The Nigerian economy and the Dutch Disease

Dutch Disease explains the relationship between exploitation of natural resources and the decline in the agricultural and manufacturing sectors. The dependent variable of the model shows the contraction of either the manufacturing or agricultural sector. The theory asserts that increase in revenues from natural resources will de-industrialize a nation’s economy by appreciating the real exchange rate, and exports on the booming commodity, which in turn makes the tradable sector less competitive. The government of Nigeria has neglected the agriculture sector, causing the sector to be less competitive in the trade market. As a result, when economic activities in Nigeria increase it tends to have a negative impact in the agricultural sector. The study used the econometric procedure in testing for the presence of the Dutch Disease in the Nigerian economy by using the estimation of the long term relationship between the agricultural output to the GDP and its determinants in equation one, and manufacturing output to the GDP and its determinants in equation two. The data set covers the period from January 1980 to December 2013. The Ordinary Least Square (OLS) method of regression will be employed in obtaining the numerical estimates of the coefficients of the equation. Granger’s Causality test will be used in the model as well