The Impact Of Transportation On The Nigerian Economy (1985 – 2015)

Project and Seminar Material for Economics

Abstract

What if the transportation section, stagnant, almost every section of any given economy will not perform well as expected. Te importance of transportation in developing or advanced economics cannot be over emphasized. Transport is one of the main sector that remains as the cornerstone of every nation for achieving growth and development as well as gaining political and economic independence. The study shows the relationship between transportation and economic development and also the level of the manufacturing output contributed in the economy due to transportation. The research employed regression analysis using OLS in verifying the relationship that exist in computing transportation, manufacturing output and inflation.

Chapter One

1.0 Introduction

1.1 Background of the Study

Nigeria became independent in 1960, having a population of over 150 million people with diverse culture and abundant resources. Nigeria has a very large labour force to support the labour market and economy which consists of different sectors, such sector includes the Agriculture sector, the Energy sector, the Mining sector, the Manufacturing sector, the Banking sector, the Communication sector, the transportation sector and so on.

Many economists have been interested in factors which can cause the growth of their nations, one major factor is TRANSPORTATION. The study of Transportation in Nigeria has become important due to the view or thought of researchers trying to formulate better policy that will affect the transport sector positively which will later bring about an efficient, effective and standard transport system. Thus the demand for Transport service in the country over the year has increased rapidly, while the supply of transport services has declined due to lesser infrastructure in place in the system, because a well-functioning and integrated transport system among other thing in the economy stimulates national growth and development which enhances the quality of life for all enabling the seamless movement of goods and services and people, through the provision of vital linkages between spatially separated facilities which enables social contact and interaction possible and also providing access to employment, health, education, and other services which brings about civilisation. For instance, Agricultural products generated in the rural areas needs to be carried/taken to the urban centres for further distribution which can take place or be achieved only through means of transporting those goods from that place to another, here transportation provides the means by which product are circulated around the country.

The evolution to modern transport system in Nigeria can be viewed from two phases according to the federal government of Nigeria draft on national transport policy on august 2010.The first phase is the colonial period that marked the origin of modern transport system.

The networks of rail, water and road developed then were geared essentially to meet the exportation of cash crops, such as groundnuts, cocoa, cotton and palm products and to the importation of cheap, mass produced consumption goods. These early transport systems were planned in the most economical way possible, as typified in sub-standard road and rail alignments and a sub base, which later proved inadequate to accommodate heavy vehicles. The second phase is the postcolonial period/attainment of independence. With a reorientation of goals, transport became one of the instruments of unification of the country and an important tool for social and economic development. The development of petroleum resources from the 1950‟s had significant impact on the nation‟s social and economic growth, putting increasing demands on the transport system.

This study will examine the impact of transportation infrastructure on economic growth in Nigeria by evaluating the relationship that exists between transportation infrastructure and economic growth.

1.2 Statement of the Problem

Given the fact that transportation Infrastructure is very crucial to the growth of the economy, the situation of Nigeria transportation infrastructure is at a poor state. Recent studies by Adeniji (2000), Innocent C. Obi (2011) shows that: less than 50% of the National road network are in fair or good condition causing an average death of 50 people per day; Less than 300,000 tonnes of freight and less than 2.3 million passenger are been transported by rail; More occurrences of air crashes in the Aviation sector; High rate of congestion in the sea port; and More vandalization of pipeline. When all this losses are added up to economic cost for loss of productive man-hour, it becomes clear that the situation really need urgent attention. However, various research studies have been descriptive showing the importance of having a better transportation infrastructure in place so as to increase the sector contribution to economic growth and development, although there are few study that are empirical. Thus, this study will enlighten us on the situation and empirical linkage of transportation infrastructure improvement and economic growth, in which more emphasis will be on Nigeria transport infrastructure.

1.3 Objective of the Study

The broad objective of this study is to examine the impact of transportation infrastructure improvement on economic growth in Nigeria.

The specific objectives of the study are as follows:

To describe the situation of transportation infrastructure in Nigeria.
To evaluate the empirical linkage between transportation and economic growth.
To access the channel through which transportation affect economic growth.

1.4 Research Questions

Based on the problems of the research topic, the research questions are as follow:

What is the situation of transportation infrastructure in Nigeria?
What is the empirical linkage between transportation and economic growth?
What channel does transportation work through to affect economic growth?

1.5 Justification of the Study

The study is justified by the need to provide empirical understanding of the impact of transportation infrastructure improvement to the economic growth of Nigeria and how it influences the development process. Thus, there is no doubt that transportation is essential in operation of a market economy; Planners needs guidance based on solid grounds, to aid in their decision to improve existing transportation and build new infrastructure. As stated by Boopen(2006), Transport improvement have opportunity cost in terms of alternative investment that can be carried out by the government. To ensure that resources are well allocated, policy makers need to have empirical base on which to draw their plan. An empirical knowledge of how transportation infrastructure improvement will affect economic growth need to be established so that adequate plan can be made for the transport sector. Also, there is the need to have a direct linkage between transport infrastructure and economic growth, in which prediction can be made to determine the level of transport investment that can achieve a desired level of economic growth.

If capital improvements in transportation facilities lead to greater development than when capital is used in other areas, then planner should realize the benefits to be gained by developing the transportation infrastructure. If on other hand, capital improvement in transportation facilities cannot be linked to economic performance, then scarce resource could, perhaps, be put to better use. There is therefore the need to examine the linkage between transport infrastructure and the economic growth of developing countries, particularly Nigeria, in order to help policy makers formulate policies that will favour the transport sector to enhance growth of economy. To the people, this study will enlighten them more on the important of having a better transport system; To students and researchers, this study reveal the current situation in the sector by adding to the work done by other researcher so as to provide base for future research; To the policy maker this study will reveal the state of transport infrastructure across the country making them known that more funds and implementation of policy already made is needed critically to be in place in the sector.

1.6 Research Methodology

This study makes use of the econometric technique in evaluating the relationship between transportation sector infrastructure sector infrastructure components and economic growth in Nigeria, The Ordinary Least Square (OLS) technique is employed in obtaining the numerical estimates of the coefficients in different equations, The OLS method is chosen because it possesses some optimal properties: its computational procedure is fairly simple and it is also an important component of most other estimation techniques. The estimation period covers a thirty years since the data needed are available for this period. The data for this study are obtained mainly from secondary source, particularly from Central Bank of Nigeria (CBN) publications.

1.7 Scope of the Study

This study is a macro-study that covers the transportation in Nigeria economy as a whole. The data generated covers the contribution of the sector to GDP from the year 1985 to 2015. The concept of economic growth has to do with the entire economy; hence the study is a macro study, Also the choice of time frame is as a result of the limited access to data.

Likewise, data availability also pose problem in the water and air transport network.

1.8 Plan of the Study

The study will be classified into five chapters.

Chapter 1 contains the introduction, background of the study, statement of the research problem, objective of the study, research methodology, significance of the study, scope of the study.
Chapter 2 contains Literature review as well as the theoretical framework, in which the chapter review the work and contribution of different researchers on the relative impact of transportation on growth.
Chapter 3 concentrates on the research methodology stating the model formulation, technique of data analysis etc.
Chapter 4 contains the empirical analysis and interpretation of results.
Chapter 5 contains the summary, conclusion and recommendation.

Chapter Five

Summary, Conclusion and Recommendation

5.1 Summary

This study looked at impact of transportation infrastructure improvement on economic growth in Nigeria between 1985 to 2015 using Central Bank of Nigeria (CBN) statistical bulletin data. Improvement in transportation infrastructure are related to transport industry efficiency, creation of social and economic benefit, reduced cost associated with transportation which leads to greater productivity, reduce distribution cost, thereby reduce production cost, expand market, increase employment demand, and increasing National output.

The channels through which transportation affect economic growth was viewed in the study through saving of labour force in which having an efficient and effective mode of transport, communication, and movement will be made easier which will save time, cost and reduce the rate of accident. The study also showed that death rate in road accident is high which leads to loss of live and reduction in labour force because when there is increase in accident there will be increase in death rate which will lead to a decrease in labour force in the economy.

The empirical linkage between transportation and economic growth was captured through the model (which made use of transport sector output, transport expenditure and gross domestic product) which captured the relationship between transportation and economic growth through statistical analysis. We found that economic growth is positively influenced by transportation whereby transport output, transport investment exerts positive influence on GDP, which implies that improvement/ increase in transport sector will lead to an increase in GDP in the country which will bring about economic growth because transportation provide intermediate service for Agricultural sector, Manufacturing output, investment e.t.c, which stimulate the economy to grow.

5.2 Conclusion

The study reveals that there is a relationship between transportation infrastructure and economic growth. It discovered a positive relationship between GDP, transportation investment and transportation output. Thus an increase in the output and investment of the transport sector will lead to increase in the GDP of the country.

These findings are supported by empirical studies such as Pravakar, Ranjau and Nataraji (2010) study, and it is further illustrated in Nogzi and Mulikat (2010) study. They found that infrastructural investment positively contributes to economic growth.

5.3 Recommendation

Based on the findings of this study, Nigeria gross domestic product can be increased if the following recommendations are take into consideration.

The Federal government budget allocation to transport sector should be increased because this will increase the funds directed to improve the available infrastructure and to add to the existing infrastructure. Also, there should be full implementation of public private partnership (PPP) in transport sector project as recommend in the National draft on transport policy for the Federal Republic of Nigeria (2010).

The Federal Ministry of Transport should balance the federal government effort through transportation regulations, strict monitoring of implementation of the allocation, improving the quality of human resources and the involvement of the private sector. They should provide adequate transportation facilities in terms of road signs, traffic lights, street lights, medians, drainages, and functional mass transit vehicles by government and private individuals is necessary so as to minimize traffic congestion and accidents.

The Federal Ministry of Transport need to increase the number of quality road networks as well as introducing high occupancy vehicle lanes. Proper maintenance of existing road networks should be enforced. There is also need for construction of flyovers at crossroads to lighten up notorious congestion areas. Also, they should be increased investment in research on other modes of transportation such as opening up water ways, revitalizing the railway system so as to reduce congestion and pressure on the existing roads.

Nigerians should ensure to pay charged taxes, toll gate fee and fines for breaking the traffic rules because this will balance the government effort in providing world-class transport facilities. Also, people should make use of other mode of transportation that are available in the country.