Download Attainment of Potential Growth Rates in Nigeria under Balance of

ATTAINMENT OF POTENTIAL
GROWTH RATES IN NIGERIA
UNDER BALANCE OF PAYMENTS
CONSTRAINTS: EXTENT,
OBSTACLES AND THE WAY
FORWARD
18
Adeolu O. Adewuyi and Tunde, W. Adeoye
Background
Growth performance of the Nigerian economy has been determined by both
domestic production and consumption activities as well as foreign
transactions in goods and services. Specifically, it has been acknowledged
that foreign trade is an Aengine of growth and development@. Further, in an
economy that is characterised by macroeconomic stability and favourable
investment climate, attractive trade policies would encourage foreign
investment, technological advancement and exports which will in turn
attract massive inflow of foreign exchange. With all these, the economy
would be able to meet its growth and development requirements in terms of
capacity to import capital goods, raw materials and technology.
Prior to the discovery of oil in 1960s, the Nigerian government was
able to execute investment projects through domestic savings, earnings
from agricultural product exports and foreign aids. However, the capacity
of the economy to accumulate domestic savings to finance investment was
limited. There was therefore, the inability of government to generate
sufficient foreign exchange due to persistent balance of payments problem
arising from the reliance on monoproduct primary export which is not
competitive at the international market. This consequently led to
unfavourable terms of trade and instability in government revenue. All
these have served as checks on demand (import demand) and a constraint
to effective implementation of national development plans.
After the discovery of oil and its massive exportation in the 1970s,
one would expect that more foreign exchange earnings will accrue to the
economy, and the economy would be able to undertake viable investment
projects that will lay a basis for sustainable growth and development.
376
Adeolu O. Adewuyi and Tunde W. Adeoye
Between 1970 and 1975, savings-GDP ratios ranged between 16.7 and 36 per
cent, while investment-GDP ranged between 16.9 and 26.0 per cent (Table
18.1). The positive savings - investment gap/GDP recorded during this
period and which reached its peak in 1974 was not unconnected with
massive inflow of foreign exchange receipts from exports as a result of oil
boom. This enabled the economy (GDP) to grow in real terms at an average
of 8.4 per cent between 1971 and 1975 (Table 18.1) All these suggest that
financial resource was not a constraint to growth during this period. This
was also evident by deficit-GDP ratio which was very low but positive in
some cases (Table 18.2). The positive balance of payments (BOP) position
recorded also signalled that the economy was financially buoyant during
the 1971\75 period (Table 18.2).
The subsequent period 1975 to 1980 also witnessed relatively high
savings and investment rates. The low and negative savings - investment
gap-GDP ratios suggest that more external financial resources were utilised
to execute investment projects since the balance of payments positions were
unfavourable (negative) for most of the years during this period. The oil
boom of 1978/79 should be noted for its impact on capital accumulation.
During this period, the balance of payments position was positive,
investment rate was high, savings rate was about 30 per cent and the ratio
of savings-investment gap to GDP was more than six per cent. Therefore,
one would have expected that the economy would grow at a higher rate.
However, the real income (GDP) growth rate for the period 1975 to 1980
was only 2.8 per cent (Table 18.1). This low growth performance of the
economy could be attributed to the type of development strategy (public
sector-led strategy) adopted during this period, which emphasised the
expansion of public sector activities, particularly the development of public
enterprises to provide basic infrastructural facilities and social amenities.
The government also embarked on income distribution policy through
various awards and other welfare packages. Trade policy during this period
also favoured imports and little or no control was exercised on government
finances and balance of payments position.
The negative price shock in the world market in the early 1980s
resulted in a substantial reduction in export earnings that accrued to
government. The aftermath of this was huge and recurring fiscal deficits,
balance of payments and debt crises, due to unsustainable huge public
sector expenditure and lack of alternative source of export earnings.
Therefore, the early 1980s witnessed deficits in current accounts and the
deficit-GDP ratio rose to 12 per cent in 1982 from four per cent in 1980. The
ratio of savings - investment gap to GDP widened and the total debt - GDP
ratio increased.
Attainment of Potential Growth Rates in Nigeria under Balance of Payments
377
Table 18.1: Savings, Investment and Growth Performance of the Nigerian Economy
InvestmentSavings-GDP
SavingsReal GDP growth
Growth Rate of
Year
GDP ratio
ratio
Investment
export receipts
gapGDP ratio
Growth Rate of
Import value
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
16.9
20.6
22.9
23.4
17.1
26.0
31.8
31.3
29.2
23.6
22.2
28.3
21.4
14.7
9.5
9.0
15.1
13.7
13.5
14.1
14.6
16.3
18.2
16.7
21.3
25.8
29.3
36.0
27.4
31.9
30.8
25.1
30.0
32.3
21.8
14.2
11.0
11.4
12.6
11.7
17.6
14.5
22.5
29.5
22.7
22.7
-0.2
0.7
2.9
5.9
18.9
1.4
0.1
-0.5
-4.1
6.4
10.1
-6.5
-7.2
-3.7
1.9
3.6
-3.4
3.9
1.0
8.4
14.9
6.4
4.5
21.4
5.5
6.4
11.7
-3.0
11.1
8.2
-7.4
2.4
5.5
-26.8
-0.3
-5.4
-5.1
9.4
3.2
-0.6
10.0
7.3
8.2
4.8
3.0
46.1
10.9
58.9
154.3
-15.0
-37.1
-13.0
-20.5
-78.7
-30.9
-22.3
-25.6
-8.6
21.1
29.0
-15.3
240.3
2.7
85.9
89.6
10.6
70.5
42.6
-8.2
23.7
41.8
114.2
38.4
37.8
15.8
-9.0
21.7
41.2
-16.1
-17.3
-19.4
-1.6
-15.3
198.5
20.1
43.9
48.2
90.3
67.7
1993
1994
1995
1996
1997
1998
1999
2000
23.3
19.6
16.3
14.2
17.4
24.1
22.3
17.7
20.2
20.6
18.4
34.9
24.6
19.6
18.2
33.4
-3.1
1.0
2.1
20.7
7.2
-4.5
-4.0
15.7
2.7
1.3
2.2
3.4
3.2
2.4
2.8
3.8
100.1
-5.8
361.4
37.8
-5.5
-65.1
36.8
38.9
13.8
-2.0
363.9
-25.5
33.5
-1.0
2.9
10.4
Sources: (1) World Bank, (various issues) World Tables and World Development
Indicators, Washington, DC (2) Central Bank of Nigeria, (various issues) Statistical
Bulletin & Annual Report and Statement of Account.
Adeolu O. Adewuyi and Tunde W. Adeoye
378
Table 18.2: Nigeria: Trends in Balance of Payments Positions and Fiscal Deficits
Year
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
Overall
Balance in the
BOP (N
billion)
0.1
0.1
-0.04
0.2
3.1
0.2
-0.33
-0.5
-1.3
1.9
2.4
3.0
-1.4
-0.3
0.4
0.3
-0.8
0.2
-2.3
8.7
-5.8
-15.5
-101.4
-41.7
-42.6
-195.2
-53.2
1.1
-220.7
-326.6
314.1
Current
Account
Balance (N
billion)
-0.1
-0.2
-0.3
0.1
3.1
0.04
-0.3
-0.7
-2.4
1.0
2.4
-4.0
-4.9
-3.1
0.0
2.2
-3.0
-0.3
-1.0
-9.2
19.4
-12.6
-5.1
-19.5
-52.3
-186.1
240.2
36.0
-331.4
46.3
713.0
Capital
Account
Balance (N
billion)
0.1
0.3
0.3
0.1
-0.01
0.1
-0.1
0.2
1.1
0.8
0.1
0.9
3.5
2.7
0.2
1.8
-1.9
1.7
0.1
-12.7
-2.2
-94.2
-19.7
-19.7
11.3
-3.3
-290.2
-30.5
116.7
-336.8
-390.3
Budget Deficit/
Surplus (N
million)
Budget
Deficit-GDP
Ratio
-455.1
171.6
-58.5
166.1
1796.8
-427.9
-1090.8
-781.4
-2821.9
1461.7
-1975.2
-3902.1
-6104.1
-3364.5
-2660.4
-3039.7
-8254..3
-5889.7
12160.9
15134.7
-35755.2
-39625.3
-107753
-70270.6
-70270.6
1000
37049.1
-5000
-133389.3
-285140.7
-103777.3
-9.0
3.0
-1.0
2.0
10.0
-2.0
-4.0
-2.0
-8.0
3.0
-4.0
-8.0
-12.0
-6.0
-4.0
-4.0
-11.0
-5.0
8.0
7.0
-8.0
-11.0
-7.0
15.0
-11.0
0.0
1.0
0.0
-4.7
-8.4
-2.9
Sources: Central Bank of Nigeria (various years). Statistical Bulletin &
Annual Report and Statement of Account, Lagos (now Abuja)
Attainment of Potential Growth Rates in Nigeria under Balance of Payments
379
380
Adeolu O. Adewuyi and Tunde W. Adeoye
In an attempt to address the various macroeconomic problems in
the economy, government adopted the demand management policy in
1982 when the problems were perceived as demand driven. In effect,
various stabilisation measures were introduced. Such measures include
imposition of tariffs and application of contradictory fiscal and monetary
policies in order to reduce the level of aggregate demand and achieve fiscal
and balance of payments equilibrium. Consequently, the deficit - GDP ratio
fell from 12 per cent in 1982 to four per cent in 1985. The overall balance of
payments position which was negative between 1982 and 1983 became
positive in the 1984 to 1985 period. All these have consequences for imports,
savings and investment and growth particularly in developing countries
such as Nigeria which depends heavily on imports for its capital goods and
raw materials. Total debt - GDP ratio rose from 9.6 per cent in 1980 to 24.1
per cent in 1985. With all these constraints on domestic financial resources
and the inability of the private sector to champion the course of growth and
development, the real GDP declined by 3.8 per cent between 1980 and 1985
(Tables 18.1 and 18.2).
The persistence of the macroeconomic problems in the economy
even after the introduction of a number of stabilisation measures made the
government to adopt the structural adjustment programme (SAP) in 1986.
This was meant to further strengthening the existing demand management
policies; restructure and diversify the productive base of the economy and
reduce dependence on the oil sector and on imports; and to achieve fiscal
and balance of payments viability, among other underlying objectives
(Philips, 1987).
Further, the SAP policy package includes trade and payment
liberalisation which suggest that there was no serious balance of payments
constraint during the period of implementation of SAP compared to what
obtained before SAP. This is because there was absence of serious
constraint on import demand, as a result of the implementation of trade
liberalisation under SAP where the levels of both tariff and non-tariff
barriers to trade were reduced. It should be noted that with the introduction
of SAP in Nigeria, the procedures hitherto used in allocating foreign
exchange and which consequently serve as a mechanism for controlling
demand for foreign exchange was abolished. Thus, the foreign exchange
market was deregulated. This policy aims at making foreign exchange
available to whoever could afford the prevailing exchange rate. Moreover,
the SAP period (1986 to 1993) was said to be characterised by persistent and
significant capital and current accounts deficits (Table 18.2) unlike the first
period (1970 to 1985).
Between 1986 and 1993, the ratio of investment to GDP ranged
Attainment of Potential Growth Rates in Nigeria under Balance of Payments
381
between 11.0 and 18.5 per cent, while the ratio of savings to GDP was
between 10.0 and 28.5 per cent. The savings-investment gap-GDP ratio
which was negative between 1986 and 1987, became positive in the
subsequent years (Table 1). This suggests that the SAP period was
characterised by relatively low level absorptive capacity of the economy
since some proportions of savings were not translated into investment
(Adewuyi, 2000). Moreover, since terms of trade fluctuated during this
period, nominal growth in trade components also fluctuated while deficits
were recorded in both current and capital accounts as well as the overall
balance of payments. Apparently, this poor performance of the major
macroeconomic variables affected the overall growth performance of the
economy as the real GDP growth rate which rose from 3.2 per cent in 1986
to 10.0 per cent in 1988, declined continuously from 8.2 per cent in 1990 to
2.7 per cent in 1993. Further, the relatively low level absorptive capacity of
the economy continued in the subsequent period (after SAP) as the savingsinvestment gap -GDP ratio was positive, while the external trade
performance indicatiors did not show significant improvements. The ratio
of fiscal deficit to GDP reached a peak of 11.0 per cent in 1994, while the real
GDP growth rate was less than 4.0 per cent in the period 1994 to 2000.
Given the foregoing, it is considered important to examine the
extent to which balance of payments position and other factors hinder
Nigeria from actualising its growth potential. This study therefore
quantifies the potential growth rates of the Nigeria economy under balance
of payments constraint. It also measures and analyses the extent to which
actual growth rates of the economy deviate from the potential growth rates.
It examines some obstacles and the way forward to the realisation of the
potential growth rate in Nigeria.
The rest of this paper is structured as follows; section 2 contains
review of literature, while section 3 presents analytical framework and the
estimated models. Section 4 discusses methodology and empirical results.
Summary of findings and concluding remarks are discussed in section 5.
Review of Literature
Conceptual Framework
The term Abalance of payments constrained growth@ can be defined as the
situation where the performance of a country in foreign markets as well as
the response of the world to this performance constrain the growth of the
country to a rate less than the rate required for addressing domestic
economic problems. That is, problems such as the prevalence of
unemployment and underemployment, and the existence of idle resources
and capacity (McCombie and Thirlwall, 1994 and Hussain, 1999).
382
Adeolu O. Adewuyi and Tunde W. Adeoye
The balance of payments constrained growth rate model is based on
the idea that the primary constraint to economic growth is the balance of
payments position. This notion is anchored on the fact that it imposes a limit
on demand to which supply can adapt. It states further that no open
economy can grow faster, in the long run, than the rate consistent with
balance of payments equilibrium on current account unless it can finance
ever-growing deficits. Further, the model emphasises the importance of
exports performance in the growth process, as exports is the only
component of aggregate demand that provides the foreign exchange needed
to procure imports (raw materials and capital goods) that are required for
output expansion and growth.
The basic model is anchored on the >>dynamic Harrod foreign
trade multiplier==, which is also known as >>Thirlwall=s law or the 45
degree rule,== developed through the pioneer efforts of Thirlwall (1979).
On the assumption of constant relative prices and absence of capital flows,
the basic dynamic Harrod foreign trade multiplier postulates that the rate of
growth of a country can be predicted by considering the ratio of the rate of
growth of a country=s exports volume to its income elasticity of demand for
imports (i.e growth rate of exports volume divided by income elasticity of
demand for imports can be used as a basis for predicting a country=s
growth rate).
Review of Empirical Studies
Thirlwall (1979) made a pioneer attempt at estimating the basic dynamic
Harrod foreign trade multiplier based on the assumption that relative prices
remain the same in the absence of capital flows. The commonly used
estimation procedure is the standard accounting method. This method gives
the average rate of growth under balance of payments constraint during a
particular time period as the ratio of the rate of growth of export volume (or
the product of average growth of world income and the income elasticity of
demand for export) and the income elasticity of demand for imports. In
addition, the validity of the model is then verified by examining the
closeness of the estimate growth rate to the actual growth rate (i.e. assessing
the extent to which the estimated growth rate approximates the actual
growth rate). He applied the basic model for a sample of developed
countries and for two overlapping post-war periods. He reports that the
model provides a reasonable or significant approximation of the growth
experience of these countries. He concludes that it might almost be stressed
as a fundamental rule that a country=s growth rate will almost be equal to
the ratio of its rate of growth of exports and its income elasticity of demand
for imports. However, he points out that the prediction of the model might
Attainment of Potential Growth Rates in Nigeria under Balance of Payments
383
not hold in a situation where the rate of growth under the balance of
payments constraint is higher than the maximum feasible capacity growth
rate (potential growth rate).
Similarly, Bairam (1988) estimates the model for a large sample of
developed countries and arrived at the conclusion that the growth
performance of a country is a function of the values of its income elasticity
of both exports and imports. In the same vein, Perraton (1990) solves the
model for 59 developing countries for the period between 1970 and 1984
and reports that the model provides a good fit for almost one half of the
sampled countries. This study also suggests that a country=s growth
performance depends on income elasticity of both exports and imports.
Among those that have applied the model for developed countries
in the 1990s are; Bairam and Dempster (1991); Andersen (1993) and
Atesoglu (1993). Bairam and Dempster (Ibid) applied the model for a sample
of developed countries and provide a qualified support for the model.
Andersen (Ibid) who introduced the element of recent development in
econometrics by employing cointegration technique to both export and
import equations, estimates the model for a sample of 16 developed
countries. He concludes that the hypothesis that there is a high correlation
between the actual growth rate and the estimated grow rate merely holds in
the very long run, and even then, a 1:1 ratio (between them) obtains when
Japan was excluded.
A country specific study was conducted by Atesoglu (1993), who
gave favourable evidence for the model after estimating the model for the
United States. The issue is that, are these results applicable to a specific
developing country? In order to answer this question, this study is made
country specific and thus, it covers only Nigeria.
Similarly, Hussain (1999) applied both the basic and extended
forms of the model to a sample of both African and Asian countries
(including Nigeria). He applied both the traditional import function and the
adjustment to equilibrium specification and reports that Burundi, Egypt,
Gabon, Kenya, Niger, Senegal and Zimbabwe are the countries where the
stock adjustment specification yield best results. This implies that the
traditional import equation gives the best fit for all other countries in the
sampled countries, including Nigeria. He submits that the basic form of the
model provides a good prediction of the actual growth rate of the sampled
African countries. The same findings was revealed in the case of the
sampled Asian countries. However, he reports inconclusive result for basic
model solved for the full sample of both African and Asian countries pooled
together. On the other hand, he submits that the extended model seems to
384
Adeolu O. Adewuyi and Tunde W. Adeoye
be superior when predicting the actual growth rate of the full sampled
countries (both African and Asian taking together). He infers from the tests
that both the basic and the extended forms of the model can be considered
as good predictors of the actual growth rates.
Recognising the limitation of the McGregor and Swales regression
test (upon which the foregoing analysis of the predictive power of the
model was based), Hussain (1999) also applied the individual country
method of assessing the predictive power of the models introduced by
McCombie (1989). He found that Aas a percentage of the full sample, the
extended model has valid prediction in about 73 per cent of the cases
compared with 55 per cent for the basic model. On the basis of this finding,
he concludes that the extended model which incorporates the terms of trade
effect and the effect of real capital inflows provides a better prediction of
the actual growth rate than the basic model. In order to gain more insight
into the model=s prediction, he grouped the sampled countries according to
the results of the McCombie test as follows: (i) countries where both the
basic and the extended models yield statistically accepted prediction; (ii)
countries where only the extended model yield statistically valid prediction;
(iii) Countries where only the basic model yields statistically valid
prediction; and (iv) countries with no valid prediction.
According to the author, Nigeria falls in the group (i) where, on
average, changes in terms of trade and real capital inflows raise the balance
of payments constrained real income growth by 0.66 and 0.41 per cent per
annum respectively, while the export volume effect increases it by 3.72 per
cent per annum. The growth rates predicted by the basic and the extended
forms of the model are 4.01 and 4.79 per cent per annum respectively,
which are not statistically different from the actual growth rate of 4.60 per
cent per annum. He submits that while the average actual growth rate of the
sampled African countries was 3.66 per cent, the average actual growth rate
of Asian countries was 6.60 per cent. The result shows that export
contributes more to growth performance in Asian countries than in African
countries while real capital flow contributes more to growth in African
countries than in Asian countries. The result further reveals that terms of
trade effect hinders growth in both African and Asian countries. He
concludes by stressing that the low growth rates in African countries
compared to Asian countries are as a result of low export expansion relative
to imports needed for the process of growth and development. He stresses
further that Athe poor performance of African countries is attributed to the
low magnitudes of their dynamic Harrod foreign trade multipliers which
are determined by their respective income elasticities of demand for exports
and imports@. --------the low dynamic Harrod foreign trade multipliers of
Attainment of Potential Growth Rates in Nigeria under Balance of Payments
385
African countries are direct products of their excessive dependency on the
exportation of primary products. To examine the relevance of these results
in contemporary Nigeria, we follow a similar pattern discussed earlier s (as
in Hussain, 1999), even though it is a country specific study .However,
unlike in Hussain (Ibid), where countries were grouped for the purpose of
analysis, the analysis of this study is based on two trade regimes in Nigeria
(1970 to 1985), (characterised by high tariff and non-tariff barriers and
import substitution strategy) and (1986 to 1995), (characterised by trade
liberalisation and export promotion).
In a related study of macroeconomic constraints and medium-term
growth in Kenya, Mwega, et. al (1994) used an alternative framework (three
- gap framework) to investigate whether it is savings, fiscal and foreign
exchange gaps that is the binding constraint on growth capacity in Kenya.
They also examine how these various gaps have evolved since the early
1970s. They found that, for some reasonable ratios of intermediate import,
foreign exchange is a major resource constraint to potential growth in
Kenya. They conclude that with increased supply of foreign exchange and
the associated reduction of import compression, savings, fiscal and external
gaps that inhibit good macroeconomic performance will be alleviated. This
study is therefore expected to corroborate the earlier findings that export
and import performances are very crucial to growth.
In Nigeria, some authors had examined the role of export and
capital flows in the growth process. For instance, Fajana (1979) investigates
the impact of export and foreign capital on economic growth. He finds that
export has greater impact on GDP growth than foreign capital inflows over
eleven years period, 1964 to 1974. He recommends that Nigeria should
deemphasise reliance on foreign capital while export should be promoted.
Similarly, Oyejide (1975), drawing a sample from 43 countries (including
Nigeria), reported a positive relationship between average growth rates of
GDP and export as a percentage of GDP over 1960 to 1967 period. In the
same vein, Egwaikhide (1991) examines the quantitative effects of export
(non-oil) expansion on Nigeria’s economic growth over the period 1960 to
1983. Based on simulation experiment, he observes among others, that a 75
per cent rise in non-oil export led to 1.4 per cent increase in real GDP. He
concludes that there is need to promote export in order to enhance GDP
growth in Nigeria.
386
Adeolu O. Adewuyi and Tunde W. Adeoye
Analytical Framework and Model for Estimation
The theory of the balance of payments constrained growth model is rooted
in Keynesian demand - side framework. The model provides an insight into
Keynesian demand - side analysis of the process of economic growth and
how trade regime influences the rate of growth of an economy. The theory
places emphasis on demand (as opposed to factors of production and
technical change as in the neoclassical framework) as the main driver of
economic growth. The theory states that increases in the labour force,
capital stock and technical change are more or less endogenous, adjusting
indirectly to the changes in the economy that resulted from changes in
demand (Thirlwall, 1979; Thirlwall and Hussain, 1982; McCombie,1989;
Hussain, 1999).
If availability of input (resources) determines availability of output
the issue then is, what determines the availability of inputs and their
utilisation. It should be noted that land-base factors of production are
endowed, and this implies that their availability is exogenously determined.
But this is not true in the case of labour and capital inputs. It is known that
the extent of demand for resources such as labour and capital makes a
difference to their supply which is certainly significant enough to generate
differences in the rates of growth of output between countries. Even within
countries, the extent to which demand creates pressure on supply may be
significant enough to generate differences in output growth rates over a
period of time. This is because government’s macroeconomic policies
influence consumption pattern (demand) of the various economic agents in
the economy. Therefore, changes in government policies may result in
consumption pattern (demand) changes. A similar analysis goes for supply,
where changes in government policies may engender changes in supply.
It can be argued that labour supply responds to demand through
migration, change in the rate of participation and the transfer of resources
from low to high productivity sectors of the economy, especially from
agriculture to industry (Hussain, 1999). All these channels of response can
be influenced through government policy. It is known that capital which is
a human-made factor of production and consequently a sort of investment
also responds to demand through its employment in various economic
activities. Similarly, different forms of technical advancement which
enhance the productivity of factor inputs are accumulated more rapidly
when there is a strong demand for output. This implies that most of the
main springs of economic growth are demand-induced (Hussain, 1999).
It is underscored that in order to understand the growth rate
differences between countries, the nature and the extent of demand
constraints on output growth must be understood, the most binding of
Attainment of Potential Growth Rates in Nigeria under Balance of Payments
387
which, in an open economy is likely to be the balance of payments. The
identity for balance of payments on current account (B) is as follows:
B=X-M
... (1)
where X and M are the values of exports and imports of goods and services
measured in a common currency respectively. Starting from a position of an
initial equilibrium in the current account, the rate of growth in the balance
can be written as:
b=x-m
where lower case letters denote the rate of growth of the variables. The
demand for exports and imports depends on relative prices and real
income. Assuming constant relative prices the demand for exports and
imports will be determined by world income and domestic income in
conjunction with the respective income elasticities of demand for exports
and imports. Assuming constant relative prices, the rate of change in the
balance of payments starting from initial equilibrium can be expressed as:
b = σw - πy
… (3)
with x = σw and m = πy, where σ is the income elasticity of demand for the
country=s exports, w is the rate of growth of world’s real income, π is the
country’s income elasticity of demand for imports and y is its real income
growth rate. From equation (3) it can be seen that movements in the balance
of payments depend on the relative size of the income elasticities of demand
for exports and imports and on the differential income growth rate between
the country and the rest of the world. If a country has an income elasticity of
demand for imports larger than its income elasticity of demand for exports
(i.e. π< σ), any attempt by that country to grow at a rate which is equal to
the rate of growth of the rest of the world (i.e. w = y), will cause the balance
of payments to deteriorate. This is precisely because there will be a greater
leakage of the country’s growth of demand into the growth of its imports,
compared with the leakage of the rest of the world’s growth of demand into
the growth of its exports. In the absence of capital inflows to bridge the
emerging deficit in the balance of payments, and with the rate of growth of
export determined exogenously by the rate of growth of world income, and
the values of σ and π constant, it is the rate of growth of domestic real
income that must adjust downwards to maintain equilibrium between the
Adeolu O. Adewuyi and Tunde W. Adeoye
388
growth of imports and exports. In this case, the rate of growth of the
country is said to be constrained by the balance of payments and the values
of σ and π play the crucial role in determining the balance of payments
constrained growth rate. This is the main premise of the basic dynamic
Harrod foreign trade multiplier pioneered by Thirlwall (1997). From
equation (3) the rate of growth which is consistent with balance of payments
equilibrium can be obtained as:
y* = σw/π
(Since balance of payments equilibrium requires σw =πy )
Thus, y* represents the rate of growth of real income compatible with
equilibrium in the balance of payments. Hence, in the long run, no country
can grow faster than y* unless it is making a balance of payments deficit
and no country can grow slower unless it is accumulating reserves
(Thirlwall, 1979).
Parameters for estimating equation 4 can be obtained by estimating
the conventional multiplicative import and export demand functions with
constant elasticities given as follows:
M = a(PfE/Pd)εYπ
X = b(Pd/PfE)βWσ
where a and b are constants; ε is the price elasticity of demand for imports
(ε<0); β is the price elasticity of demand for exports (β<0); Y is the level of
real domestic income; W is the level of real >>world== income; π is the
income elasticity of demand for imports (π>0 ); and σ is the income
elasticity of demand for exports (σ>0).

The higher the income elasticity for demand for imports (π), the
lower the balance of payments constrained growth rate, and viceversa.

A faster growth of world income will raise the balance of payments
constrained growth rate.
Methodology and Empirical Analysis
Methodology
In order to fit the models (equation 4), some basic parameters need to be
estimated which include the income elasticity of demand for imports and
exports. Therefore, estimation of the import demand and export supply
functions (equations 5 and 6) for the two policy regimes (1970 to 1985) and
Attainment of Potential Growth Rates in Nigeria under Balance of Payments
389
(1986 to 2000), is a crucial initial condition for fitting the model. Since these
equations are estimated in logarithm form with the Ordinary Least Squares
(OLS) technique, therefore, the estimated results provide the elasticities.
These equations have been estimated by regime periods to capture the
growth rate differences under alternative policy regimes in Nigeria.
Export prices and consumer price index are considered as proxies
for domestic prices while import price are used as foreign price in the
estimation of the model. Some variables such as imports, exports, nominal
GDP are deflated. The data for this study were sourced from (i) World Tables
and World Development Indicators (various issues); (ii) Central Bank of
Nigeria (CBN), Statistical Bulletin (1996 and 2002), and Annual Report and
Statement of Accounts (various Issues).
Empirical Analysis
Assessing the Suitability of the Estimated Results of the Import Demand and
Export Supply Equations for Predicting Nigeria’s Growth Performance
The import demand and export supply equations were estimated for three
periods (Pre-SAP 1970 to 1985; SAP and post- SAP periods – 1986 to 2000
and the entire study period - 1970-2000) in order to obtain price and income
elasticities of import demand and export supply required to fit the model.
The results presented in Table 18.3 indicate that the independent variables
included in the import demand equations A, B and C have higher
explanatory power, as they can explain between 70.0 and 95.0 per cent of
the variations of the dependent variable. The durbin-watson statistics for
all these equations are within the acceptable range. The inclusion of the
lagged values of the dependent variables RM(-1) in all the equations have
already left little to be worried about the incidence or occurrence of
autocorrelation.
Further, in all the import demand equations estimated, all the
coefficients of the explanatory variables are statistically significant and they
all have the expected positive sign. The positive sign of the coefficient of
relative price variable (LOG Pf/Pd) implies that the higher the import price
relative to the domestic price (export price), the higher the demand for
imports. This relationship is applicable to an import dependent economy
such as Nigeria where the demand for import is price inelastic. The
coefficients of the log of relative price variables are very small and less than
one which confirms that import demand is price inelastic for Nigeria. This
may indicate an insignificant change in import demand in the face of a
change in relative prices. The theoretical proposition that the demand for a
commodity is a direct or positive function of income is also confirmed by
390
Adeolu O. Adewuyi and Tunde W. Adeoye
the result presented in Table 18.3, where it was shown that import demand
is a direct or positive function of income (gross domestic product). The
coefficients of the log of income variable- LOG RGDP (which can be
interpreted as income elasticity of import demand) are relatively large
which suggest that import is a necessity or a luxury and therefore,
consumes a relatively significant proportion of national income. This may
imply that import demand will change significantly in the face of a change
in national income. The proposition that current level of consumption may
be determined by past level of consumption is also validated by this result,
in that the results show that immediate past level of import demand
[represented by one period lagged value of import - LOG RM(-1)]
determines the current level of import demand. All these results conform
with some peculiar characteristics of the Nigerian economy which further
confirm their reliability for use in further estimations and analysis.
Similarly, the results presented in Table 18.3 show that the
explanatory variables included in the export supply equations D, E and F
have higher predictive power, as they can explain between 50.0 and 94.0 per
cent of the variations of the dependent variable (export supply). The
durbin-watson statistics in all the equations are within the acceptable bound
of 1.85 and 2.0, which suggests the absence of autocorrelation. Moreover,
all the explanatory variables except the experimented variables AR and MA
are statistically significant which confirms their reliability for further
analysis. The coefficients of the log of the relative price variable LOG
(pd/pf) are negative, which implies that the terms of trade of Nigeria=s
export is unfavourable. The coefficients of the log of this variable (which
can be interpreted as price elasticity of export) are less than one which
indicates that the supply of export in Nigeria is price inelastic. This implies
that export supply will not change significantly in the face of a change in
relative price. This result reflects the characteristics of OPEC oil market
where there are quotas and therefore, supply cannot quickly or easily adjust
to relative price changes. The results further show that export supply is a
direct or positive function of world income (WY), the higher the world
income, the higher the export supply from Nigeria to the world market.
The relative large coefficient of world income variable indicates that the
supply of exports in Nigeria is income elastic (it ranges between 3.0 and
6.2). This implies that export supply will change significantly in the face of
a change in world income. This result reflects the significance of Nigeria=s
crude oil to the world.
Attainment of Potential Growth Rates in Nigeria under Balance of Payments
Table 18.3
391
392
Adeolu O. Adewuyi and Tunde W. Adeoye
It is clear from the foregoing that the estimated coefficients of the
explanatory variables in the import demand and export supply equations
are reasonable in the context of Nigeria and reliable in the sense that they
satisfied both the statistical criteria and economic a priori expectation, that
are required of them before they can be used for fitting the model and for
subsequent analysis. Comparing our basic parameters - income elasticity of
import demand and export supply (i.e., π and σ respectively), it would be
observed from Table 18.3 and the appendix that, π is less than σ (i.e., 2< π <
3 and 3 < σ  6) which according to balance of payments constrained growth
model implies that any attempt by Nigeria to grow at a rate which is equal
to the growth rate of the rest of the world (i.e., w = y) will engender a
deterioration of balance of payments. This is based on the fact that Athere
will be a greater leakage of the country=s growth of demand into the
growth of its imports, compared with the leakage of the rest of the world=s
growth of demand into the growth of its exports (Hussain, 1999). This
observation is a reflection of the basic characteristics of the Nigerian
economy in terms of import dependency and non-competitiveness of
exports which make the country susceptible to balance of payments
problems.
Comparing the Actual Growth Rates with the Potential Growth Rates Predicted by
the Model
Examining the results presented in Table 18.4, some differences were
noticed between the actual growth rate and the growth rates predicted by
the model. This implies that the actual growth rate deviates in one way or
the other, positively or negatively, a little or significantly, from the growth
rate predicted by the model. These deviations are either positive and
significant (under prediction) or negative and significant (over prediction)
or insignificant (almost exact prediction). A look at the estimated results
presented in the Table shows that the entire study period is characterised by
both over - and under - predictions as well as almost exact prediction of the
actual growth rate of the economy. However, for most years covered in the
study, the model over predicts the actual growth rate. On the average, the
actual growth rates deviated from the potential growth rates by about 3.5
per cent. This result implies that the economy has been unable to achieve
the potential growth rates most years in the study period. It can be seen that
for most of the years in the pre-SAP period, the model over predicts the
actual growth rate, which implies that the economy could not attain the
potential growth rates. On the average, the model over predicts the actual
growth rate by 4.6 per cent
Attainment of Potential Growth Rates in Nigeria under Balance of Payments
393
Table 18.3: Results of the Estimated Import Demand and Export Supply Equations Required for Fitting the
Models
EQUATIONS EXPLANATORY Other results
VARIABLE
EQUATION- A (1970-85)
CONSTANT LOG LOG LOG R2 = 0.96
(PF/Pd)RGDP RM (- adjusted R2 =
(Y)
1)
0.95
DEPENDENT VARIABLE IS LOG OF REAL
IMPORT (RM)
-29.47
(-3.93)
0.13
(2.87)
2.77 0.70 DW - STAT =
(3.98) (7.54) 2.10
F - STAT =
83.25
EQUATION –B (1986-2000)
CONSTANT LOG LOG LOG R2 = 0.80
(PF/Pd)RGDP RM (- adjusted R2 =
(Y)
1)
0.70
DEPENDENT VARIABLE
IS LOG OF REAL IMPORT (RM)
-26.99
(-3.06)
0.35
(2.45)
2.73 0.39 DW - STAT =
(3.62) (2.42) 2.28
F - STAT =
8.14
EQUATION- C (1970-2000)
CONSTANT LOG LOG LOG R2 = 0.91
(PF/Pd)RGDP RM (- adjusted R2 =
(Y)
1)
0.90
DEPENDENT VARIABLE IS
LOG OF REAL IMPORT (RM)
-23.64
(-4.50)
0.33
(4.78)
2.18 0.79 DW - STAT =
(4.78) (12.89)1.82
F - STAT =
75.87
EQUATION –D (1970-85)
DEPENDENT VARIABLE
IS LOG OF REAL EXPORT (RX)
CONSTANT LOG LOG MA
(Pd/PF)RW (1)
(Y)
-53.50
(-5.33)
R2 = 0.95
adjusted R2 =
0.94
-0.50
3.80 0.96 DW - STAT =
(-3.34) (6.24) (32.70)193
F - STAT =
66.12
EQUATION –E (1986-2000)
DEPENDENT VARIABLE
IS LOG OF REAL EXPORT (RX)
CONSTANT
-92.99
(-2.00)
MA
LOG LOG (1)
(Pd/PF)RW
(Y)
R2 = 0.66
adjusted R2 =
0.50
-0.45
6.17 0.52 DW - STAT =
(-1.91) (2.20) (1.41)* 1.85
F - STAT =
3.91
EQUATION –F (1970-2000)
CONSTANT LOG LOG AR (1) MA
(Pd/Pf) RW
(1)
(Y)
R2 =
0.89
Adeolu O. Adewuyi and Tunde W. Adeoye
394
adjusted
R2 =
0.86
DEPENDENT VARIABLE IS
LOG OF REAL EXPORT (RX)
-42.00
(-3.50)
-0.28
3.10 0.38 0.26 DW (-2.48) (4.27) (1.09)* (0.68)*STAT =
1.91
FSTAT =
35.96
Source: Author=s estimate
(1) Figures in parenthesis are the t-statistics; (2) The coefficients of the explanatory variables are statistically
significant at levels ranging between zero and ten per cent.
(3) *indicates the Coefficients of the explanatory variable that are not Statistically Significant. (4) Foreign Price (PF) is
proxied by import price index while domestic or export price (Pd) is proxied by Consumer Price Index (CPI).
Table 18.4: Comparison between the Actual Growth Rates and the Potential Growth
Rates Predicted by the Model
Years
Actual Growth
Rate(yA)
Potential Growth Rate
predicted by the Model
(yp)
Difference
(yA- yp)
(Pre-SAP Period)
1971
21.35
19.9
1.45*
1972
5.48
8.64
-3.16**
1973
6.42
8.68
-2.26**
1974
11.74
16.96
-5.22**
1975
-2.96
1.23
-4.19**
1976
11.08
6.86
4.22*
1977
8.15
5.49
2.66*
1978
-7.36
5.76
-13.12**
1979
2.44
5.21
-2.77**
1980
5.48
4.19
1.29*
1981
-26.81
2.19
-29.0**
1982
-0.34
0.55
-0.89**
1983
-5.37
4.12
-9.49**
1984
-5.10
6.17
-11.27**
1985
9.38
6.53
2.85*
Pre-SAP Average
2.24
6.83
-4.59**
3.15
6.78
3.63**
-0.57
7.91
-8.48**
9.91
9.94
-0.03***
(SAP & Post-SAP
period)
1986
1987
1988
Attainment of Potential Growth Rates in Nigeria under Balance of Payments
395
1989
7.39
7.46
-0.07***
1990
8.20
6.75
1.45*
1991
4.73
3.84
0.89*
1992
2.93
2.94
-0.01***
1993
2.65
3.84
-1.19*
1994
1.31
3.39
-2.08**
1995
2.15
6.23
-4.08**
1996
3.40
7.10
-3.70**
1997
3.20
7.73
-4.53**
1998
2.40
4.48
-2.08**
1999
2.70
6.12
-3.42**
2000
3.80
8.69
-4.89**
Mean (SAP& Post-SAP)
3.82
6.21
-2.39**
Overall average
3.03
6.52
-3.49**
Source : Computed Note: (1) Positive difference (*) indicates under-prediction while negative
difference (**) indicates over-prediction and (***) indicates almost exact prediction
Adeolu O. Adewuyi and Tunde W. Adeoye
396
The likely explanations for the inability of the economy to attain the
potential growth rates include the internal factors such as the poor state of
infrastructure, low level of human capital, corruption, debt overhang,
political and policy instability as well as other exogenous and endogenous
factors or negative shocks. These factors can affect export performance and
hence the growth performance of an economy and thus, make the actual
growth rate significantly fall short of the potential growth rates. This is
because if the state of infrastructural facilities is bad and the political as well
as policy environment are unstable, macroeconomic performance is likely to
be adversely affected through declining productivity. It should be noted
that the few cases where the actual growth rates exceeded the potential
growth rates may be due to the fact that the model does not take account of
the positive effect of favourable terms of trade and inflow of capital as well
as other positive exogenous and endogenous shocks that may lead to
appreciable improvement in growth performance. For instance, despite the
huge capital inflow recorded in 1974, the model still under predicts the
actual growth rate. This is evidence that the model can not capture the
effect of real capital flows.
The Table indicates that the SAP and post-SAP periods were
characterised by over - and under predictions as well as almost exact
prediction of the actual growth rate by the basic model. The model over
predicts the actual growth rate for most of the years during SAP and postSAP periods. It was only in two years (1990 and 1991) when it under
predicts the actual growth rate. It is interesting to see that the model
predicts growth rates that are almost exactly the same as the actual growth
rates of some years which are; 1988, 1989 and 1992, where the differences
(deviations) are 0.3, 0.9 and 0.3 per cent respectively. On the average, the
model over predicts the actual growth rate by about 2.40 per cent. The
same explanations hitherto offered for the cases of over - and under
predictions are also applicable here1.
1It should
also be stressed that measurement and aggregation errors are not
also ruled out as factors accounting for the differences observed. These
problems may be due to inadequacy of data reported by the various sources
Attainment of Potential Growth Rates in Nigeria under Balance of Payments
397
Summary of Findings, the Way Forward and Concluding Remarks
Summary of Findings
The empirical analyses reveal that the demand for import in Nigeria is price
inelastic. This finding confirms that Nigeria is highly import dependent. It
was also revealed that the demand for import is income elastic in Nigeria.
This finding corroborates the earlier findings because it suggests that import
demand is a necessity to Nigeria. With respect to supply of export, it was
revealed that Nigeria=s exports face unfavourable terms of trade in the
world market. It was further shown that Nigeria’s export supply is a direct
function of world income, and that export supply is income elastic. This
finding reflects the importance of crude oil export from Nigeria to the rest
of the world.
Empirical result shows that the Nigerian economy has been unable
to achieve the potential growth rates of most years in the study period. A
number of factors have been attributed to this problem. These include the
poor state of infrastructure, low level of human capital development,
corruption, and rent-seeking activities, debt overhang as well as political
and policy instability.
Promoting the Achievement of the Potential Growth Rate under the Current
Democratic Government in Nigeria: The Way Forward
It is acknowledged that a lot of efforts have been made by the current
democratic government in Nigeria. However, a number of constraints that
can hinder the achievement of potential growth rate are identified and
solutions to them are discussed in what follows.
One of the major problems hindering productivity and growth in
Nigeria is irregular supply of electricity. Efforts made by the current civilian
administration to record a major breakthrough in the area of
telecommunication can also be extended to other areas, particularly
electricity, a critical input to production in both the public and private
sectors, especially for the small and medium scale enterprises. All these will
produce multiplier effects on employment and output of the economy.
Sustainable long-term growth and development depend on
execution of capital projects. It is worthy of note that the present situation of
non-release of funds for executing capital projects and preponderance of
recurrent expenditure in the overall budget may hinder growth and
development in Nigeria. There is therefore the need to reconsider budget
(expenditure) policy particularly on capital projects so as to fine-tune it for
the purpose of promoting growth and development in the country. Coupled
with this is the application of the due process in government contract
398
Adeolu O. Adewuyi and Tunde W. Adeoye
awards, which at present is seen as a barrier to execution of development
projects and programme and surprisingly, a source of further corruption
(since individual civil servant now sets up private firms to bid for
government contracts). Therefore, the essence of the policy, which is to
eliminate corruption and obtain value for money so as to achieve
development may be jeopardised. Therefore, application of this policy has
to be improved upon because of its negative consequence on capital projects
which are critical to economic development. Thus, there is need to create
awareness on what due process in contract awards entails and to clearly
specify the rule behind it so that people will know the conditions they are
expected to meet. Reform in the banking sector can be gradual so as to
minimise its unemployment implication.
Corruption and rent-seeking activities, which are ubiquitous in
Nigeria at both public and private sectors, hinder productive investment
and growth of output. Through corruption, the economy is being deprived
of funds that could have being invested in the productive activities by
different cases of mass looting of public treasury by public and political
office holders. The recent cases unfolded by the Independent Corrupt
Practices Commission (ICPC) and the Economic and Financial Crime
Commission (EFCC) are unimaginable. The economic costs of corruption
and rent-seeking activities have been well documented in the literature
(Boninger, 1995 and Adewuyi, 2002). Corruption and rent-seeking have
been regarded as a tax on investment and output, which may result into
high production cost and increase in prices of commodities. The ICPC and
the EFCC should be given all the necessary support that will enable them
discharge their responsibilities effectively.
The level of indebtedness of the Nigeria economy has to be reduced
drastically so as to free resources to undertake development projects. The
current governmental effort to purse debt relief for the country is
commendable. Efforts should be intensified to finally obtain debt relief for
Nigeria to get out of the debt trap. A new borrowing policy has to be
designed to take account of the sustainability of debt in terms of debt
service capacity and the equilibrium level of debt that is compatible with
long-term growth and development of the economy. Prudent expenditure
management to show value for money and the exercise of concrete actions
to eliminate corruption in the system are some of the measures that can be
taken. This will also make the government to be able to attract increased
flow of official development assistance (ODA). Donors and other
development partners want to see concrete output for their support.
Implementation of credible and consistent policies, eradication of
corruption and security of lives and properties are necessary conditions for
Attainment of Potential Growth Rates in Nigeria under Balance of Payments
399
attracting increased flow of foreign direct investment (FDI). All these
problems can be solved within the context of regional integration
development agreements such as NEPAD, particularly with its peer review
mechanism which emphasises good governance.
Given the nexus between health, education and wealth creation and
accumulation, there is need to develop social and human capital, and
eradicate cultural, religious and attitudinal factors inhibiting the
achievement of potential growth rate. Thus, apart from eradicating diseases
and epidemics in Nigeria, there is need to promote universal basic
education. There is also the need to increase the capacity and capability of
health facilities (primary and comprehensive health centres and general
hospitals) to deliver medical services to the people. In particular, the
number of medical personnel has to be increased, while the size of medical
equipment and materials have to be raised. The level of income of the
people has to be increased so as to enable them afford balance diet and
medical care, which will promote their health status, and hence raise
productivity.
There is need to fine-tune policies and programmes embedded in
the National Economic Empowerment and Development Strategy (NEEDS)
so as to make it consistent with achievement of MDGs, particulrly in terms
of attainment of a higher rate of growth. Most of the reform programmes in
NEEDS have to be implemented gradually and sequentially so as not to
work against one another and compound the existing poor living conditions
in Nigeria. If the public sector must be downsized, then private sector must
be lifted up to the position or level that can absorb resources (particularly
labour) that are thrown out of the public sector. This implies that financial
resources and adequate infrastructure must be made available to promote
private sector activities. A situation where fiscal deficits accumulate and
financed with financial resources from the banking sector (thereby
crowding out private sector investment) should be discouraged. Since
infrastructure is a major determinant of production cost in the private
sector, and hence competitiveness of locally made goods, efforts have to be
intensified towards improving the state of infrastructure in Nigeria.
Reform agenda implemented under NEEDS should promote
productivity in the public sector. Similarly, enabling environment including
adequate provision of financial support will enhance private sector
productivity and output growth. The combined effects of increased
productivity and output in the private and public sectors will enable
Nigeria attain the desired annual growth rate of at least 7.0 per cent
prescribed in most Poverty Reduction Strategy Papers (PRPS) including
400
Adeolu O. Adewuyi and Tunde W. Adeoye
those in NEPAD and MDGs.
If growth in Nigeria is to be driven by trade, particularly export,
apart from addressing internal factors, there is need to focus on external
market access barriers, particularly those in the developed nations. A major
factor which creates market access problem for Nigeria and other African
countries is predominance of low value-added activities at the expense of
high value-added activities which have the high potential of broadening
economic opportunities (in terms of investment and employment
generation) and sustaining economic growth. Another factor is the high
tariff peak and tariff escalation in industrial nations, particularly in export
sectors of interest to Nigeria and other African countries, compared with
low average tariffs in the latter countries as a result of both unilateral and
multilateral trade reform efforts. Increased tariffs on raw materials or
intermediate inputs have persistently limit export opportunities and hence,
hinder vertical diversification and industrialisation in Nigeria and other
African countries (Oyejide, 2002)
Non-oil products are usually associated with tariff peaks,
particularly agricultural products that are perceived to have a high export
diversification potential. Further, the developing countries cannot explore
the benefits of the preferential market access granted to them by the
industrialised nations under various schemes because the latter offer
massive domestic support to agriculture, a major export interest to the
former. Apart from this, exports from African countries including Nigeria
confront series of non-tariff barriers, among which are standards
specification in terms of sanitary and phytosanitary (SPS) and technical
barriers to trade (TBT). It was reported that pre-export inspection, home
country and border inspections and testing at the point of entry adversely
affected Nigerian exporters. It was discovered that many firms in Nigeria
could not meet up with international standards because of their inadequate
funds and non-affordability of the extra costs involved which ranged
between N500,000 and N5 million (Ogunkola and Bankole, 2005). This
additional cost could render Nigeria=s exports non-competitive.
Other market access problems faced by Nigerian exporters include
lack of access to basic information about opportunities in foreign markets
due to negligence on the part of exporters or non-affordabilty of access cost.
It also includes late delivery of products to export markets, mismatch of
scale and technical competence of exporters from developing nations with
requirements of the buyers from the developed countries and poor
bargaining power. Further, Nigerian and African exporters also face lack of
information about financial institutions and instruments in foreign trade
transactions, differences in business culture and inexperienced
Attainment of Potential Growth Rates in Nigeria under Balance of Payments
401
intermediaries. All these market access problems can be reduced or
eliminated by fully participating in both the regional and multilateral trade
negotiations, particularly at the level of the Rounds conveyed by the World
Trade Organisation (WTO).
Concluding Remarks
Balance of payments position constitutes a Astructural@ problem that can
hinder attainment of potential growth in Nigeria. This problem can be
solved by diversifying the structure of production and reduce dependency
on imports. Achievement of potential growth can be promoted by making
exports competitive through macroeconomic stability, improvement in the
state of infrastructure, human capital development, eradication of
corruption, elimination of external market access problems, among other
factors.
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