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| Pages: 61
CHAPTER ONE
INTRODUCTION
BACKGROUND OF THE STUDY
Trade arrangements and engagement between Nigeria and its trading partners are in tandem with the magnitude of various endowments the country possesses. For instance, Nigeria is endowed with a population of over one hundred and seventy (170) million citizens, oil production of over two (2) million barrels per day and a Gross Domestic Product (GDP) of over USD 500 billion (U.S. Department of State, 2015:3). On trade footprint, the country’s total external trade stood at N16, 426.8 billion at the end of the fourth quarter of 2015, with an import value of N2, 833.5 billion from Asia, N2, 501.6 billion from Europe, N871.3 billion from America, N420.4 billion from within the African continent, and N213.8 billion from ECOWAS region (National Bureau of Statistics, Foreign Trade Report, 2015: 1-2).
According to the U.S. Department of State (2015:3), Nigeria is the thirteenth world’s largest oil producer and sixth largest oil exporter, producing high-value and low-sulfur crude oil. The contribution of crude oil to the value of total domestic export trade in 2015 amounted to N6, 945.3 billion (NBS, Foreign Trade Statistics Report 2015: 3). Chete, Adeoti, Adeyinka and Ogundele (2014), assert that prior to the discovery of crude oil, agriculture was the mainstay of the Nigerian economy. The agricultural sector provided food, raw materials, revenue and employment for the nation’s teeming population. However, after discovering crude oil in commercial quantities after the nation’s independence in 1960’s, its exploration and exportation weakened the agricultural sector and led to a shift away from industrial activities of a productive nature towards an over-reliance on a single commodity, which is – crude oil (Chete et al., 2014; UNCTAD, 2015).
Correspondingly, Nigeria's trade policy after the nation's independence in 1960 was largely based on an import substituting strategy (World Bank, 2010). However, in the early 1980's, Nigeria encountered various economic problems, which stirred up the need to adopt an effective expansionary trade policy that could ameliorate the apparent economic problems in the country. Hence, in 1986, the expanding economic crisis and its degrading effects on the nation's economy formed the basis for the adoption of the Structural Adjustment Program (SAP), as unguardedly imposed by the World Bank and the International Monetary Fund (Olaniyi, 2014; Odejimi & Odejimi, 2015).
The Structural Adjustment Programme (SAP) was widely acknowledged as a profound economic reform for reversing the downward trends in the economy. The policy was aimed at; promoting investments, reducing the total reliance on crude oil revenue, developing and utilizing domestic technology, encouraging the use of local rather than imported raw materials, privatizing and commercializing state-owned enterprises (Chete et al., 2014). These initiatives were proposed by the global financial institutions, that is, the institutions of the Washington Consensus as the panacea for the promotion of industrial efficiency, and improvement in the performance of the nation's industrial sector (Tamuno & Edoumiekumo, 2012; Olaifa, Subair & Biala, 2013; Chete et al., 2014). Also, documented evidence reveal that trade liberalization was one of the fundamental objectives of the Structural Adjustment Programme (Olaifa et al, 2013).
Initially, it was expected that the implementation of the trade liberalization policy, under the platform of SAP, would assist in eliminating foreign exchange control, removing price control, disbanding commodity boards and industrial output in the Nigerian economy (Tamuno & Edoumiekumo; 2012; Olaifa et al., 2013; Osa, 2014). However, Tamuno and Edoumiekumo (2012) posit that the adoption of the Structural Adjustment Program (SAP) in Nigeria failed to meet up with these expectations and was unable to reverse the economic crisis in
INTRODUCTION
BACKGROUND OF THE STUDY
Trade arrangements and engagement between Nigeria and its trading partners are in tandem with the magnitude of various endowments the country possesses. For instance, Nigeria is endowed with a population of over one hundred and seventy (170) million citizens, oil production of over two (2) million barrels per day and a Gross Domestic Product (GDP) of over USD 500 billion (U.S. Department of State, 2015:3). On trade footprint, the country’s total external trade stood at N16, 426.8 billion at the end of the fourth quarter of 2015, with an import value of N2, 833.5 billion from Asia, N2, 501.6 billion from Europe, N871.3 billion from America, N420.4 billion from within the African continent, and N213.8 billion from ECOWAS region (National Bureau of Statistics, Foreign Trade Report, 2015: 1-2).
According to the U.S. Department of State (2015:3), Nigeria is the thirteenth world’s largest oil producer and sixth largest oil exporter, producing high-value and low-sulfur crude oil. The contribution of crude oil to the value of total domestic export trade in 2015 amounted to N6, 945.3 billion (NBS, Foreign Trade Statistics Report 2015: 3). Chete, Adeoti, Adeyinka and Ogundele (2014), assert that prior to the discovery of crude oil, agriculture was the mainstay of the Nigerian economy. The agricultural sector provided food, raw materials, revenue and employment for the nation’s teeming population. However, after discovering crude oil in commercial quantities after the nation’s independence in 1960’s, its exploration and exportation weakened the agricultural sector and led to a shift away from industrial activities of a productive nature towards an over-reliance on a single commodity, which is – crude oil (Chete et al., 2014; UNCTAD, 2015).
Correspondingly, Nigeria's trade policy after the nation's independence in 1960 was largely based on an import substituting strategy (World Bank, 2010). However, in the early 1980's, Nigeria encountered various economic problems, which stirred up the need to adopt an effective expansionary trade policy that could ameliorate the apparent economic problems in the country. Hence, in 1986, the expanding economic crisis and its degrading effects on the nation's economy formed the basis for the adoption of the Structural Adjustment Program (SAP), as unguardedly imposed by the World Bank and the International Monetary Fund (Olaniyi, 2014; Odejimi & Odejimi, 2015).
The Structural Adjustment Programme (SAP) was widely acknowledged as a profound economic reform for reversing the downward trends in the economy. The policy was aimed at; promoting investments, reducing the total reliance on crude oil revenue, developing and utilizing domestic technology, encouraging the use of local rather than imported raw materials, privatizing and commercializing state-owned enterprises (Chete et al., 2014). These initiatives were proposed by the global financial institutions, that is, the institutions of the Washington Consensus as the panacea for the promotion of industrial efficiency, and improvement in the performance of the nation's industrial sector (Tamuno & Edoumiekumo, 2012; Olaifa, Subair & Biala, 2013; Chete et al., 2014). Also, documented evidence reveal that trade liberalization was one of the fundamental objectives of the Structural Adjustment Programme (Olaifa et al, 2013).
Initially, it was expected that the implementation of the trade liberalization policy, under the platform of SAP, would assist in eliminating foreign exchange control, removing price control, disbanding commodity boards and industrial output in the Nigerian economy (Tamuno & Edoumiekumo; 2012; Olaifa et al., 2013; Osa, 2014). However, Tamuno and Edoumiekumo (2012) posit that the adoption of the Structural Adjustment Program (SAP) in Nigeria failed to meet up with these expectations and was unable to reverse the economic crisis in
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