CHAPTER ONEINTRODUCTION1.1 BACKGROUND OF THE STUDYThere is a number of reasons for a country to be concerned about itsrate of economic growth. Economic growth is desired by both affluentand non-affluent economies. Economic growth is the desire for higherlevels or real per capital income, real output which must grow fasterthan the production of the economy in question. Economists, policymakers,public and private sectors work ceaselessly towards attainingeconomic growth by the use of development and growth models andpolicies. Among the policies used are trade policy (Import and exportpolicies, monetary policy, exchange rate policy, fiscal policy, marketetc). In this study, the non-oil exports and economic development inNigeria will be examined.Non-oil exports are the products, which are produced within the countryin the agricultural, mining and querying and industrial sectors that aresent outside the country in order to generate revenue for the growth of11the economy excluding oil products. These non-oil export products arecoal, cotton, timber, groundnut, cocoa, beans etc.Today, as in the past, the growth of Nigerian economy remains partlydependent upon increasing productivity of the agricultural sector.Helleiner (2002:124) states that no matter how much development andstructural transformation achieved, it will remain its relative dominancein the economy to many decades to come. Precisely, it is fromagricultural exploits that the economy has received its principal stimulusto economic growth.Agricultural sector can assist through the exportation of principalprimary commodities which will increase the nation’s foreign earningsand which can be used to finance a variety of development projects.The growth of the agriculture sector can make a substantial contributionto the total tax revenue, as well as having some implications for intersectionalterms of trade. Also in the area of capital formation, thesavings generated in this sector can be mobilized in developmentpurposes, while increase in rural income as a result of increasingagricultural activities can further stimulate the product of the modem12sector. The needs of the agricultural sector could indirectly influence thecreating of additional infrastructures which are indispensable to rapideconomic development. (Olaloku. 2001:13).Another non-oil export to be dwelled on, is industrial sector. It is thefastest growing sector in Nigeria economy. It comprises of manymanufacturing and mining. Nigeria has manufacturing base prior to1960 and shortly after.The problem was due to lack of modern technology skills, managerialexperience of complex organizations and financial back -up. Theproblem was further aggravated by the colonialists’ merchantsconvincing arguments on the goodness of comparative cost advantage.Nigerians were coaxed into concentrating their efforts in the productionof primary agricultural products and exporting them to the metrologicalindustries in Europe.Our industrial sector took off after independent relied on satellite firmsrepresenting British interest. The bank sector, which is constellation ofcolonial banks branches and some companies that were able to investin manufacturing were the multi-national that have access to funds,13technology and managerial expertise. This greatly hindered theprogress of indigenous entrepreneurs.The Nigerian manufacturing sector has been described by Ikediala(1983) as consisting of more assembling plants. He says that theimplication of this is that the industries have very little backward linkagein the economy, since the bulk of the inputs is imported, thus themanufacturing sector depends on imported raw-material the extent of42%. The capacity utilization of manufacturing industry has alwaysbeen low in this country. The reasons as put by CBN (1998) are notunconnected with raw materials scarcity, consumers resistance due tohigh prices, increase in cost of manpower. Others mentioned areequipment breakdown due to poor technology, lack of spare parts. Timelags between, when inputs are ordered for and when they arrive, cashflow problems in industries becomes a permanent features.The Nigerian Civil war brought about the deterioration of the oil palmgrooves and plantation were abandoned and little if any new plantingwas undertaken. As a result of that, the output of palm oil and palmkernel declined drastically. But according to Onwuka (1985), the14problems of palm products are due to the stagnation in the productionof this commodity, which is partly explained by the presence of wildpalm trees, which are of low-yield quality, and the difficultiesexperienced in harvesting them. In addition, the old system of pricingwhich guarantees low producer prices for palm produce discouragesubstantial investment from being made for further production of thisproduct. Also, the problem marketing boards cannot be over looked.Marketing board is an institution set up by the government with theexclusive right to buy and sell certain agricultural products.They purchase some products locally export sales are made throughthe Nigerian marketing company, which is jointly owned by all state,marketing. One of the functions of the marketing board is to stabilize theprizes or our cash crops and hence creates stability of income forfarmers and to accumulate funds for development purposes. But theoperation has failed to provide incentives to farmers to increase theirinput. Also, the producers paid unnecessary tax and they took from theproducers some money, which should have gone to them as income.They thus reduced the amount of capital available to the producers.15This criticism, according to Adenira (1999) made the FederalGovernment to reform the Marketing Board System with a view toincrease producers’ prices and income. He said that the essentialfeatures of the new reform are the prices, which are now fixed by asingle authority while producer taxation (export duty and produce saletax) has been abolished. Another major innovation in the system is thecreation of commodity boards with responsibility of marketing specificproducts whenever they are produced in the country. These boards arelikely to reduce administrative problems and be more economicalcompared with all oil-produced state Marketing Boards previously inexistence.The major fault of the successive government that are supposed tosustain this sector through the building of macro-economic structuresand incentives diverted their attention away from agriculture. The resultwas sharp in the export/import equation as country started importingeven palm oil that was hitherto imploring from Nigeria. The situationwas becoming worrisome thus by 1975 there were attempts torecapture the lost of glory of agriculture. General Olusegun Obasanjo’s16operation feed the nations becomes the first real expressed officialattempt in this direction. It was followed by the establishment of twoRiver Basin Development Authorities in 1977. By 1978/1979, the federalGovernment made budgetary provision to establish 4,000 hectares ofmechanized farms in each of the 19 states then, by 1979, there was are-launch of “operation feed the nation” with a new tag “GreenRevolution” with various committees set for its implementation (Oko,1999).If the efforts of the two leaders-General Olusegun Obasanjo and AlhajiShehu Shagari’s regimes could have brought vigor to the agriculturalsector, the activities of the sic-commodity boards did not assist much..Oko said that fixing export product prices without recourse to costinputs discourages agriculture therefore remained slow because fooddemand was growing at the rate of 3.5% per in the 80’s whileagricultural output was crawling at 11 %. Between 1990 and 1998 GDPin agriculture declined to 6.2%. Then the distributions of agricultureinputs to producers were neglected, infrastructure facilities likemotorable feeder roads, and irrigation facilities etc, made it difficult to17increase agricultural production. CBN mandate to bank with regard tobank loans to agriculture as priority sector for preferential leading wasfloated.18THE TABLE BELOW SHOWS YEARLY PALM PRODUCTSPRODUCTION AND COCOA PRODUCTS PRODUCTION IN TONES,WHICH COVER FROM 1990-2004.Year Palm Products Cocoa Products1990 730 11901991 760 13631992 792 13214191993 825 4191995 837 5031995 871 4031996 920 5911997 938 6351998 992 6831999 1003 7212000 1411 8322001 1603 9252002 114 11602003 1701 11652004 1770 1200Source: CBN Annual Report and Statement of Account 2004