.1 indicates that Shipping trade, Agriculture and industry moved in-line with each other though there was a little difference from the sectors. Agricultural, industrial and shipping sectors followed the same pattern which implies that they are more likely to have the same amount of domestic input in the country’s GDP. These three (3) sectors rose from 1993 till 2016. Services tend to rise higher than the other sectors in GDP. It rose from 1993 till 2016 and it showed a rapid increment.
CHAPTER FIVE
SUMMARY OF FINDING, CONCLUSION AND RECOMMENDATION
Summary of Findings
The trend analysis on the shipping trade in Nigeria from 1981-2016 was positive and this can be attributed to the reform policies which enables public, private partnerships that led to concessioning of Nigerian ports since 2006. The analysis on cointegration regression analysis was also ascertained between GDP and economic growths. This was established by the probability value (p-value) < 0.05 at 5% level of significance. Hence, the study established that there is a linear trend between the dependent variable and the explanatory variables.
Conclusion
Appraisal of shipping trade on economic growth in Nigeria was carried out covering thirty-six years (1981-2016) of operations of Nigerian ports with indicators of economic growth such as: gross domestic product, external reserves and external debts payments. Trend analysis for the same period was also examined. Consequently, it could be deduced that there was relationship between GDP and shipping trade, external debts payments and external reserves. Shipping is of great importance to Nigerian economy as identified in this study. One of the major challenges facing Nigeria at present is that it has no meaningful participation in the shipping industry as Nigeria depends on foreign vessels both for Exports and Imports trades.
In conclusion, Nigerian can gain a foothold in its shipping industry. The potential would be enormous, if shipping activities are properly harnessed given the few suggestions made in this study. Shipping will be ranked next to oil in foreign exchange earnings if not overtaken. Shipping is indispensable in economic growth and development of Nigeria with its attendant positive multiplier
Recommendations
The findings of this study bring to the limelight the needs for the following recommendations.
- Government should and must do all it can to curtail foreign dominance and the repatriation of profit for a more sustainable economy as well as funding shipping services and operation (maritime) with needed finance.
- Port facilities should be upgraded and modernized for quick discharge of consignments as a ship owners are more interested in timely turn-around of vessels for next engagement and avoid long-time and lay days.
- Unnecessary delays, sharp practices and scam should be drastically reduced at the ports for shipment to move freely thereby making Just in Time (JIT) supply chain management to be effective in Nigeria.
- Government should encourage production of exportable goods for maximum deployment of ships as most ships coming to Nigeria waters sail back on-ballast.
- Investors should be encouraged to go into shipping trade with incentives like tax free holidays, government guaranteed loans etc.
References
- Adeleye, J.O, Adeteye, O.S. and Adewuyi, M.O (2015): “Impact of International Trade on Economic Growth in Nigeria”, International Journal of Financial Research, Vol. 6(3)
- Christiana, O. I. and Matthew, B. O. (2013): “Has Maritime Transport Sector Impacted on The Growth of Nigeria’s Economy?”, Journal of Business and Economics, 4 (8), 722-736.
- Durand, J.F. (2014): Wikipedia. [Online] Available at: http://en.wikipedia.org/wiki/Passengership [Accessed 24 March, 2018].
- Ekpo, 2012: Impact of Shipping on Nigerian Economy: Implications for Sustainable Development Journal of Educational and Social Research Vol. 2 (7) October 2012.
- Essien, E.A. (2002): “Nigeria’s Economic Growth: Performance and Determinant” CBN Economic and Financial Review. Vol. 40(3).
- Essien, E.A. and Bawa, E.N. (2007): “Explaining Growth: A Cross-Country Analysis of West African Monetary Zone (WAMZ)”. CBN Economic and Financial Review. Vol. 40. setp.
- Harris, R. (1995): Cointegration Analysis in Economic Modelling; New York, Prentice-Hall.
- Ijirshar V. U., Joseph F. and Godoo M. (2016): The Relationship between External Debt and Economic Growth in Nigeria; International Journal of Economics & Management Sciences2016, 6:1
- Ma, S. (2011): “Lecture Notes, Handout and Slides on Logistics”. Malmo World Maritime University. Marin, P.H. (2011): Les Paquebots, ambassadeurs des mers. Paris: Gallimard.
