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TOURISM AND ECONOMIC GROWTH IN NIGERIA (1996-2016)

ABSTRACT

The study examined the impact of tourism earning on economic growth in Nigeria between 1996 and 2016. The study sought to ascertain the vibrancy of tourism industry on the Nigerian economy. A model was specified in which tourism earning, inflation rate and exchange rate are expressed as a linear function of economic growth (proxy by real GDP). The econometric techniques of Augmented-Dickey Fuller test, Johansen Cointegration test and the Error Correction Model. The results showed that exchange rate, real GDP and tourism earning were stationary at first-order difference while inflation rate was stationary at zero-difference. The cointegration result affirmed a long-run equilibrium relationship between the variables. The ECM result showed that the speed of adjustment from short-run equilibrium to long-run equilibrium is 15%. Tourism earning and inflation rate had positive effect on economic growth but exchange rate exerted negative effect. However, none of the variables has significant influence on economic growth in Nigeria. The study therefore maintains that although tourism earning contributed to economic growth between 1996 and 2016, its effect on economic growth is slender. The study concluded that tourism sector positively but minutely contributed to economic growth in Nigeria between 1996 and 2016. The study suggest that; Infrastructural Development:  Infrastructures such as water, power, communication, transportation and healthy and safety services, should be developed and provided in a way that would minimize the ecological footprints of tourism, and to a standard, encourage local and international tourism; Active Promotion Policies and Marketing Strategies: Tourism should be actively promoted through appropriate policies and planning while at the same monitoring and dealing with possible negative effects of tourism on the local economy. Government should step up to play an active role in the development of tourism. This is essential because the tourism industry cannot act alone; Data Collation on Tourism: In most tourist destination in Nigeria, there is lack of reliable data on tourism. Such data are important in planning and allocating resources in the tourism sector; Encouragement of Tour Training and Education: Effective training and education should be provided in order to create professionalism in the industry towards efficiency in service delivery.

CHAPTER ONE

INTRODUCTION

1.1  Background of  Study

The United Nations of World Tourism Organization defines tourism as the activities of persons travelling to and staying in places outside his/her usual environment for not more than one consecutive year for any purpose including holidays, leisure and recreation, business purposes, health, education or other related reasons. The scope according to the World Tourism Organization of Tourism is much wider than the traditional perception of tourists, which included only those travelling for leisure. (UNWTO statistics database, 2015).  Tourism is the temporary movement of people to destinations outside their normal places of work and residence, it also relates to the activities undertaken during their study in those destinations, and the facilities created to cater to their needs. (Mathieson and Wall, 1982). Tourism is the sum of the phenomena and relationships arising from the interaction of tourists, business suppliers, host governments and host communities in the process of attracting and hosting these tourists and other visitors. (Macintosh and Goeldner, 1986).

Tourism’s current role in expanding economic opportunity in developing countries has been a puzzle. The past decade has seen marked growth in the attention paid by policymakers, development experts and industry leaders to the contributions made by the tourism sector especially in developing countries. The United Nations environment program promotes sustainable tourism; and the United Nations World Tourism Organization is not only exclusively devoted to tourism, but has even created an international foundation to enhance its contribution to development. (Ashley, Caroline, Peter, Amy & Hannah, 2007) Today, tourism is a major source of income and employment in both developed and developing countries. Tourism affects also the economy of both the source and host countries, in some cases being of vital importance. Tourism has become a phenomenon in both developed and developing economies across the globe owing partly to bizarre of income generation, employment creation and poverty elimination potentials; and exploring development variables associated with the intangible products (Andriotis, Georg & Athanasios 2008).

The strength of tourism development is obvious in solving social economic problems such as increased standard of living, poverty reduction, employment generation and income redistribution effect on an economy (Aliyu, Abdulkadir & Aliyu 2013). Tourism has developed a large economic impact on all sphere of the society to become one of the fastest growing industries globally. Tourism has become one of the major players in ‎international commerce, and represents at the same time one of the main income ‎sources for many developing countries. This growth goes hand in hand with an ‎increasing diversification and competition among destinations‎. This spread of tourism in developed states has produced ‎economic and employment benefits in many related sectors - from construction to ‎agriculture or telecommunications. ‎ (UNWTO statistics database, 2015).

The economic relevance of tourism is remarkable, the UNWTO—the United Nations World Tourism Organization (2010) estimates that tourism is roughly 9 % of the global Gross Domestic Product (GDP) and 8 % of world employment. Nevertheless, measuring the economic contribution of tourism in a national economy is not an easy task. There are statistical issues which need to be discussed, particularly related to the definition and the classification of concepts linked to both the demand and the supply side of tourism. (Candela & Figini, 2012). Tourism is one of the fastest growing industries with an annual average growth rate of about 5% and numbers of international travel might nearly double until 2020 compared to 2006. Having experienced a growth of 25% between 1995 and 2005, tourism today accounts for 10% of the source of foreign exchange earnings for many developing countries. The tourism industry ranks about 6th in international trade after trade in fossil fuels, telecommnunication and computer equipment, automotive products and agriculture. (UNDP, 2005)

Nigeria has her first international tourists in 1472, when Portuguese merchants came to Nigeria, apparently in search of trade. There are also historical records of Trans-Saharan and caravan movements. Since then, the tourism industry has continued to show appreciable growth in the country. (Bola, 2010) In 1962, the Government established the Nigerian Tourist Association (NTA) and charged it with the responsibility of promoting domestic and international tourism in the country. Tourism as an economic activity came to Nigeria in the Military regimes with the decision of the Olusegun Obasanjo’s determination and subsequent decree No. 54 of 1976 establishing the Nigeria Tourism Board (NTB) to tap into the natural resources of the country (Bola, 2010)

The Tourism board of Nigeria was later transformed through a decree NO. 86 of 1991 to bear the name, Nigeria’s Tourism Development Corporation (NTDC) providing it with a preferred sector status. The Nigeria’s Tourism Development Corporation is responsible for tourism in Nigeria and it promotes the country as a domestic and international tourist destination. Tourism development suffered during the military regime and has been recovering with the rise of democracy. Through the establishment of the Nigeria’s Tourism Development Corporation (NTDC), the Government has repositioned tourism to take a prominent position in the diversification of economic agenda. The Government captured tourism among the six top priority areas and engaged domestic and stakeholders including UNWTO and UNESCO to prepare a comprehensive National Tourism Development Master Plan (NTDMP) in 2006. The total world tourism export was US $265 billion in 1989 and rose by almost 100% in 1998 to US $508.9 billion. Nigeria’s share was only US $6 million in 1989 rising to US $25 million in 1994 to US $81 million in 1998. These translate to a share of 0.002%, 0.006%, 0.015% in those years. (Abiodun, 2002).

The tourism industry as defined by Inskeep (1991) gives a clear cut distinction of the components of the travel and tourism industry, which is a fundamental base of this research study. The WTO’s (1999) definition of the travel industry which defined the industry as the composition of organization both public and private that are involved in the development, production, distribution and marketing or products and services to serve the needs of the travelers. (Munzali, 2011). Nigeria which is amongst the most privileged nations of the world has so much attractions which include mountains, hills and highlands; caves and valleys (with waterfall and water tributaries) spectacular vegetation (dense high forest, savannah and Sahel). The Tourism industry is growing at a respectable rate of 7.2% in Africa per year and this number has the potential to be much higher. (Munzali, 2011­). Nigeria is endowed with diverse natural and manmade tourism resources, Smith (2007) argues that economic benefits of tourism is a function of destination image and facilities that will promote positive words of mouth and revisit intentions by tourists.

The slave trade history is perhaps one of the most significant history of Nigeria and the history of African. The Nigerian slave route identifies the main routes used for the shipment of slaves from West Africa to the world. Portuguese explorers settled in Nigeria in the 15th century after it was discovered by the Europeans. They starting the slave trade business and the success of this business therefore brought about the interest of other foreign traders such as the Dutch, British and other European commercialists who joined the business. Proof has it that Nigerian slaves were important in evolving of America to Cuba and other Caribbean Countries down to Brazil. (Munzali, 2011)

The Nigerian slave trade route would be of great interest to tourist, adventurers and historians. It would be also of great because it proves how Nigerians are spread all over the entire world. (NTDMP, 2006). This probably lead to the wide spread of young footballers in British countries who are now been chased by the Nigerian Football Federation. Historical events such as the exploring of the River Niger by Mungo Park and Richard Lemon lander who both died in their exploration also lead to the exposition of Nigeria to the world. Also, Mary Slessor who stopped the killing of twins who were thought to be possessed with evil spirits. She also in the (second half of the 17th century) removed the agenda of women been treated inferior “than cattle” in the society especially in the Eastern regions of the country. (Munzali, 2011)

According to Tunde (2012), the only way to realize the important roles of tourism is through development, packaging and promotion of tourist centers. Tourism has been recognized and accepted as one of the fasted growing sector of the world’s economy. The emphasis in the potential of tourism to improve the economics of developing countries such as Nigeria was based on existing research, evidences and not just political tendencies. This campaign became of importance in 2005 at the review meeting of Millennium Development goals at the United Nations. The discourse was that tourism has potential for driving the developing nations toward achieving the MDGS (Holden, 2008). At the meeting, tourism was called upon to take its place in national development to help achieve the sets targets (World Bank, 2002). Because of the important and relevance of tourism, nearly every developing country is now promoting some brand of tourism tied to its development (Marafa, 2000, Yunis, 2004).

An important interests of Nigeria administration is to diversify the economy through areas where the nation has comparative advantage one of which is the hospitality and tourism industry. The policy gets its motivation from the pronouncement and determination of the Secretary General of the World Tourism Organization (WTO) to develop and market Nigeria as a tourism destination. According to different scholars, policy has been defined as a guide to action, as a means to an end and not an end itself and a tool for solving socio-economic and political problem (Aluko, odugbesan, Gbadamiso & Osuagwu, 2011). It is on the basis of these that policy gains an absolute importance in the achievement of organizational goals. Thus, it is critical for the tourism policy to be appraised and reappraised in other for the nation to achieve its set tourism objectives and goals. 

1.2  Statement of the Problem.

The Tourism sector as an industry in the Nigerian Economy has faced pro and counter debates on its abundant resources that can positively affect economic growth. Several of the tourist attractions in the economy are underdeveloped and the few ones developed encounter the problem of poor management necessary enhancing economic growth. Significant problems such as high level of insecurity, leading to visa restrictions from international embassies, bad current state of infrastructural facilities, also poor publicity and marketing have all led to the low performance in the Tourism sector, also affecting economic growth. These problems have created hindrances to foreign exchange earning which the country needs for sustainable growth and consequential development. Also the rise in the level of inflation, inflation which is a persistent rise in the general prices of goods and services without a corresponding increase in income level has led to the reduction the rate of development of the tourism sector, also affecting economic growth.

1.3   Objectives of the Study.

The broad objective of this study is to evaluate and measure the economic effect and the relationship between tourism and economic growth in Nigeria. Other specific objectives are to determine;

I. How much capacity has tourism to tackle the general social economic problem in the economy such as low par capital income, poverty and general unemployment.

II. To measure how exchange rate fluctuations, affect tourism.

III. To analyze the effect of inflation on the economy and how it affects tourism participation.

1.4  Research Questions.

I. Is there a relationship and what is the effect of tourism on economic growth in Nigeria?

II. Does tourism have the capacity to impact positively the GDP of the Nigerian economy?

III.  How does high exchange and inflation rate affect tourism?

1.5   Statement of Hypothesis.

The following hypothesis is being formulated to guide the study

H0: The tourism sector of Nigeria has no significant effect on economic growth in Nigeria.

H1: The tourism sector of Nigeria has significant effect on economic growth in Nigeria.

1.6  Justification of Study.

Various empirical studies on the effect of tourism on economic growth have brought about different conclusions. This research will examine the functional relationship between tourism and economic growth in Nigeria as an effective means of diversification and promotion of sustainable growth, creating employment opportunities and improving the general standard of living. Its aim is to analyze the importance of tourism and tourism contributions to the economy. Having experienced a growth of 25% between 1995 and 2005, tourism today accounts for 10% of the source of foreign exchange earnings for many developing countries. The Tourism industry is growing at a respectable rate of 7.2% in Africa per year and this number has the potential to be much higher. Tourism in Nigeria therefore need to be paid more attention because of this significant level of growth prediction. The year (1996-2016) has been chosen for this project because tourism in Nigeria started to be paid formal attention in the year 1991 with the establishment of the National Tourism Development Commission. Also, the shift of attention from the manufacturing sector to the service sector is also a significant reason to focus on tourism.

1.7  Scope of the Study.

The research work covers the effect of tourism on economic growth from (1996-2016). It estimates tourism among other economic sectors as a very important industry in the economy that will affect the social economic life of people that are faced with poverty, unemployment, low per capital income and places emphasis on that fact that growth can occur if the tourism potential resources are identified, harnessed, developed and packaged into a tourist product. 

1.8  Significance of Study.

This research provides insight into the necessity of tourism as a mean of improving economic growth and will therefore be of valuable use to the following set of people.

I.  To the academia, this study will provide insight on career opportunities and spark creative thinking in relation to the tourism industry both for students and lecturers

II.  To tourists, it reveals the available tourist attractions in Nigeria.

III. To an ordinary reader, this work will serve as an eye opener and a valuable store of knowledge, also encouraging citizens to partake in domestic tourism.

IV. To government and relevant authorities, it will show clearly the importance for the allocation of economic resources to make tourist attractions more appealing through the improvement and maintenance of infrastructure and the general development of local tourist attractions in the economy.

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