Terms of trade of some oil-exporting developing nations: Their economic development prospects (with a focus on Nigeria)

The debate over the movement of the Net Barter Terms of Trade series in Developing countries has raged on since the P-S hypothesis in 1950. The persistent economic problems of the Developing countries, the phenomenal success of the South East Asian nations, and Oil price shock of the 1970s has kept the trade-growth relation at the forefront of economic research in the last couple of decades. Most development plans are based on projected performance of the economy. A corner stone of these projections rests on the projected performance of the export sector. Thus, a good understanding of the trade-growth relation is an important ingredient of sound economic planning and policy. This dissertation attempts to determine the movement of the Net Barter Terms of Trade series of seven Oil-Exporting Developing Countries and measure the impact of the observed moment on economic growth in the sample nations. In this study, the latest approach for fitting a model through time series was adopted. A preliminary examination of a plot of the series and its autocorrelation function led the researcher to suspect the presence of unit roots in the error term. A formal urgumented Dickey Fuller test confirmed the presence of unit roots in the series of all sample nations. After first differencing, an ARIMA model was fitted through the series. The results of the model showed no secular deterioration in the Net Barter Terms of Trade series for all sample nations. In model II, which is a modified version of Salvatore\u27s 1983 simultaneous equation model, the impact of terms of trade on the growth of GDP per capita was measured. The results of model II reveal that terms of trade and the share of investment in GDP have a positive effect on GDP per capita growth rate. The results support the school of thought that regards trade as the hand maiden of growth. The results of the investment function supports the assertion by Levine and Renelt that the convergence of GDP per capita growth rate may not happen via domestic savings and capital inflow. The policy implications of these findings are numerous. The failure of this study to support the P-S hypothesis, means that these nations have to shift emphasis from external to internal sources to address their economic problems. They have to address the allocational efficiency of their investments, curb the deleterious effects of Dutch Disease, adopt orthodox macroeconomic policies and an outward trade orientation