IMPACT OF SESAME EXPORTS ON THE ECONOMIC GROWTH OF NIGERIA
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CHAPTER ONE
1.0 INTRODUCTION
BACKGROUND OF THE STUDY
There is an increasing interest in the relationship between export and economic growth. Theoretically, there is a long-standing debate over the relationship between the export and economic growth in both advanced and less advanced economies.This is principally the reason why foreign trade has been of interest to development economists. Exports are a key part of international trade, while the export of agricultural goods in particular is vital to economic growth(Udo et al, 2001).
Export growth, therefore, is often considered to be a main determinant of the production and employment growth of an economy which is shown in Gross Domestic Product (GDP) growth (Onyebinama et al., 2003). The most important and crucial aim of the developing countries in general and Nigeria in particular is to achieve a rapid economic growth and development and exports are generally perceived as a motivating factor for economic growth. The desire for rapid economic growth in developing countries is attained through more trades.
There is no shortage of empirical and theoretical studies regarding the role of exports in raising the economic growth and development of a country. The classical economists like Adam Smith and David Ricardo have argued that international trade is the main source of economic growth and more economic gain is attained from specialization. According to the export led growth hypothesis, exports being the major source of economic growth have many theoretical justifications.
First, in Keynesian theory more exports generate more income growth through foreign exchange multiplier in the short run. Second, Export raises more foreign exchange which is used to purchase commodities such as machinery, electrical and transport equipment, fuel and food which is motivating factors for the economic growth of any nation. Third, exports indirectly promote growth via increased competition, economies of scale, technological development, and increased capacity utilization. Fourth, many positive externalities like more efficient management or reduction of organizational inefficiencies, better production techniques, positive learning from foreign rivals and technical expertise, about product design are accrued due to more exports, leading to economic growth. In fact, over the past decade, Nigeria like other countries in sub-Saharan Africa (SSA) has experienced a dramatic decrease in export growth in general, and agricultural exports in particular, causing problems that need to be solved urgently (Nnamerenwa, 2004).
According to Dwivedi, (2004) economic growth is an important macro-economic objective because it enables improved standard of living and job creation. A fast-rising growth rate not only commands international recognition, it also paves a way for development. Economic growth implies the expansion of a country’s productive capacity. It refers to an increase in the amount of goods and services produced in a country over a period of time. Economic growth indicators include Gross Domestic Product (GDP), inflation rate and rate of employment. Gross Domestic Product (GDP) is considered the broadest economic growth indicator. It represents the market value of all goods and services produced in an economy during a given period usually a year.
More so there is a long-standing debate over the relationship between the export and economic growth in both advanced and less advanced economies. There are a couple of empirical studies that confirm the robust connection between export and economic growth in countries across the globe. Some studies support the hypothesis of export-led growth (ELG) mostly in the developing nations (Kang, 2015). They argue that the exports of goods and services generate foreign exchange that is required to import foreign goods. The increase in underlying commodities’ imports, in turn, stimulates a nation’s capacity to produce in the long run. This is more pronounced in less developed economies that have a heavy disadvantage in the production of capital goods. Arguably, both exports and imports growth rates of these commodities fluctuate over time. Similarly, some studies (Bbaale and Mutenyo, 2011; Gbaiye et al., 2013; Awe and Ogunjobi, 2014; Ijirshar, 2015) have also confirmed the hypothesis that agricultural export-led economic growth in Nigeria fluctuate. In contrast to agricultural export- led growth arguments, proponents of the opposite viewpoint opine that the agricultural export does not have a robust connection for fostering economic growth. Even though agricultural production and exports have been severely neglected for oil in recent decades (Verter and Bečvařova, 2014), it is still the major nonoil foreign exchange earner in Nigeria and other Sub-Saharan African countries (SSA).
Sesame (Sesamum indicum L.) is an important oilseed crop that is cultivated on small holder farms of the humid tropics. The presence of antioxidants (sesamum, sesiamolin and sesamol) makes the oil to be one of the most stable vegetable oil in the world (Ali et al., 2015). Sesame draws its importance from the fact that it is a food crop; a raw material for industry, feed for livestock and an export crop (Agele et al., 2015).Sesame is one of the cultivated oil seed crops in the world.
According to Onyibo (2005), since its introduction to Nigeria after the Second World War, it has been regarded as a crop of insignificant importance compared to groundnut and other cash crops. Sesame is widely grown in the Northern and Central part of the country initially as a minor crop until 1974, when it became one of the major cash earner in many northern states such as Benue, Gombe, Kogi, Jigawa, Kano, Nasarawa, Katsina, Plateau, and Yobe States as well as the Federal Capital Territory (Nwalem et al., 2018).
The demand for sesame and its products is growing both at the National and International levels. Sesame seeds (approximately 50 percent oil and 25percent protein) are used in baking, candy making, in cooking and salad oil and margarine. The oil can also be used in manufacturing of soaps, paints, perfumes, insecticides and pharmaceuticals. Sesame meal, left after the oil is pressed from the seed, is an excellent high protein (34-50percent) feed for poultry and livestock (Oplinger 2007 and Nwalem et al, 2015).
Specifically, Sesame was first grown in the middle belt of Nigeria in the late 1940s by the West African Oilseeds Mission‘s mandate to investigate the possibility of the production of groundnut and other oilseeds including sesame (Olowe, 2007). The cultivation of Sesame falls within the guinea savanna agro-ecozone of Nigeria where the annual rainfall is usually below 1000 mm (Agele et al., 2015). Nigeria is the second largest producer in Africa of sesame seed, producing about 120,000 mn tonnes per year (FAO 2012). The commodity is exported majorly as seeds, ranking amongst the top five exported products from Nigeria (STDF, 2016). Sesame production played an important socio-economic role, particularly in the northern states of Nigeria. It has a high nutritional value, being rich in proteins, fats, vitamins and selenium. Development of this sector reduces poverty and improves standard of living, while contributing to the reduction of rural migration of people towards urban areas (STDF, 2016). The major exports markets for Nigerian sesame seed are Japan, China, Turkey, United Arab Emirate (STDF, 2016).