Augustine Chidiebere OSIGWE E-mail address: onyi2amaka@yahoo.com Tel.: +234 8038728652

1. THE REAL SECTOR AND THE SERVICE SECTOR PERFORMANCES IN NIGERIA: ANY CURSE FROM THE OIL RESOURCE ABUNDANCE? Augustine Chidiebere OSIGWEE-mail address: onyi2amaka@yahoo.comTel.: +234 8038728652

2. Outline of the Presentation • Introduction and Problem statement • Objectives of the Study • Justification for the study • Scope of the study • Analysis of sectoral performances • Alternative definitions and measurement of resource abundance • Empirical literature review • Theoretical Framework and Methodology • Empirical results • Conclusion • Policy Recommendations

3. Introduction • Link exist between resource-abundance and a number of socio-economic problems • In Nigeria, crude oil has been a major source of revenue, energy and foreign exchange in Nigeria. • Given the role of the oil sector, there is the compelling need for a desirable and appropriate production and export policy for the sector.

4. Problem Statement • Nigeria as a net oil exporter since the 1970s, marked a new and often volatile era in its economic history. • Before oil, primary agricultural produce were the main exports. • There is the problem of successfully translating the huge oil wealth into sustainable development. • Increases in the prices of non-tradable goods and services, thus hurting the rest of the tradable goods sector in Nigeria.

5. Objectives of the Study • In broad objective is to examine the effects of oil resource abundance on investment and sectoral output in Nigeria. The specific objectives are:   • To estimate the effects of oil resource abundance on investment in the real sector and the service sector of the Nigerian economy. • To analyze the magnitude of the effects of oil resource abundance on the output of these sectors.

6. Justification for the study • The justification is threefold – covering theoretical, methodological and empirical issues. • Theoretically, his study aims to establish innovative ties and robust bridge between the channel and impact approaches. • Methodologically, the macro-econometricmethod of analysis is adopted. • Empirically, since this study will not examine just as the same variables as most previous studies, its empirical results will be obviously different.

7. Scope of the study • The sectors of interest to this study are; agriculture and service. • The study period is 1970 to 2010.

8. Analysis of sectoral performances

12. Alternative definitions and measurement of resource abundance • Share of primary commodity exports in GDP (Sachs and Warner, 1995) • Net present value of the stream of rents (World Bank , 1997, 2005). • Natural resource exports, production, or reserves (Stijns, 2005). • Ratio of windfall profits from oil to GNP (Ross, 2006). • Net exports per capita (Perry et al., 2011). • Ratio of revenues from petroleum and minerals to total government revenues (Herb, 2005).

13. Alternative definitions and measurement Cont. • this study adopts the Herb (2005). The reasons for this are two-fold; • The measure aptly captures the Nigerian situation where a great chunk of the government fiscal actions draw heavily from the activities in the oil sector. • It enables us to capture the “fiscal impact of oil” on the Nigerian economy.

14. Empirical literature review • empirical debates on the effects of natural resource abundance seem inconclusive and produce mix results • Long run effect of oil abundance on GDP is positive and significant (Moradi, 2007, Iran, 1968 - 2005.) • Adverse nexus between exports related natural resources as ratio of GDP and economic growth (Hussainet al, 2009, Pakistan,1975-2006). • Apermanent oil shock resulted in manufacturing production reductions (Ismail, 2010, 90 countries).

15. Theoretical Framework and Methodology • Dutch disease framework developed by Corden and Neary (1982). Why the choice? • First, it is capable of revealing many historical episodes where there have been sectoral boom, with adverse or favourable effects on other sectors. • Second, it provides a systematic analysis of some aspects of structural changes in a small open economy. • Lastly, it is suitable in countries where the proceeds from resource abundance accrue directly to the government.

16. Formulation of the model • The variations in the investment and output of the sectors are hypothesized as a function of oil resource abundance plus the control variables. This is algebraically expressed as; • Variations in investment and output in Agric, and Serv, = f(oil resource abundance + control variables)

17. The supply block model The demand block model The Models

18. Empirical results • The test for stationarityshows that 4 out of 14 variables are stationary at level. All others only became stationary after first differencing.

19. Results for the Outputs

20. Results for Investments

21. Validation of the Macroeconomic Model

22. Conclusion • Oil resource abundance (ORA) has negative and significant effect on the agricultural sector output and investment. • ORA has a negative and insignificant effect on the service sector’s output and a positive but highly insignificant relationship with the sector’s investment.

23. Policy Recommendations • The government should subsidize the ailing agriculture sector. • Basic infrastructures that enable the service sector to thrive should be provided. • The right policy mix which includes macroeconomic stability, efficient management of oil revenue, economic diversification as well as accumulation of human, institutional and social capital is what Nigeria needs to deal with the Dutch disease effects of oil resource abundance.

24. Thank you for your Attention.