The Nexus between Non-oil Sector and Balance of Payment Equilibrium in Nigeria
Keywords:
Non-oil sector, Agricultural Sector Export, Manufacturing Sector Export, Service Sector Export, Balance of PaymentAbstract
This study investigates the link between the balance of payment equilibrium in Nigeria and the non-oil industry of Nigeria using yearly time series data from 1970 to 2021. The results back up the ARDL Wald test analysis's conclusion that there is a long-term relationship between Nigeria's non-oil economy and the equilibrium balance of payments. The paper was anchored on the absorption theory of balance of payment and uses the Autoregressive Distributive Lag approach to co-integration and the Error Correction Model to assess the long-term relationship between each of the sectors and the balance of payment equilibrium in Nigeria. The estimated coefficients of the long-run relationship confirm a negative long-run relationship for the balance of payments equilibrium, manufacturing exports, exchange rate, real domestic interest rate, and US Treasury Bill, while a positive long-run relationship is confirmed for agricultural exports and service exports. . The presence of short-term disequilibrium is shown by the negative value of the ECM coefficient, which the model's set of variables is working to address over the long run. The magnitude of this ECM coefficient shows that over time, the balance of payment equilibrium factors will rectify any imbalance in the non-oil sector's contribution to the balance of payments (BOP) by around 21%. (one year). Corrective progress is frequently made at a slow rate. According to the report, Nigeria's government should utilize all economic resources to their fullest potential in order to develop a robust non-oil industry, which includes a sector of agriculture that is dependent on machinery. Technology-based industrialization must be implemented, and to meet all local demands, a well-organized service sector must be established.
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