LOCAL PRODUCTION AND ITS IMPACT ON NIGERIA ECONOMY
ABSTRACT
The purpose of this study is to examine local production and its impact on Nigeria economy. This study adopted the survey, ex post facto and descriptive research design for both quantitative and qualitative analysis. It is ex-post facto research design in that the data generated were already put in place and are not subject to the manipulation of the researcher, this were data within the period of 1989 to 2014. This data were extracted from CBN statistical bulletin in CBN website and from the website of Food and Agriculture Organization of the United Nations (FAO). This study presumed that the economic development in Nigeria (represented by real GDP) is dependent on Total Local Production TLP (independent variable), Cashew production in Nigeria CPN (independent variable) and money supply MSP (independent variable). Multiple regression analysis was applied for the data analyses following the specified model. The result obtained shows that total local production and money supply exert a positive but insignificant influence on the development of Nigeria economy. Also, cashew production in Nigeria has not contributed so much to the Nigeria economy. This study recommended that government should encourage cashew producers by providing supports and incentives and persuade the banks to give preference to local production.
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND TO THE STUDY
Nigeria is a middle income, mixed economy and emerging market, with expanding communications, technology and production sectors (Onuba, 2015). It is ranked as the 21st largest economy in the world in terms of nominal GDP, and the 20th largest in terms of Purchasing Power Parity. It is the largest economy in Africa; its re-emergent, though currently underperforming, production and manufacturing sector is the third-largest on the continent, and produces a large proportion of goods and services for the West African sub-region. Nigeria recently changed its economic analysis to account for rapidly growing contributors to its GDP, such as telecommunications, local production etc.
Nigeria's economy is struggling to leverage the country's vast wealth in fossil fuels in order to displace the poverty that affects about 33% of its population (Olomola, 2007). Economists refer to the coexistence of vast wealth in natural resources and extreme personal poverty in developing countries like Nigeria as the "resource curse", although "resource curse" is more widely understood to mean an abundance of natural resources which fuels official corruption resulting in a violent competition for the resource by the citizens of the nation (Olomola, 2007). This has led to massive underdevelopment in every area including local production. There is no stable electricity supply to drive any production, bad roads, multiple taxation and host of other factors are militating against local production in Nigeria.
The ability to compete with other nations is very vital for their survival as a nation. Since their survival depends on their ability to provide basic goods and services to the people, there is need to increase local production sectors of economy. That notwithstanding, local production of a nation according to Robert (1988), is the amount of output produced per unit of output of the nation. Because labour is the most important input, the most popular factor to be considered in local production is labour or output per hour of labour.
Furthermore, Udabah (1998) highlights that every developed country is very conscious of the relationship between her level of local production and her ability to compete with other developed countries in the world market for industrial products. Again, it is obvious that in Nigeria, as in many other developing nations, low level of local production contributed significantly to the economic problems. In fact, one of the major characteristics of developing nation is low level of local production which could lead to other problems like those of low income, low savings, low investment and unemployment. Consequently it was observed by Robert (1988) that the level of local production is determined by the unit of output in the manufacturing sector. Low level of local production in a particular country further shows itself not only in the high prices of industrial products in the domestic market but also in the lack of competitiveness in the international market.
As a result of that, nations should be more productive in order to earn enough foreign exchange to pay its imports, hence there is almost continues comparison in levels of local production among the world’s great industrial nations. This is for the simple reason that local production level determines the living standards of the people and the degree of economic growth and development. Economic growth depends on both the growth of resources and technological progress. Advance in technology allow resources to be more productive. On the other hand if the quantity of resources is growing and each resources is more productive, then output grows even faster than the quantity of resources (Sotubo, 2016). The amount that output grows because the labour force is growing depends on how much labour contributes to the production of output.
However, this study on local production and its impact on the Nigeria economy will be focused on the Cashew industry in Nigeria. Nigeria needs to increase its cashew production capacity and export less of the raw commodity to other countries, cashew exports from Nigeria generated N17.7 billion ($108 million) in 2013, accounting for about 10 percent of the country's agricultural exports. Yet this is just a fraction of the revenue generated by other countries that have more capacity to add value to the raw product, and go on to export it to markets in the European Union, the United States and the Middle East. Also, three main cashew products are traded on the international market includes raw nuts, cashew kernels and cashew nut shell liquid (CNSL). A fourth product, the cashew apple is generally processed and consumed locally. The raw cashew nut is the main commercial product of the cashew tree, though yields of the cashew apple are eight to ten times the weight of the raw nuts. Raw nuts are either exported or processed prior to export. Processing of the raw nuts releases the by-product CNSL that has industrial and medicinal applications. The skin of the nut is high in tannins and can be recovered and used in the tanning of hides. The fruit of the cashew tree that surrounds the kernel can be made into a juice with high vitamin C content and fermented to give a high proof spirit. However, the researcher is of the opinion that increase in the production of cashew in Nigeria will contribute significantly to the Nigeria economy based on the high level of income that will be generated from the sales of the products.
1.2 STATEMENT OF THE PROBLEM
Eboh (1998) argued that Nigeria is among the 20 poorest countries in the world despite its widely acknowledged huge economic potentials. It has been evident that the widespread of poverty in Nigeria today remains the major challenge to Nigeria’s development efforts. Prior to this, there is low level of local production in Nigeria. By low level of local production, it mean that the country is producing virtually nothing. Recently, the newly elected President Muhamadu Buhari stated that the country has been importing every finished product’s including toothpicks. However, the low level of investment in agriculture and productions in Nigeria is quite worrisome.
Generally speaking the lack of their skills also is often tied to lower level of education is also a factor in local production. Additionally, it is important to know that human capacity does not only includes study skills and knowledge but also includes good health. Again, lack of human resources development is an essential ingredient militating against local production and development in less developed countries. Such underdeveloped countries lack people possessing critical skill and knowledge required for all round growth and development of the economy through the instrument of local production.
More so, the most widespread obstacle to increase in local production manifest in the developing countries is capital formation. This is as a result of the vicious circle of poverty. In developing countries, the masses are poverty ridden. Hence, they use outdated capital equipment and methods of production. Nigerians practice subsistence farming of cashew, lack mobility and have little connection with the market sector of the economy. These ugly development, however decrease Nigeria’s level of local production. Therefore, the level of local production of the nation is marginally low. The researcher is however curious of ascertaining the impact of local production on the Nigeria economy with emphasis on the cashew industry.
1.3 OBJECTIVES OF THE STUDY
The following are the objectives of this study:
1. To examine the impact of local production on the Nigerian economy.
2. To examine the effect of cashew processing and production on the Nigeria economy.
3. To identify the factors limiting the level of processing and production in Nigeria.
1.4 RESEARCH QUESTIONS
1. What is the impact of local production on the Nigerian economy?
2. What is the effect of cashew processing and production on the Nigeria economy?
3. What are the factors limiting the level of processing and production in Nigeria?
1.5 HYPOTHESIS
Hypothesis One
HO1: There is no significant relationship between local production and Nigerian economy
HA1: There is significant relationship between local production and Nigerian economy
Hypothesis Two
HO2: There is no significant relationship between cashew processing and production and Nigerian economy
HA2: There is significant relationship between cashew processing and production and Nigerian economy
1.6 SIGNIFICANCE OF THE STUDY
The following are the significance of this study:
1. This study will be a useful guide for the government of Nigeria and the policy makers in taking decisions that can improve the economy of Nigeria through policies that will enhance local production. This will invariably lead to higher local production which is good for the economy.
2. This research will be a contribution to the body of literature in the area of the local production and its impact on the Nigeria economy, thereby constituting the empirical literature for future research in the subject area
1.7 SCOPE/LIMITATIONS OF THE STUDY
This study will cover the level of local production in Nigeria and its effect on the economy of the nation between 1980 and 2014. This study will specially focus on the Nigeria cashew industry
1.8 DEFINITION OF TERMS
Production: the action of making or manufacturing from components or raw materials, or the process of being so manufactured.
Local: Belonging or relating to a particular area or neighborhood, typically exclusively so.
Processing: perform a series of mechanical or chemical operations on (something) in order to change or preserve it.
Equipments: the implements used in an operation or activity
Economy: the wealth and resources of a country or region, especially in terms of the production and consumption of goods and services.
REFERENCES
Eboh, M O A. (1998) Macroeconomic policy and the industrial Sector, in macroeconomic policy in an open developing economy.
Olomola A.S. (2007) “Strategies for Managing the Opportunities and Challenges of the Current Agricultural Commodity Booms in SSA” in Seminar Papers on Managing Commodity Booms in Sub-Saharan Africa: A Publication of the AERC Senior Policy Seminar IX. African Economic Research Consortium (AERC), Nairobi, Kenya
Onuba, I. (2015). "Only 4.67 million Nigerians are unemployed —NBS". The Punch Newspaper.
Robert, J. (1998). Value creation – Nigerian manufacturing sector. Financial Times Ltd.
Sotubo, 'J. (2016). "Buhari: Why President should devalue naira – Chuba Ezekwesili [VIDEO]". pulse.ng.
Udabah, T. (1998) Nigeria's economy at the crossroads. Africa recovery 13(1):8.
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