Oil Price Instability and Industrial Sector Output in Nigeria
CHAPTER ONE
OBJECTIVE OF THE STUDY
The objectives of the study are;
- To ascertain whether there is a strong positive correlation between high and rising oil price and industrial sector growth in Nigeria.
- To ascertain whether exchange rate volatility have had an adverse effect on manufacturing sector performance in Nigeria
- To ascertain whether financial repression “low interest rate” have had an adverse effect on the manufacturing sector programme in Nigeria.
CHAPTER TWO
REVIEW OF RELATED LITERATURE
INTRODUCTION
Theoretically, no single theory explains the relationship between crude oil price and output. Thus, different theoretical approach has been advanced in the literature to ascertain this relationship. Starting with the Dutch Disease which indicates that windfalls from a sharp surge in oil price cause inflation in most developing countries because the economy is not well diversified to absorb the inflow of foreign earnings. Therefore, resource pull and spending effects occur when large inflow from oil export hits a less diversified economy (Mieiro and Ramos, 2010). The booming export sector experiences rise in marginal productivity and thus, pay factors employed relatively more than other sectors. As a result, factor inputs/resources are pulled to the booming sector (oil/export sector) at the expense of other tradable sectors (agriculture and manufacturing) and the non-tradable sector, which is expected to boom accordingly, for sustainable economic growth. This implies that fluctuation in oil price affects both aggregate and sectoral output in most resource based economies. Furthermore, the standard growth theories focus on primary inputs such as; Capital, labour and land and some include technology. According to the traditional neo-classical growth theory, output growth is achieved through an increase in labour quality and quantity (through education and population growth), increase in capital (through saving and investment) and improvement in technology (Todaro and Smith 2004). Again, the neoclassical viewpoint which is based on a technological relationship between output and productive inputs as considered in the pioneering work of Robert Solow (1978), its extensions finds an empirical variant in the Cobb-Douglas production function. However, this Model fails to recognize the role of primary energy inputs such as; oil deposits. Therefore, natural scientists and some ecological economists have made efforts at evolving some theories which capture the role of oil price fluctuation on economic growth, thus incorporating the linkage between energy resources and output growth. In the light of recognizing the role of primary energy inputs, the Mainstream theory of economic growth was developed by Samuelson and Nordhaus in the 20th century. The theory postulates that production is the most important determinant of growth of any economy, and production which is the transformation of matter in some way requires energy. This theory categorizes capital, labour and land as primary factors of production that exist at the beginning of the production period and is not directly used up in production (though they can be degraded or added to).
CHAPTER THREE
RESEARCH METHODOLOGY
Research design
The researcher used descriptive research survey design in building up this project work the choice of this research design was considered appropriate because of its advantages of identifying attributes of a large population from a group of individuals. The design was suitable for the study as the study sought to oil price instability and industrial sector output in Nigeria
Sources of data collection
Data were collected from two main sources namely:
Primary source and Secondary source
Primary source:
These are materials of statistical investigation which were collected by the research for a particular purpose. They can be obtained through a survey, observation questionnaire or as experiment; the researcher has adopted the questionnaire method for this study.
Secondary source:
These are data from textbook Journal handset etc. they arise as byproducts of the same other purposes. Example administration, various other unpublished works and write ups were also used.
CHAPTER FOUR
PRESENTATION ANALYSIS INTERPRETATION OF DATA
Introduction
Efforts will be made at this stage to present, analyze and interpret the data collected during the field survey. This presentation will be based on the responses from the completed questionnaires. The result of this exercise will be summarized in tabular forms for easy references and analysis. It will also show answers to questions relating to the research questions for this research study. The researcher employed simple percentage in the analysis.
CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATION
Introduction
It is important to ascertain that the objective of this study was on oil price instability and industrial sector output in Nigeria. In the preceding chapter, the relevant data collected for this study were presented, critically analyzed and appropriate interpretation given. In this chapter, certain recommendations made which in the opinion of the researcher will be of benefits in addressing the challenges of oil price instability and industrial sector output in Nigeria
Summary
This study was on oil price instability and industrial sector output in Nigeria. Three objectives were raised which included: To ascertain whether there is a strong positive correlation between high and rising oil price and industrial sector growth in Nigeria, to ascertain whether exchange rate volatility have had an adverse effect on manufacturing sector performance in Nigeria, to ascertain whether financial repression “low interest rate” have had an adverse effect on the manufacturing sector programme in Nigeria. In line with these objectives, two research hypotheses were formulated and two null hypotheses were posited. The total population for the study is 200 staff of agricultural sector, Lagos state. The researcher used questionnaires as the instrument for the data collection. Descriptive Survey research design was adopted for this study. A total of 133 respondents made directors, administrative staff, senior staffs and junior staffs were used for the study. The data collected were presented in tables and analyzed using simple percentages and frequencies
Conclusion
The results obtained reveal that oil price impacted positively on aggregate output but negatively on agricultural, manufacturing and service sector suggesting that at the aggregate level, oil price tend to increase total output while an increase in oil price impacted negatively on the outputs of productive sectors since it serves as an input factor in the production process of these sectors. This indicates that fluctuation in oil price creates uncertainty in the production capacity of the productive sectors and it also undermines the effectiveness of the government fiscal management of crude oil revenue
Recommendation
The study, therefore, recommends that the Nigerian government need to diversify its export revenue base in order to minimize the over reliance on crude oil. Also, the country needs to develop the local capacity of its refining so as to reduce the importation of refined petroleum which serves as input to most productive sectors of the economy.
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