ABSTRACT
This study investigates the impact of trade and transportation on the growth of the services sector in Nigeria, focusing on the period from 1981 to 2022. The services sector, a critical component of Nigeria’s economy, has experienced significant transformations, driven by both domestic factors and global economic dynamics. However, the role of trade and transportation infrastructure in facilitating this growth remains under-explored, particularly in the context of a developing economy like Nigeria. This research seeks to fill this gap by examining the relationships between trade in services, the development of transportation infrastructure, and the expansion of the services sector.
Utilizing a correlational research design and a quantitative approach, the study analyzes secondary data from reputable source such as Central Bank of Nigeria (CBN). Key variables include the services sector's GDP contribution, employment in services, trade volumes, and transportation infrastructure indicators like road and rail networks, port throughput, and air transport capacity. The analysis employs descriptive statistics, correlation analysis, multiple regression models, and time-series techniques to assess the impact of trade and transportation on the services sector.
The findings reveal a significant positive relationship between trade in services and the growth of the services sector, highlighting the importance of global economic integration for Nigeria's economic diversification. Furthermore, transportation infrastructure emerges as a crucial determinant of services sector performance, with well-developed infrastructure facilitating increased trade and economic activities within the sector. The combined impact of trade and transportation infrastructure on the services sector is found to be greater than their individual effects, underscoring the need for integrated policy approaches that simultaneously address trade facilitation and infrastructure development.
The study contributes to the literature on economic development by providing empirical evidence on the drivers of services sector growth in a developing country context. It also offers practical insights for policymakers, emphasizing the importance of improving transportation infrastructure and enhancing trade policies to support the sustainable growth of Nigeria’s services sector. The research concludes with recommendations for targeted investments in transportation infrastructure, policies to boost trade in services, and strategies to leverage these factors for broader economic development.
TABLE OF CONTENTS
CONTENT PAGE
Cover page i
Title page ii
Declaration iii
Certification iv
Dedication v
Acknowledgements vi
Table of contents viii
List of Tables x
List of Figures xi
Abstract xii
CHAPTER ONE: INTRODUCTION
1.1 Background to the study 1
1.2 Statement of problem 2
1.3 Aim and Objectives 3
1.4 Justification of the study 3
Research Question 5
Research Hypothesis 5
Scope of the study 5
Limitation of the study 6
Definition of some terms 7
CHAPTER TWO: LITERATURE REVIEW
2.1 Conceptual Review 9
2.2 Theoritical Review 12
2.3 Emperical Review 14
CHAPTER THREE: RESEARCH METHODOLOGY
3.1 Research Design 19
3.2 Research Method 19
3.3 Sources and method of data collection 19
Variable measurement and definition 19
3.5 Model Specification 20
3.6 Method of model estimation 21
3.7 Unit Root test 23
3.8 Coefficient of determination 23
3.9 Variance Inflation Factor 23
3.10 Durbin Watson Test Statistics 23
3.11 Testing For Heteroscedasticity 24
3.12 Tools For Data Analysis 25
CHAPTER FOUR: DATA ANALYSIS AND RESULTS
4.0 Introduction 26
4.1 Graphical Analysis 26
4.2 Integration Order Test Analysis 26
4.3 Estimate Of Multiple Regression 28
CHAPTER FIVE: SUMMARLY, CONCLUSION AND RECOMMENDATIONS
5.1 Summary 31
5.2 Conclusion 31
5.3 Recommendations 32
REFERENCES 33
LIST OF TABLES
Table 1 Estimates of the Regression Model 28
Table 2 Breusch-Godfrey Serial Correlation LM Test 29
Table 3 Heteroskedasticity Test: Breusch-Pagan-Godfrey 30
LIST OF FIGURES
Figure 1 Time plot of services (Serv) sector, trade(TRD) and transportation sub-sector growth in Nigeria (1981 – 2022) 26
Figure 2 Stability Diagnostic test using CUSUM test 30
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND TO THE STUDY
The largest economy in Africa, Nigeria, has seen notable expansion in its service industry. This industry sector, which includes a wide range of industries like professional services, healthcare, tourism, banking and finance, and telecommunications, has shown to be essential for economic growth and job creation (World Bank, 2023).
The development of the service industry is significantly accelerated by trade and transportation. While trade makes it easier for countries to exchange goods and services, transportation makes sure that these commodities are moved both locally and globally in an effective manner. The productivity, competitiveness, and general performance of the service sector are inextricably related to the effectiveness of trade and transportation networks (The Organization for Economic Cooperation and Development, OECD, 2022).
According to the World Trade Organization (WTO), international trade is vital for sustainable economic growth and development. It creates opportunities for diversification, revenue generation, and foreign exchange earnings. Nigeria's trade activities involve the export of commodities such as crude oil, agricultural products, solid minerals, and manufactured goods, as well as the importation of machinery, equipment, and consumer goods (WTO, 2021).
Nigeria's service sector significantly benefits from international trade through various channels. The exchange of knowledge, technology, and best practices across borders contributes to enhancing the quality and efficiency of domestic services. Moreover, trade facilitates collaboration, partnerships, and market expansion, enabling service providers to tap into global opportunities and achieve economies of scale. Consequently, the growth and development of the service sector are intrinsically linked to the volume, direction, and composition of trade flows (World Trade Organization, 2023).
Apart from trade, the development of transportation infrastructure is essential to the expansion of the service industry. Supply chain management and trade facilitation depend on having adequate logistics and transportation systems. Effective transportation networks lower transaction costs, increase accessibility, and improve connection. These networks include land, air, sea, and train transportation. The expansion of the service industry depends on investments in logistics and transportation infrastructure, particularly when it comes to delivery efficiency, cost-effectiveness, and speed (World Bank, 2019).
1.2 STATEMENT OF PROBLEM
Nigeria's service sector is experiencing substantial growth, contributing to job creation and economic development. However, the sector's full potential is hindered by challenges in trade and transportation. Inadequate infrastructure, including poor roads, railways, and ports, hampers connectivity and increases operational costs for service providers (World Bank, 2019). Furthermore, complex customs procedures, inefficient logistics, and restrictive trade policies create barriers to market access and limit the participation of Nigerian service firms in international trade (Federal Ministry of Transportation, 2020; World Trade Organization, 2021).
To optimize the impact of trade and transportation on the service sector, addressing these challenges is crucial. Improving infrastructure, streamlining customs processes, and facilitating market access for service providers are essential steps to enhance the sector's competitiveness and contribution to Nigeria's economy.
1.3 AIM AND OBJECTIVES
The general aim of this study is to examine the impact of trade and transportation on services sector growth in Nigeria.
The objective of this study is to examine the dynamics, trends, and patterns in trade and transportation and how they affect the expansion of the service industry:
1. To evaluate the effect of trade on the expansion of Nigeria's service sector.
2. To examine the effect of transportation on the growth of the service sector in Nigeria.
3. To examine the previous effects of trade and service sector on the Nigeria’s economic growth
1.4 JUSTIFICATION OF THE STUDY
Economic Significance:
The Nigerian economy is heavily dependent on the service industry, which generates jobs, foreign exchange revenues, and the country's GDP. To fully utilize the service sector's potential for economic development, regulators, investors, and business stakeholders must comprehend how commerce and transportation affect the sector's growth (CBN, 2021). In addition to helping to establish methods to maximize the service sector's contributions to Nigeria's overall economic growth, this study will offer insightful information on the mechanisms and reasons propelling the sector's expansion.
Policy Relevance
Sustainable economic development depends critically on effective trade facilitation and transportation infrastructure. Through an analysis of the effects of trade and transportation on the service industry, this research will identify the necessary policy interventions to tackle the current obstacles and limitations. It will educate decision-makers on the particular issues that need to be addressed in order to support the expansion of the service sector, such as market access improvement, trade facilitation reforms, and infrastructure development (Federal Ministry of Transportation, 2020).
Business Competitiveness
Efficient trade and transportation systems directly affect the competitiveness of service providers. By understanding the implications of logistics inefficiencies, customs procedures, and trade barriers, this study will enable businesses in the service sector to identify bottlenecks and implement measures to enhance their operational efficiency. It will also shed light on the potential benefits of improved transportation infrastructure and connectivity for achieving cost-effectiveness, timely delivery, and enhanced service quality (World Bank, 2019).
Global Integration
In order to diversify its economy and seize chances in foreign markets, Nigeria must engage in international trade. However, trade restrictions and restricted market access may make it more difficult for Nigerian service providers to grow. In order to improve market access and increase Nigeria's competitiveness in the global service market, this study will examine the obstacles and constraints to global trade integration for the service sector. It will also offer insights into the trade agreements, international partnerships, and policy reforms that will be needed (World Trade Organization, 2021).
Knowledge Gap
While there is existing literature on trade, transportation, and service sector growth individually, there is a need for more comprehensive studies that focus specifically on their interrelationships in the context of Nigeria. This study will address this knowledge gap and provide a holistic understanding of how trade and transportation impact the service sector's growth in Nigeria. It will contribute to the existing body of knowledge and serve as a foundation for future research in this area.
By conducting this study, we aim to provide evidence-based insights and recommendations that can inform policy formulation, business strategies, and investment decisions, ultimately leading to the sustainable growth and development of the service sector in Nigeria
1.5 RESEARCH QUESTION
1. Does trade contributes to the growth of the service sector?
2. Does transportation contributes to the growth of the service sector?
1.6 RESEARCH HYPOTHESIS
H0: Trade and transportation as a sub-sector do not have an impact on the service sector growth in Nigeria.
Ha: Trade and transportation as a sub-sector has an impact on the service sector growth in Nigeria.
Justification
The research hypothesis aims to test the impact of trade and transportation on service sector growth in Nigeria. The null hypothesis (H0) states that trade and transportation as a sub-sector do not have an impact on the service sector growth in Nigeria, while the alternative hypothesis (Ha) suggests that trade and transportation as a sub-sector has an impact on the service sector growth in Nigeria.
1.7 SCOPE OF THE STUDY
The purpose of this study is to investigate how trade and transportation affect Nigeria's service sector's expansion. It’s main goal will be to comprehend the ways in which trade and effective transportation networks impact the growth and development of the nation's service industry. The study will take into account a variety of trade-related factors, such as international, domestic, and intra-regional trade, as well as various forms of transportation, including air, sea, rail, and road travel.
The relationship between trade, transportation, and the expansion of the service sector will be examined using both qualitative and quantitative methodologies in this study. Comprehensive case studies and interviews with important players in the transportation, trade, and service sectors will be part of the qualitative research process. Statistical methods will also be used in quantitative analysis to examine secondary data gathered from pertinent government papers, databases on international trade, and transportation indicators.
A number of potential mediators or moderators of the relationship between trade , transportation, and the expansion of the service sector will also be taken into account in this study. These variables could be Nigeria's overall economic performance, competitive markets, government policies, infrastructural development, and technology adoption.
1.8 LIMITATION OF THE STUDY
Practical Constraints
Time And Resource Limitations: Conducting comprehensive research on this topic requires significant time and financial resources.
Access To Information: Obtaining relevant data and information may be hindered by bureaucratic challenges and limited access to government agencies.
Language Barriers: Conducting research in Nigeria may require language skills to effectively communicate with respondents and interpret data.
THEORETICAL AND CONCEPTUAL CHALLENGES
Defining The Service Sector: Clearly defining the scope of the service sector can be challenging due to its diverse nature.
Measuring Service Sector Growth: Selecting appropriate indicators to measure service sector growth can be complex.
Conceptualizing The Relationship: Understanding the complex interactions between trade, transportation, and the service sector requires a strong theoretical framework.
Sample Selection Bias:
The study's conclusions can be biased by the sample that was chosen. The industries and locations included for the investigation might not accurately reflect Nigeria's whole service industry. This bias may limit the findings' applicability to the larger service industry (Olumuyiwa et al., 2019).
1.9 DEFINITION OF SOME TERMS
1. Trade
Trade refers to the exchange of goods and services between countries and regions. It involves the buying and selling of products, both domestically and internationally, through various channels such as imports, exports, and bilateral agreements (World Trade Organization, 2021).
2. Transportation
Transportation encompasses the movement of goods, people, or information from one place to another. It involves the use of various modes such as road, rail, air, and sea to facilitate the efficient and timely movement of goods and services (UNCTAD, 2021).
3. Service Sector
The service sector, also known as the tertiary sector, comprises economic activities that do not involve the production of tangible goods but rather the provision of intangible services. It includes industries such as finance, education, healthcare, tourism, transportation, and communication (World Bank, 2021).
4. Growth
Growth, in the context of the service sector, refers to an increase in the size, output, and value of the sector over a specific period. It can be measured in terms of factors such as employment, revenue, contribution to GDP, and the expansion of service offerings (Oluwatobi et al., 2018).
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