Impact Of Globalization On The Nigeria Economy (A Case Study Ministry Of Petroleum)
This paper investigates the impact of globalization on the Nigeria economy using a case study ministry of petroleum ‘between’ 1962-2019 through the application of simple Annual Average Growth Rate (AAGR) technique. The comparative analysis of growth of key sectors of the Nigerian economy (petroleum, manufacturing sectors) between Pre-globalization (Pre-SAP;1962-1985) and Post-globalization periods (Post-SAP;1996-2019). The study reveals that ‘‘globalization’’ had had negative impact on some sectors especially petroleum, and manufacturing.
Globalization had had positive impact on the overall performance of the economy which is measured by GDP. This implies that despite its negative impact on some sectors of the economy; still is beneficial to the growth of the economy. This paper therefore, recommends that concerted effort need to be taken by government and policy makers to boost the performance of the sectors negatively impacted by globalization especially petroleum which is the largest contributor to GDP in recent time in the country, followed by manufacturing and solid minerals with the view to diversifying the economy. The paper also recommends that crude petroleum should be refined before exporting in order to benefit more from globalization. Another policy implication of this study is that inflation and unemployment may be successfully control if the rate at which Nigerian economy is globalized reduces to some level (i.e. openness of the economy be reduce).
Table of Content
- 1.1 Background of the Study
- 1.2 Statement of Problem
- 1.3 Research Objectives
- 1.4 Research Questions
- 1.5 Research Hypothesis
- 1.6 Significance of the Study
- 1.7 Definition of Terms
- 1.8 Organization of the Study
2.0 Literature Review
- 2.1 Conceptual Framework
- 2.2 The Concept of Globalisation
- 2.3 Dimensions of Globalisation
- 2.4 Nigeria in the Global Economy
- 2.5 Globalization for Developing Countries in Asia
- 2.6 Globalization in Africa
- 2.7 Effects of Globalization
- 2.8 Prospects and Challenges Of Globalisation
3.0 Research Methodology
- 3.1 Design of the Study
- 3.2 Sources of Data
- 3.3 Data Analysis
4.0 Results and Discussion
- 4.1 Results
5.0 Summary, Conclusion and Recommendations
- 5.1 Summary
- 5.2 Conclusion
- 5.3 Recommendations
1.1 Background of the Study
Globalization is nothing but the functioning of a business on a global level. When we treat the entire globe as our potential market, we globalize our business. Usually, there are certain barriers when it comes to the functioning of the business on an international platform. These barriers might include ones such as potential, financial, and even geographical. When a businessman or country overcomes these barriers, he/its successfully globalizes his/its business. Today, the sharing of information has reached a level we thought it never could. Upcoming artists and basically other ‘like-minded’ people could never share their interests, projects and views over a common thought. Globalization and international business thus, also mean the sharing of ideas and views on an international level. Until a few years back, hardly anyone focused on the globalization issues in business. Globalization got with it some huge profit and expansions, and no one seemed to bothered by the negative side of this concept. However, gradually, the pros and cons were discussed, and this gave rise to some globalization issues around the world. Globalization also may mean diminution or elimination of state-enforced restrictions on exchanges across borders, and the increasingly integrated and complex global system of production, distribution and exchange that has emerged as a result. The world has been significantly changing since the end of the era of cold war.
Specifically, since 1980s, the world economy is being guided by neoliberal economic policies that attempted to promote capitalism at a global scale through trade liberalization, foreign direct investment (FDI) and financial capital flows as well as the relaxing of government regulations especially in financial, goods and labour markets (Ornaran n.d.). These developments had succeeded in relatively shrinking the political, economic, and cultural barriers in favour of western countries (Imam, 2009). Globalization in Nigeria can be tress back to the introduction of Structural Adjustment Programme (SAP) in 1986, during Babangida’s regime. This paper would analyse the impact of globalization on the performance of the Nigerian economy by dividing the period into two. Period before globalization and SAP and also period after globalization and SAP.
Today, there is growing evidence that world economies are even more integrated and inter-connected than they were in 1929 (Obi, 2009; OECD, 2009). Sequel to this development, a small change might have a very serious impact on trade and investment world over (OECD, 2009). However, the increasing global interdependence generated by globalization had brought about an increasing inequality that global institutions were unable to contend with effectively (UNCTAD, 2009). There is now a growing belief that the global economic crisis was largely a product of exploitative tendency of capitalism entrenched by U.S., which has succeeded in creating a huge structural imbalance between savings and investment in the global economy. This growing imbalance can also be seen as widening inequalities between the developed and the developing countries in the context of modern form of exploitation-globalization (Benn, 2009). These unfortunate developments in the forms of capitalism and later globalization have inadvertently led to unanticipated global decline in stocks prices and markets, shrinking of credits, reduction in production leading to adverse repercussions on employment, trade and growth in GDP (Benn, 2009).
The wave of financial globalization since the mid-1980s has been marked by a surge in capital flows among industrial countries and, more notably, between industrial and developing countries. While these capital flows have been associated with high growth rates in some developing countries, a number of countries have experienced episodic collapses in growth rates and significant financial crises over the same period, crises that have exacted a serious toll in macroeconomic and social costs. As a result, an intense debate has emerged in both academic and policy circles about the effects of financial integration on developing economies. But much of the debate has been based on only casual and limited empirical evidence.
The rapid advance in technology and telecommunication has reduced the cost associated with foreign portfolio and direct investment. Without moving from one location to another, a foreign investor could deploy funds across the globe with the aid of telecommunication facilities. The ease with which capital can be re-deployed to take advantage of better returns has often proved adverse for the economies experiencing the outflow. Reductions in transport and communication costs, capital account opening, financial market deregulation and privatization of state enterprises have combined to create a favourable environment for increased capital mobility (Fischer, 1998: 164). The globalization of financial markets has proved complex to understand because the phenomenon encompasses both product and capital markets. The integration of financial markets has exerted considerable constraints on the conduct and effectiveness of macroeconomic policies in recent times, as depicted by the financial crisis in South East Asia in 1997. The rapid advance in globalization, especially after the end of the cold war has tended to re-enact the laissez-faire doctrine that was prevalent before the ideological polarization of the world. The fact that globalization could mean many’ things to different people, depending on where they fit into in the current dispensation, makes it imperative to explore the implications of the phenomenon for domestic macroeconomic management. The extent to which the effectiveness of domestic economic policy can be compromised if adequate consideration is not given to countervailing responses of other nations is a major area of inquiry of this paper. This is more important as the interdependence between nations is an indication that growth could be undermined if nations build protective walls around their economies. Stabilizations of finance and financial risk have been attributed to an increase in the technical capabilities for engaging in precision finance, the integration of national financial markets, the blurring of distinctions between financial institutions and the activities of the markets they engage in, and the emergence of the global bank and the international financial conglomerate, each providing a mix of financial products and services in a broad range of markets and countries. Financial globalization has resulted in two distinct developments in global finance. In the first place, traditional banking institutions have evolved into financial services firms with new accounts. Additionally, non-bank financial institutions now actively compete with banks both on asset and liabilities sides of the balance sheet thereby blurring the distinction between banks and non-bank financial institutions. Also, the rapid growth in the share of other earning assets in total assets and relative growth in off-balance sheet items have been unprecedented (IMF, 1998: 180- 182).
1.2 Statement of Problem
Globalization is a very uneven process, with unequal distribution of benefits and gains costs and losses. This imbalance lends to polarization between the countries and groups that gain that are mostly in the North (more developed countries) and the many countries and groups in society that lose out or are marginalized, mostly in the South (less developed countries). Globalization, polarization, wealth concentration, poverty and marginalization are therefore interwoven. Globalization has been a mixed blessing to Nigeria, as a member of the less developed countries (LDCs) in the South. This study therefore sets out to investigate the impact of globalization on the Nigeria economy using a case study ministry of petroleum.
1.3 Research Objectives
The purpose of this study is to investigate the impact of globalization on the Nigeria economy using a case study of the ministry of petroleum.
Specifically, the objectives include:
- To ascertain whether globalization promotes economic growth in Nigeria
- To determine the impact of globalization on macroeconomic variables in the country such as inflation and unemployment
- To determine the significant impact of globalization on various sectors of the economysuch aspetroleum
1.4 Research Questions
This project is designed to tackle the following reach questions;
- Does globalization promote economic growth in Nigeria?
- What is the impact of globalization on macroeconomic variables in the country such as inflation and unemployment?
- Is there any significant impact of globalization on various sectors of the economy such as petroleum?
1.5 Research Hypothesis
The following null hypotheses were formulated to guide the study the hypothesis is to be tested at 0.5 alpha levels.
- HO1: There is no significant impact of globalization on the Nigeria economy
- HA1: There is a significant impact of globalization on the Nigeria economy
1.6 Significance of the Study
The study is significant in various ways. It will provide valuable insights in the effects and impact of globalization on Nigeria and the Ministry of Petroleum in particular. Also, in view of the fact that globalization is an inevitable phenomenon of human history, it will reinforce the need for Nigeria to effectively manage globalization to maximize the benefits and minimize the costs.
1.7 Definition of Terms
Is the process of interaction and integration among people, companies, and governments worldwide. Globalization has accelerated since the 18th century due to advances in transportation and communication technology.
Refers to the influence of one variable on another.
An economy is an area of the production, distribution and trade, as well as consumption of goods and services by different agents. In general, it is defined ‘as a social domain that emphasize the practices, discourses, and material expressions associated with the production, use, and management of resources’.
1.8 Organization of the Study
This study is divided into five chapters. The first chapter is the introduction which contains the background, research problems and objectives. The second chapter is the literature review and the third chapter is the research methodology. In the fourth chapter, the researcher analyses the data and discusses the results. The fifth chapter is the last chapter which presents the summary, conclusion and recommendations.
5.0 Summary, Conclusion and Recommendations
In this study, an attempt has been made to investigate the impact of globalization on the Nigeria economy using a case study ministry of petroleum. The comparative analysis of growth of key sectors of the Nigerian economy between Pre and Post-globalization periods reveals that the ‘‘globalization’’ had had positive impact on some sectors of the economy especially manufacturing; while negative impact on some sectors especially petroleum.
Globalization had also had positive impact on the two macroeconomic variables (inflation and unemployment) under the study, this means that globalization led to increase in both inflation and unemployment in Nigeria. Above all, Globalization had had positive impact on the overall performance of the economy which is proxy by GDP, this implies that despite its negative impact on some sectors of the economy; and increases in the inflation and unemployment, is still beneficial to the growth of the economy.
Globalisation, the closer interaction between national economies through trade, investment and capital flows, made possible by technological development and advancement in telecommunications, has increased global welfare and transformed the world into a global village. Globalisation has evolved over the years, but its rapidity intensified after the endof the cold war. Globalisation slowed during the cold war as a result of protectionist policies applied to defend ideological interests by the major protagonists. With the end of the ideological polarisation of the world, increasing emphasis has been placed on openness and liberalisation of national economies to secure maximum benefits from global economic prosperity. Above all, countries must pursue sound policies, liberalise their economies, reduce the role of government relative to that of the private sector and ensure good governance in order to reap the fruits of globalisation. Otherwise, poor policies will be rewarded by marginalisation in the global arena.
- This study recommends that concerted effort need to be taken by government and policy makers to boost the performance of the sectors negatively impacted by globalization especially petroleum which is the largest contributor to GDP in recent time in the country, followed by manufacturing and solid minerals with the view to diversifying the economy.
- The study also recommends that crude petroleum should be refined before exporting in order to benefit more from globalization.
- Also another policy implication of this study is that inflation and unemployment may be successfully control if the rate at which Nigerian economy is globalized reduces to some level (i.e. openness of the economy be reduce).
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