Shipping Trade And It’s Impact On Economic Growth In Nigeria

Project and Seminar Material for Maritime and Transport

Abstract

Study examines the impact of ocean shipping trade on the economic development of Nigeria, covering the period from 1976 to 2015. Ocean shipping trade, in thousand tons served as an independent variable in all three set of assumptions, the gross domestic product, the value of Nigeria’s external reserves and payment of external debt were used as proxies for the level of economic development respectively.

A simple regression analysis was applied using time series data. The findings of the study are that a significant and positive relationship between the shipment leaves the ocean exports and gross domestic product, foreign reserves and payment of external debt. Also the export shipping trade, is an important factor for economic development of Nigeria under each of the dependent variables.

Based on these findings and conclusions, the study, among others, recommended that the overall institutional framework in the economy should be improved to take full benefits of trade expedition to the ocean in Nigeria. In addition, it is necessary to improve the lack of transparency and thus reduce the corruption that seems to be endemic in our country, and therefore to improve the earnings of export shipping trade.

Table Of Content

Preliminary Page(s)

Title page
Certification
Dedication
Acknowledgement
Abstract
Table of content
List of Tables
List of Figures

Chapter One

1.0 Introduction

1.1 Background
1.2 Statement of the problems
1.3 Objectives of the study
1.4 Research Questions
1.5 Research Hypotheses
1.6 Significance of the study
1.7 Scope of the study
1.8 Limitations of the study

Chapter Two

2.0 Literature Review

2.1 Conceptual framework
2.2 Current status and Trends in World Shipping
2.2.1 Overview of the World Shipping Industry
2.2.2 Trends in ship types and features
2.2.3 Trends in shipping Economics
2.2.4 Overview of shipping markets the current trend
2.2.6 The Global Evolution of Containerisation
2.2.7 Ownership of Merchant Navy fleet
2.2.8 Opportunities for African Maritime countries
2.2.9 Importance of Maritime Trade in Nigeria’s economy

Chapter Three

3.0 Research Design and Methodology

3.1 Definition of Area and population of study
3.2 Sources of Data
3.3 Procedure for Date Analysis
3.4 Operational Definition of variables / hypotheses testing
3.4.1 Hypothesis 1
3.4.2 Hypothesis 2
3.4.3 Hypothesis 3
3.5 Test of significance
3.5.1 Test of model significance – ANOVA
3.5.2 Test of Model significance – Coefficient of determination and the F-Test Approach
3.5.3 Test of the significance of the explanatory variables
3.6 Assumptions of the linear regression model

Chapter Four

4.0 Data presentation, Analysis and interpretation

4.1 Introduction
4.2 Data Presentation
4.3 Data Analysis and hypotheses testing
4.3.1 Influence of shipment Export Trade on Economic Development
4.3.1.1 Test of Model significance – ANOVA method
4.3.1.2 Test of model significance – R2 method
4.3.1.3 Test of the significance of the explanatory variable
4.3.2 The Influence of shipment export trade on Nigeria External reserve
4.3.2.1 Test of model significance –ANOVA method
4.3.2.2 Test of model significance –R2ANOVA method
4.3.2.3 Test of the significance of the explanatory variable
4.3.3 The Influence of shipment Export trade on External Debt payment
4.3.3.1 Test of model significance – ANOVA method
4.3.3.2 Test of model significance R2
4.3.3.3 Test of the significance of the explanation variable
4.4 Discussion of Results
4.4.1 Hypothesis 1
4.4.2 Hypothesis 2
4.4.3 Hypothesis 3

Chapter Five

5.0 Summary, Conclusion And Recommendations

5.1 Summary of findings
5.2 Conclusion
5.3 Recommendations
Bibliography
Appendices

List Of Tables

2.1 Distribution of the world fleet and DWT capacity of containers by country group – beginning 2007
2.2 Freight costs as percentage of import value for various regions of the world
3.1 Hypothetical ANOVA table
4.1 Nigeria’s total ocean shipment export in thousands of tones, gross domestic product, external reserve and external debt service in millions of naira, 1976-2006
4.2 Hypothesis 1 result / output
4.3 Hypothesis 2 result / output
4.4 Hypothesis 3 result / output

List Of Figures

2.1 Composition of the world fleet 20
2.2 Shipping statistical table 21
2.3 Structure of shipping market 27
2.4 World merchandize trade (Exports F.O.B) 28
2.5 The global evolution of containerization 32
2.6 Growth in containerized shipping 33
2.7 Evolution of container vessel size 35
2.8 Distribution of world container traffic by region 38

Chapter One

Introduction

1.1 Background To The Study

Shipping has for a long time been recognized as one of the strong catalysts for socio-economic development. Back in 1776, Adams Smith noted that “A business working in a country town without links to the outside world can never achieve high levels of efficiency because its small market will limit the degree of specialization”. Because shipping is one of the cheapest and efficient modes of transportation over long distances, it has since the ancient times been at the forefront of opening up of the world, and thus a major driver of the process of globalization.

Shipping, especially container shipping, has been both a cause and effect of globalization. Container shipping could lay claim to being the world’s first truly global industry. In fact, container shipping could claim to be the industry which, more than any other, makes it possible for a truly global economy to work. It connects countries, markets, businesses and people, allowing them to buy and sell goods on a scale not previously possible. It is now impossible to imagine world trade, and ultimately our lives as consumers, without container shipping. Shipping has led to a phenomenal growth in world merchandise trade, which has consistently grown faster than output. In 2006, goods loaded at ports worldwide are estimated at 7.42 billion tonnes, up from 5.98 billion tonnes in 2000. The value of total world exports increased from US$6,454 billion in 2002 to US$40,393 billion in 2005, representing an increase of 64 per cent. (See Fig 4).

According to Kummi (2007), shipping has emerged as one of the most powerful socio-economic and political forces shaping the world today. The phenomenon of shipping is moving the world towards increasing and irreversible integration of economic, social, cultural and political systems. Globalization through shipping trade has “decoupled time and space” resulting in the “death of distance”. Thanks to globalization, the once big world has been transformed into “one little village”.

Shipping has been one of the main causes and effects of globalization. The impact of globalization on shipping, especially container shipping, has been most phenomenal. Indeed, shipping connects countries, markets, businesses and people, allowing them to produce, buy and sell goods on a scale not previously possible. It therefore becomes necessary, if not imperative for countries to try to evaluate impact of shipping trade on their economies. Consequently, this study is an appraisal of the impact of shipping trade on economic growth in Nigeria.

1.2 Statement Of Research Problems

The maritime industry is international in nature and is acknowledged to be a very dynamic component in the socio-economic configuration of any given maritime nation. Nigeria is no exception. Even land-locked countries such as Mali and Burkina – Faso in West Africa also hinge, their economic fortunes on the maritime sector relying as it were on the port of Abidjan for import and export transactions. One major problem that has continued to plague the industry in Nigeria is the issue of adequate policy formulation and implementation, hence the contribution of shipping trade to economic growth has therefore being a subject of debate.

In traditional maritime nations such as United Kingdom, the USA, the Scandinavians, other European Countries among others, the factors of time, proper planning, co-ordination and implementation of clear-cut policies through government intervention largely account for the enviable levels of efficiency, sophistication and monumental success in their maritime activities especially in respect of its contribution to economic growth. The reverse appears to be the case in Nigeria as the fortunes of the industry have continued to suffer progressive catastrophe over the years. A very near example is the fact that the Nigerian National Shipping Line (NNSL) which took delivery of 19 (nineteen) brand new tonnages from European shipyards in 1979 and 1980, has not only lost all her vessels but has been liquidated altogether. This is complicated by the inability of governments of different types to float an indigenous national carrier up till date.

Therefore, the basic questions that will agitate the mind of the researcher include the following:

What has been the trend and pattern of shipping or maritime trade in Nigeria?
What are the causes of the trends in the shipping trade?
What has been the impact of shipping trade on economic growth in Nigeria using economic indicators of Gross Domestic Product (GDP), External Reserves and Debt Services payment as yardsticks?

This study therefore, investigates the impact of ocean shipping export trade on economic development in Nigeria.

1.3 Objectives Of The Study

The central objective of this study is to empirically determine the impact of ocean shipping export trade on Nigeria’s economic development. Specifically, the study intends to accomplish the following:

To determine the relationship between ocean shipping export trade and Nigeria’s gross domestic product.
To ascertain the influence of ocean shipping export trade on Nigeria’s external reserve.
To determine whether ocean shipping export trade significantly influences the level of external debts payment.
To isolate policy constraints towards the effective use of ocean shipping export trade to boost economy and proffer policy recommendations.

1.4 Research Questions.

Having stated the above objectives, we therefore, consider the following research question relevant for the study?

What is the nature of relationship between ocean shipping export trade and Nigeria’s economic development?
To what extent has ocean shipping export trade influenced the level of Nigeria’s gross domestic product?
What is the influence of ocean shipping export trade on Nigeria’s foreign exchange reserve?
To what extent has ocean shipping export trade influenced Nigeria’s debt service payment?
What are the policy constraints toward the effective use of ocean shipping export trade receive in Nigeria?

1.5 Research Hypotheses

In order to carry out an adequate research work, and to analyze the relationship of the needed variables, we shall make the following hypotheses:

H0: 1 There is no significant relationship between ocean shipping export trade and the Gross Domestic Product.
H0: 2 There is no significant relationship between ocean shipping export trade and External Reserve.
H0: 3 There is no significant relationship between ocean shipping export trade and External Debts Payment.

1.6 Significance / Justification Of The Study

There is no gain saying the fact that the issue of economic growth and development is one of the most sensitive issues in Nigeria of today. One reason for the sensitivity of this issue is the scenario of abject poverty in the Land of surplus as is the case in Nigeria. The reason for this boils down to the fact that every reasonable Nigerian is bothered about the economic imperialism brought about by the level of underdevelopment. The generation yet unborn is even saddled and sold to economic slavery because of the present level of poverty and penury.

A research work on such a sensitive matter as the relationship between economic development, external reserve, debt payment and ocean shipping export trade in Nigeria, is therefore at this time a necessity.

The need to provide a lasting solution to the problem of underdevelopment, abject poverty, tribal clashes, Niger Delta Youth restiveness, religious bigotry among others, provide workable economic growth scenario, management of our abundant natural resources among others as would be advocated in this research work is therefore a task that must be done and hence a justification for this research work. Hence, this study is significant.

1.7 Scope Of The Study

This research work aims at covering an overview of the nature of the relationship between the ocean shipping export trade and economic development in Nigeria, giving special attention to the some indicators of economic growth in Nigeria – gross domestic product, external reserve and external debt payment. References would be made to other countries which are relevant to this research work. The study also covers a period of 39years, 1976-2015.

1.8 Limitations Of The Study

The research work has been intended to have an overview analysis of the Nigerian ocean shipping export trade in relation to it economic development and growth. It would assess the concept of ocean shipping export trade in relation to the current level of economic growth given special attention to relationships between ocean shipping export trade and some indicators of economic growth.

However, due to time constraints and lack of good data base and information sources in Nigeria and worst still because of lack of good data in the required government ministries and parastatals, the research work could not cover all the economic growth information of the country.

Chapter Five

Summary, Conclusion And Recommendations

5.1 Summary Of Findings

This study investigated the impact of Shipment Export Trade on Nigeria’s Economic Development, covering the period, 1976-2006. Three major hypotheses were formulated and tested with these objectives in mind.

To determine the nature of relationship between Shipment Export Trade and the level of gross domestic product in Nigeria.
To ascertain if Shipment Export Trade exhibits a significant relationship with the level of External Trade in Nigeria.
To determine whether a significant relationship exists between Shipment Export Trade and the level of External Debt Payment in Nigeria.
To determine whether the Shipment Export Trade contributes significantly to Economic Development.
In all cases, the hypotheses proved significant even at 0% alpha level or 100% confidence level, thus, suggesting that Shipment Export Trade exerts a significant influence on the levels gross domestic product, external reserve and external debt payment, respectively for hypotheses one through three.

5.2 Conclusion

The study is on the impact of Shipment Export Trade on economic development of Nigeria, covering a period of thirty-one years from, 1976-2006. Three hypotheses were actually tested for the following conclusions to be reached:

Shipment export trade has actually exerted a positive effect on the economy as a whole.
Shipment Export Trade exerts a significant positive effect on the level external reserve in Nigeria.
Akin to the two revelations above, the Shipment Export Trade exerts a significant effect on the level of Nigeria’s external debt payment, especially for the period under investigation, 1976 – 2006.

5.3 Recommendations

The findings of this study therefore, bring to the limelight the need for the following recommendations:

With the perceived weak institutional setting, there is therefore the need to improve the institutional setting in order to boost external trade contribution to the economic as a whole. Even though Shipment Export has been found to contribute positively to the economy generally, whether in terms of contribution to gross domestic product, external reserve or external debt payment, one is tempted to say that more contributions would have been recorded with strong institutional setting.
Similarly, the poor transparency and corruption that appear to be endemic in our country call for concerted effort to make for an improved performance.
It has also been observed that information is grossly inadequate in the export trade. Hence, the need to improve the market information, especially in the areas of reporting and disclosure standards can hardly be over-emphasized. For instance, it appears disturbing that there seems to very wide gaps between what the Nigeria’s actual export receipts and the export targets. At best, this portends or lends further credence to the seeming over-orchestrated corrupt practices in high places in Nigeria.
Above all, there is need for policy makers to be consistent, both in terms of formulation and policy implementation.

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Frequently Asked Questions

What are the effects of shipment export trade in Nigeria?

1) Shipment export trade has actually exerted a positive effect on the economy as a whole. 2) Shipment Export Trade exerts a significant positive effect on the level external reserve in Nigeria.

Does international trade promote economic growth and development in Nigeria?

Literature on international trade and growth of the Nigerian economy are large. Whereas some scholars argued that international trade promote economic growth and development, o thers argued that it does not. For instance, reduced.

What is the importance of maritime transport in the Nigerian economy?

Maritime transport also generates the much needed foreign exchange to the Nigerian economy. This is in the form of ship repairs, levies, taxes and port fees and charges among others.

What is the best study on the Nigerian shipping policy?

Gambo, B. (1999); An evaluation of Nigerian Shipping Policy; A research work conducted in 1999. Maritime Transport (1981); A study by the Maritime Transport Committee