In section 2 we explored the current literature relating to the economic growth and development of Nigeria and Ghana, consolidating the various arguments to see whether any key messages were apparent. In section 3 we then examined the two countries in more detail, presenting a timeline of relevant economic, social and political happenings since there time series, examining some of the key characteristics of each country in more detail, and then making a direct comparison of the two. Sections 4 and 5 then presented the empirical contribution of this research: a broad econometric examination of the causal relationships between exports and GDP verse versa. In this section this study will bring together the key findings of these three pieces of analysis and then make some applications, concluding with a short discussion of possible channel for future research.
6.1.1 Nigeria
This study begins with a discussion of Nigeria. The literature review revealed a strong consensus that exports were a (if not the) key driver of growth in the Nigerian economy, and this notion certainly seemed to have some weight as we looked in more detail at the growth strategies pursued by successive Nigerian governments. It was not surprising, therefore, that our statistical analysis provided within a multivariate Vector-Auto Regressive (VAR) framework, the concept of Granger causality is employed to determine the direction of causation between exports and output, duly taking into account the stationarity properties of the time series data. With further validation from impulse response function and variance decomposition, the empirical evidence shows, export-led growth in Nigeria. Both of the bivariate VEC models found evidence for a significant long-run relationship between exports and GDP, and variations in export performance seem to provide a good explanation for subsequent variations in GDP in the significant majority of our models. Given that the volume of Nigerian exports over the years was relatively small compared to many of the East-Asian tiger economies, this phenomenon cannot be explained by export volume alone. I looked at a number of ways in which exports might contribute to GDP beyond their own direct (accounting) contribution, and in the case of Nigeria i found that two particular explanations stood out. The first is the notion of idea gaps and positive externalities attributable to foreign investment. The unique combination of generous quotas under the MFA and the establishment of a heavily crude oil-focussed EPZ meant that FDI for crude oil manufacturing had a particularly knowledge and technology-imparting quality. The second is that through a transformation of the export sector the government was able to bring about an economy-wide structural transformation, positioning Nigeria to have a comparative advantage in a series of high value-added sectors: from petroleum oil to petroleum gas. Nigeria was also in a position for increased export production to soak up a large pool of surplus labour, and there is some evidence that increased capacity to import capital goods was another mechanism by which exports contributed to growth, but we have not tested this notion here. Other factors such as enhanced competition and economies of scale may also have contributed to the effect of exports on output growth, but these mechanisms do not receive much attention in the literature. Sawkut et al. (2009) may have calculated that the price of the EPZ experiment outweighed the benefits, but this is certainly not the conclusion I emphasis.
Moreover, the overall this social development took less of a central role in the economic growth process supporting, rather than leading. Another vital supporting role was played by the strong institutional environment, which promoted consistency in development despite continual changes to the ruling government. There is certainly reason to believe that Nigeria ‘got lucky’ in many ways, but the government was able to take advantage of the opportunities presented to it in such a way as to bring about a strongly export-led growth, the gains from which were protected by this strong institutional framework. The conclusion must be, therefore, that exports were central to growth in Nigeria over the period. However they cannot be credited with all the success: export strategies carried Nigeria to success, but they themselves were propped up and supported by these other important factors. There is some evidence to support the idea that GDP growth also led to increases in the export sector a notion which seems to have some merit but the overall relationship was certainly dominated by exports leading growth.
6.1.2 Ghana
In the case of Ghana, a review of the literature revealed less emphasis on exports than it did for Nigeria. Exports were certainly not disregarded, but overall they were presented as one important aspect in an array of different factors that contributed to the country’s rapid income growth. This made it less obvious what to expect from our econometric analysis. The fact that i found almost negligible evidence for any causal relationships was in many ways in-line with the idea that exports were part of a package of growth-contributors and in themselves may not have led growth in the Granger-causal sense. This is strengthened by the fact that there was no significant evidence that GDP was leading exports, which is not out of line with the notion that exports were just a product of greater output and a constant marginal propensity to export. Even though our examination of the different periods of Nigerian development highlighted the importance of exports in the government’s development strategy only after the end of the socialist period, our tests of this narrower range of years still found no evidence for export-led growth. Nor did we find evidence in any of the disaggregated export sectors we examined, which suggests that our findings are reasonably robust. The literature and our own qualitative analysis reveal that exports were still important, however. It appears that spillovers from international investment contributed to growth, imports of capital goods helped to transplant improved production techniques from abroad and the government seemed to promote certain export industries as part of a wider strategy to diversify the economy away from more traditional industries and in to new high value-added sectors.
6.1.3 A comparison
Despite very similar growth rates since their respective time series, it has become apparent that there were quite different underlying growth processes taking place in these two countries and exports were important in both. This is reflected in the EPZ policies of the two countries. It seems that both countries attained significant benefits from the transplantation of foreign technologies, skills and knowledge brought about by increased foreign influence as a result of these trade policies. Moreover, the governments of both nations promoted priority export sectors in order to lead the country through a structural transformation, moving from a reliance on agriculture to drive growth in the oil sector and then move into services (both fortunate enough to be attractive destinations). According to authors such as Herman and Montroll (1972), this dynamic structural transformation is a common occurrence as countries develop, but the way in which Nigeria and Ghana pushed this forward by use of export strategies is somewhat less common.
Both countries invested significant resources into social policies, and the subsequent rise in human development undoubtedly played a role in their successes. In Nigeria this was more central to the development strategy, which may well have been due to a greater potential for marginal gains in Nigeria. Lower initial levels of life expectancy, education, general health and participation of women meant that investments in this area had greater opportunity to drive growth. Accompanied by much lower private savings rates, this made Nigerian and Ghanaian public investment key in providing a strong capital base for economic expansion. The institutional environment played a fundamental supporting role in both countries, which is intriguing given that the governments stood as polar opposites.
Overall, it seems that if export-led growth is the desired method for achieving growth, Ghana stands as a better model than Nigeria. And this empirical evidence complements the qualitative evidence i have also presented here. Ghana is a prime example of export-led growth, but even then i have demonstrated the importance of the wider context. If, however, the goal is not export-led growth but growth in general, the answer is less clear. Nigeria demonstrates that exports can be an important part of the growth process even when they are not found to have led growth. Other factors can play a more or less central role, depending on the prevailing conditions in the countries themselves, but it seems that strong political will and a good institutional environment are important in either case.
6.1.4 Recommendation
Although making a solid contribution to our understanding of this specific area, this study naturally could not cover all that i would have liked it to. Nowhere was this more evident than in the econometric analysis. The methodology chapter made it strikingly apparent that to test for causal relationship between export and economic growth by including every possible permutation would comprise an unwieldy number of regressions. However, there are some particular additions that i would suggest are worth undertaking. If the data can be found, it would be worth replicating some of these tests using quarterly or monthly data, rather than the annual data i have used here. To our knowledge, these datasets are not available for either country over the period I am interested in, but if one is satisfied to look at a smaller (more recent) time period then this could provide an interesting robustness check to our results. As noted earlier, however, this would raise a number of new issues around seasonality. Low observation counts prevented us from examining separate time periods in this study, but given the discussion on how the importance of exports varied across different periods in both countries, this could be a valuable upshot from the use of quarterly or monthly data.
Moreover, given the currently tumultuous political and corrupt environment in Nigeria it would be interesting to undertake a retrospective study of the underlying causes of economic growth of Nigeria in, say, ten to fifteen years’ time. Once the ‘dust has settled’ and a better understanding of the true political and uncorrupt environment in Nigeria under the president Muhammad buhari regimes has come to light, I may be have a better understanding of the true impacts of the country’s institutions and the true role played by democracy. Coupled with further examination of the importance of exports to the growth process in future years, this would build on the story I have told here. Building a vibrant economy or restoring growth to a sluggish economy takes resources, to ensure long-term growth and prosperity. Nigeria and Ghana must use it rescores wisely, invest in advanced technology and rebuild the institutions and infrastructures without which the economy will not gain from the power of productivity: A nation enjoys higher standards of living if the workers can produce large quantity of goods and services for local consumption and extra for export. Every administration that comes on board takes on a new policy initiative instead of building on the previous ones
Overall, this study has shown that Nigeria and Ghana provide an interesting and insightful comparison. These two very different countries demonstrate that perpetual poverty and stagnation of incomes need not be the status quo for the countries of Africa, but that sustained and equitable economic growth is in fact attainable. Whether it be through a central focus on export policies as in Ghana, or a developmental strategy including export policies as part of a package involving other social policies as in Nigeria, growth is possible. The wider context is certainly a crucial determining factor in the success of such policies, but the poor initial conditions in both of these countries demonstrate that strong visionary leadership has the potential to bring about great social and economic advancements even in a continent as afflicted by poverty as Africa.