Over the years, the non-oil sector of the Nigerian economy such as agriculture, manufacturing and other businesses which could generate funds in the form of tax revenues have been neglected due to the boom in the oil revenue in the past. This study investigated the impact of non-oil revenueonthe economy of Nigeria from 1981-2019. In carrying out the study we employed the regression analysis, in order to establish a long run relationship among the variables employed in this study. The study was guided by research objectives and hypotheses. The non-oil revenue variables analyzed are agricultural revenue, manufacturing revenue and value added tax revenue which are the independent variables while real Gross Domestic Product Proxy for economic growth is the dependent variable. Historic descriptive research method was used in this study and data were sourced from Central Bank statistical Bulletin. The result shown that agricultural revenue, manufacturing revenue and Value Added Tax revenue have significant impact on economic growth in Nigeria for the period under study. It was recommended that the government should diversify and sustain its policies on agricultural sector. Also, the government should give tax holiday to manufacturing sector in Nigeria for increased production and finally, government should increase VAT base by incorporating many other items into the VAT net.
1.1 BACKGROUND OF THE STUDY
Prior to the discovery of oil in Nigeria, agriculture was the mainstay of the economy. Agriculture was the highest earner of foreign exchange for the country. Nigeria's export earnings increased from N339.4 million in 1960 to N14,077 million in 1980s, (Oladipo,1998). Nigeria was also largely self-sufficient in the area of food production. Nigeria is well known in the production of cash crops like Groundnut, Cocoa, Rubber, Cotton, Millet, Palm Oil, etc. and there is a readily available market for these products outside the shores of the country. Nigeria is also blessed with fertile land and good climatic conditions which serve as an added advantage over its counterparts, (Okunnu, 2008). The importance of the Agricultural sector in the country can indeed never be over-emphasized especially since we are no strangers to how life was before and during the colonial era when we depended solely on the production of food crops and cash crops. Food crops did more than enough in sustaining the everyday domestic food requirements and cash crops generated bountiful revenue which pulled the economy on an upward motion. The 1970s saw the oil boom period and with the dominant poor maintenance culture, and non-challant attitude, Nigeria left the agricultural sector in a pathetic state of retrogression (Olomola, 1998). The rise in the oil sector's fortune led to gross neglect of the non-oil sector particularly agriculture which provided food for the people and export earnings (Nwaeze, 2005). This position occupied by agriculture was overtaken by the oil sector in the mid 70s.
The economic development of any nation depends largely on the level of resource mobilization within that economy. That is perhaps why the issue of revenue generation is taken seriously by every government in power. The essence of revenue generation is to provide the basic social and infrastructural needs of the citizens (Nakah, 2018). Prior to 1970, revenue generation in Nigeria was dependent mainly on the non-oil sector. The foreign exchange of Nigeria at that time was earned from the sales of different cash crops such as Cocoa, coffee, palm oil, rubber, groundnut to mention but a few. This implies that the non-oil sector accounted for a greater chunk of the total revenue earnings of the country. Unfortunately, with the discovery of oil in the early 1960s, there was a dramatic change in the structure of Nigerian economy. As a result, the nonoil sector started experiencing unprecedented neglect by successive governments. This culminated in a perceptible drop in the contributions of the non-oil sector to about 23%. By the year 2000, oil accounted for about 98% of total exports and about 83% of Federal Government Revenue (Odularu, 2008).It should be noted that after Nigeria shifted its focus from non-oil revenue to oil revenue, Nigeria's growth and development has continue to decline with little hope of recovery (Chima, 2017). However, the dwindling oil revenue has thus, provided the country another opportunity to look inward by diversifying into other sources of revenue that would catapult the country into quick economic development. This indeed, is the essence of the “Economic Recovery and Growth plan (ERGP)” established by the Federal Government of Nigeria in 2017 which was subsequently endorsed by the international monetary Fund. The discovery of oil/gas in commercial quantities in the early 1960s has led to the underdevelopment of other sectors of the economy. This is so because oil now contributes about 90% of the foreign exchange of Nigeria, and about 80% of the Federal revenue (Salami, Amusa&Ojoye2008). As we know, oil is a non-regenerative resource (Idekwulim, 2014). Meaning that, a day will surely come when the oil will no longer be available for use. Hence, the need for urgent diversification of the economy towards the non-oil sector in line with the Federal Government's diversification policy. This position was well articulated by Ajakaiye, (1997), when he stated thus: “the Nigerian authorities adopted the orthodox structural adjustment programme in September, 1986, whose primary objective remains to alter the structure of production so as to diversify the economic base and reduce dependence on imports and on oil”. The monoculture nature of the economy has turned back to bite the country real hard. Oil price plummet is even beginning to tell on the economy and has shown that crude oil is not the best commodity to bank on. Though, Nigeria experienced substantial capital inflow largely in the form of oil sector earnings, the large oil revenue coupled with the accumulation of reserves in major foreign currencies became enabling factor in the decision to revalue the naira (Adeyemi, 2004). Over the years, the non-oil sector of the Nigerian economy such as agriculture, manufacturing and other businesses which could generate funds in the form of tax revenues have been neglected due to the boom in the oil revenue in the past. The resultant effect today is the recession in which the country has found itself, coupled with its attainment effects such as sky rocketing prices of goods and services (inflation), decayed infrastructures, poor power supply, non-payment of salaries, closure of industries, youth restiveness, high unemployment rate among others. Several empirical studies had been carried out on the effect of non-oil revenue on the economic growth of Nigeria at various range of economic period, e.g. Kawa (2017), Anthony et al (2015), but there seems to be a dearth of literature relating to the effect of non-oil revenue on the economic development of Nigeria. Furthermore, earlier studies on non oil revenue and economic development need an update in terms of recency and periods of study, hence the period gap created would be filled by this current study looking at variables from 1989-2018.
1.2 STATEMENT OF PROBLEM
Over the years the government has received annually over half of its revenue from the oil sector up to about 85% to the neglect of the non-oil sector. The earnings from the oil sector had an impact on the poor performance of non-oil sector which has resulted to a whole number of economic problems being faced by the country. The total oil revenue generated between 2000 and 2009 amounted to N34.2 trillion while non-oil was N73 billion representing 82.36% and 17.64% respectively (CBN Statistical Bulletin, 2009). This is a clear indication that the dependency on oil is high and therefore caused a neglect of the non-oil sector and then leading to the low level of economic activities. Some of these problems include: Rising cost of goods and services (inflation), non-payment of salaries of public and civil servants, loss of jobs (unemployment), decayed infrastructure, poor security, poor power supply and others. The continued unimpressive performance of the non-oil sector and the vulnerability of the external sector thus dictate the urgent need for a reappraisal of the thrust and contents of our development policies and commitments to their implementation. Extant literature has identified various factors as being responsible for Nigeria's poor economic performance, but of grave consequences has been the continued over reliance on the fortunes on the oil sector and the failed attempts to achieve any meaningful economic diversification into the non oil productive sector. The over dependence of the nation on the now dwindling oil sector and the poor contribution of the non-oil sector to revenue and growth is worrisome. Many attempts by past governments in terms of policy formulations and programmes to boost the non oil sector and create a broader revenue base have not yielded much result. This has been traced to poor implementation of policies, lack of appropriate funding, lack of political will and of course the continued belief that revenue from oil is guaranteed. It is in the light of the above that this study seeks therefore amongst other things to evaluate the contribution of non-oil revenue to Nigerian economy.
1.3 OBJECTIVES OF THE STUDY
The broad objective of this study is to investigate the impact of non-oil revenue on the economy of Nigeria from 1981-2019. However, the specific objectives are;
- To identify whether or not there is a significant impact of Agricultural Revenue on economic growth in Nigeria.
- To determine the impact of Manufacturing Revenue on economic growth in Nigeria.
- To determine the impact of Value Added Tax Revenue (VATR) on economic growth in Nigeria.
- To determine the role of non-oil export on the Nigerian economy.
- To proffer suggestions on the way forward for the development of the Nigerian economy.
1.4 RESEARCH QUESTIONS
- To what extent do the earnings from the agricultural sector contribute to economic growth in Nigeria?
- To what extent does manufacturing revenue impact on the economic growth in Nigeria?
- How far does Value Added Tax Revenue impact on economic growth in Nigeria?
- What is the role of non-oil export on the Nigerian economy?
- What are the proffered suggestions on the way forward for the development of the Nigerian economy?
1.5 RESEARCH HYPOTHESIS
The following hypotheses are tested in this study;
Ho1:Agricultural revenue does not have significant effect on gross domestic product in Nigeria.
Ho2: Manufacturing revenue does not have significant effect on gross domestic product in Nigeria.
Ho3: Value added tax revenue does not have significant effect on gross domestic product in Nigeria.
1.6 significance OF THE STUDY
It is important to study the relative impact of non-oil revenue on economic growth in Nigeria to ascertain whether the revenue gotten from this sector is contributing to our economic growth and per capita income or whether we have just been wasting our resources. This would give an insight into the dynamism of the Nigerian non-oil revenue operations. Thus, investors in the non-oil revenue would find this work very useful in predicting the non-oil revenue performance and expected yield from the market, which will aid investment decisions.
1.6 SCOPE AND limitations OF THE STUDY
This research work covers the impact created on economic growth by non-oil revenue. The geographical area involved is Nigeria. The study is as such a comparative one. The variables of interest are non-oil revenue, agricultural revenue, manufacturing revenue, Value added tax and GDP. The time period is from 1981-2019.
1.7 OPERATIONAL DEFINITION OF TERMS
Gross Domestic Product: Implies the market value of all officially recognized final goods and services produced within a country in a given period. GDP per capita is often considered as an indicator of a country's standard of living. GDP is related to national account, a subject in macro -economics. It is customarily reported on an annual basis. It is defined to include all final goods and services, that is, those that are produced by economics resources located in that nation regardless of their ownership and are not resold in form.
Economic growth: Can be defined as an increase in value of goods and services produced in a country. Growth implies an increase in real GNP per unit of labor input. This refers to changes in labor productivity over time. Economic Growth is conventionally measured as the rate of increase in Gross Domestic Product (GDP).Growth is usually calculated in real terms (netting out the effect of inflation on the price of the goods and services product). Growth improved the standard of living of the people in that particular country.
Non-oil Revenue: These include the exportation of the non-oil produces among which are agricultural, industrial and manufacturing outputs. The Non-Oil Revenue (NONR) is all revenue types not covered by oil resources are grouped as non-oil revenue. Basically, it includes company income tax, customs and excise duties, value-added taxes which are the three most important sources of non-oil revenue.
Non-oil export index: This is the fraction of the total export of goods and services that are produced within the economy that are not directly related to the oil sector of the economy. The non-oil products exports are unlimited as they include cash crops, food crops, manufacturing, entertainment, tourism etc. the value of the non-oil export index shall be used for measuring the non-oil export.
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