What if the transportation section, stagnant, almost every section of any given economy will not perform well as expected? The importance of transportation in developing or advanced economics cannot be over emphasized. Transport is one of the main sector that remains as the cornerstone of every nation for achieving growth and development as well as gaining political and economic independence. The study shows the relationship between transportation and economic development and also the level of the manufacturing output contributed in the economy due to transportation. The research employed regression analysis using OLS in verifying the relationship that exist in computing transportation, manufacturing output and inflation.
1.1 Background Of The Study
Earlier thought of investment was considered as the adjustment from a given level of capital that plays a critical part in economic growth models and is an essential component of aggregate demand that also has considerable effect on economic activities both in the short and the long run (Von, F. Hayek, 1941) and (T. Haavelmo, 1960). Recognition has been given to the relevance of infrastructure in determining economic development and growth over a long time. Recent literature is also replete with studies on the role of public and private investment and their impact on economic growth. Both public and private investment have been shown to have a positive impact on economic growth in long run, but in the short run only the private investment has a significant relationship with growth (D.A. Aschauer, 1989a), (F. Nourzad, and M. Vrieze, 1995), (D. Canning, 1999) and (D. Canning, and E. Bennathan, 2000). Reference (D.A. Aschauer, 1989) in particular argued that much as of 1970s, the decline in productivity in the United States of America (U.S.A) and other developed economies heightened especially highway and other transport infrastructure. This further posits investment analysis as an impetus for empirical research into the relationship between economic growth and infrastructure.
Earlier thought of investment was considered as the adjustmentfrom a given level of capital that plays a crucial role in the models of economic growth and it is an essential component of aggregate demand that also has considerable effect on economic activities both in the short and the long run (Von, F. Hayek, 1941) and (T. Haavelmo, 1960). The benefits and importance of infrastructure to economic growth have been recognized for a long time. Recent literature is also replete with studies on the role of public and private investment and their impact on economic growth. Both public and private investment have been shown to have a positive impact on economic growth in long run, but in the short run only the private investment has a significant relationship with growth (D.A. Aschauer, 1989a), (F. Nourzad, and M. Vrieze, 1995), (D. Canning, 1999) and (D. Canning, and E. Bennathan, 2000). Reference (D.A. Aschauer, 1989b) in particular argued that much of the decline in productivity in the United States of America (U.S.A) and other industrial countries that occurred in the 1970s was precipitated by dwindling rates of public capital investment, particularly in highway and other transportation infrastructure. This further posits investment analysis as an impetus for empirical research into the relationship between economic growth and infrastructure.
Reference (M. B. Ortiz-Moctezuma, 2010) identified two schools of thought with respect to the link between infrastructure and economic growth. Firstly, the Keynesian school starts with the notion that any income or infrastructure can only be generated by economic growth itself in the first place. On the other hand, the Neo-Classical approach treats infrastructure as a production factor in the same style as labour and capital, as embedded within the Endogenous Growth Theory.
However, the jury is still out on the link between the growth of the economy and the provision of infrastructure. Some authors contended nonexistent link or indeed weak linkage. F. Rodriguez, 2010 also argue for non-provision of public infrastructure.
Good transportation infrastructure is essential in economic development. It promotes factor mobility and reduces trade costs. In addition, it promotes market integration, thereby providing avenue for the reduction of price volatility and reallocation of resources in line with comparative advantage. Investments in transportation infrastructure can also influence the productive capacity through its use as a direct input in the production process thereby increasing such resources. For example, a newly constructed road allows goods to be transported to market quicker thereby reducing the total cost of production and transportation. The creation of infrastructure can on the other hand, determine the national output. The generation of intermediate products and attendant multiplier effect may cause this to happen. Indirectly, such infrastructure can also enhance the productivity of existing resources. Furthermore, it can lead to “agglomeration effect” which is the magnetic or catalytic pull or attraction of resources from other regions to the area of infrastructural development by lowering production and distribution costs, stimulating private investments, improving labour productivity and engendering technological innovations. In the light of the considered effect of transportation infrastructure on economic growth, there is the need to empirically examine whether transportation capital causes economic growth causality in the Nigerian case.
Earlier macro ¬econometric studies on the roles of public infrastructure investments in economic growth, mostly from the developed countries have adopted aggregate time series. D.A. Aschauer, 1989 expanded the conventional production function to include the public capital or its components while A. H. Munnell, 1990 also utilized
Cobb ¬Douglas production function with an assumption of constant return to scale across all inputs Earlier functional studies on the investments in public infrastructure from the developed economies deployed aggregate time series. D.A. Aschauer, 1989 expanded the production function in its conventional form to include the public capital. A. H. Munnell, 1990 in addition, assumed constant return to scale for all the inputs, utilsing the Cobb-Douglas production function. However, serious methodological problems often beset such analysis as spurious correlation (non-stationarity) is usually manifested. Attempts at correcting the non-stationarity problem by first differencing of time series data was bedeviled with the problem of working only on the short run relationship between and among the series. The opinion expressed by A.H. Munnell, 1992 was that given the lack of robust data, time series data are of limited use.
Another approach that has been proposed for examining infrastructure is the growth nexus. This is the use of cost function method that avoids the multi-collinearity problem may cause spurious results arising from biases in the estimated coefficient. The problem of causality may also arise. However, this may not arise when using production function approach because the inputs prices instead of quantities are exogenously determined. However, T. H. Oum, W.G. Waters and Y. Chunyan, 1998 posited that cost functions require the assumption of an optimal mix of inputs which is more plausible for applications to individual firms opted a(micro data)than to aggregate or even industry-level data.
Our approach in this study is the use of a variant of augmented Solow model econometric framework employed by B. Seetanah, 2009 to scrutinize the relationship between economic growth and investment in transport infrastructure in developing countries using Nigeria as the case study. We decomposed capital investment into three types, namely private capital, transport and other public capital investment.
We are interested in investigating the determinants of growth. The basis for exploring the issue is the Growth accounting pioneered by M. Abramovitz, 1956 and R. M. Solow, 1957.
The organisation of the rest of the study is as follows: Section 2 provides an overview of transport infrastructure investment in Nigeria. In section 3 a review of the literature encompassing theoretical, empirical and methodological issues on infrastructure and growth is provided. The transportation system in Nigeria is being seen as the means towards attainment of growth and development of the Nigeria economy. To attain such growth, an efficient function forms has to be laid.
In every aspect of man’s activities, transportation has come to play a vital role, which ranks it among the most important determinants of any success in such human activities. The transportation of goods and services has become vital to the economy due to foreign exchange earning to the sector of the economy. As such there is need for this study. A good and well backbone for a vibrant and growing nation.
Therefore, transportation is defined as the movement of people and material from one point to the other for one reason or the other. This movement could be on sea, land or air. Transport is hardly in demand for its own sake; rather it is linked organically to the survival of other sector namely social, political and economic sector. Hence the need for transportation services in any economy is it socialist or capitalist cannot be under estimated. The interaction between the level and pattern of transportation resources and the standard of living of the population of any country is or critical factor affecting social, economic, political military, religion, recreational or educational progress and must therefore be taken into account at all levels of planning. Therefore, activities in aspect of transportation system while their subsequent operations and development would generate increase demands for transportation of goods, services and people. The development and efficiency of transportation system is a pre-requisite goal of all developing countries.
Money and funds have been selectively applied to this particular field of development and the principle is now generally accepted that the improvement of transport forms perhaps the most valuable single contribution towards economic, social and political development. In diverse ways of man’s daily activities transport system have served and will be serving and shall still serve. For example transportation system has been employed to serve in various economies’ criteria rather conveying raw materials to the manufacturing plants or finished goods, to the consuming areas. Certainly in the early stages of economic in communities where subsistence agriculture is still important transport is probably the key to development “Fertilizer improve strains of seeds, education and other subject are all of the greatest importance. But the needs for transport is prior of these” (Clark 1968).
Nigeria like any other developing country recognizes the importance of and need to develop an efficient transport system evidently stated in the third National Development Plan of 1975 to 1980. The transportation system has to support the growth and development of agriculture, commerce and industry with efficient movement or people and goods throughout the country. As a matter of public policy the government supports the continued development of efficient dynamic and flexible transport service as being vital to economic growth, expanding productivity and general process of the nation. The efficient and effectiveness of transportation system influence the cost of every commodity consumed or exported, thereby affecting business economic and industrial opportunities of every citizen the basic objective of the government in this field is to develop and assure the continued expanding availability if fast, save and economic transport service needed in a growing and changing economy in order to move people and goods in response to public and private demand the lowest consistent with health safely, convenience, and their broad public objectives (Ahmans 1990)
In the light of this, government has lead emphasis on efficiency, flexibility, safely and lowest cost in the development of transportation services especially the Federal Urban Mass Transit Programme in 1988 (Daily Champion, 1988) that led to the emergency of transport outfit such as Borno Express Corporation in Borno State, Kaduna transport Authority in Kaduna, Kwara Express in Kwara State, Plateau Express Limited in Plateau State. Like most government establishment they were making parastatals and their services are to be subsidized in relation to the private transport sub sector. All these development are effort towards a reflection of national growth, which had generated the information of various outfits to cope with this general pace in a natural building. These factors ensure a free low factor of production commodities with regards to cost of production and job opportunities. And from the welfare view point, it enhances higher standard of living of the populace.
Therefore, this essay is aimed at studying an economic analysis Nigeria economy with particular reference to Borno express corporation and the length at which public demands transport service (Bello, 2000).
1.2 Statement Of The Problem
In the transportation sector of Nigeria economy, there are numerous problems which the transportation sector faces. These problems are great source of concern to economic and the government at large. The transport sector virtually serve as source of foreign earning and equally means of conveying goods and services to the nooks and crannies of the country.
Transportation economics encompasses, air, sea and land transportation system with specification reference to Nigeria, the road transportation system is the most widely used of all forms of transportation system.
Hence, the federal state and local government have ensured that road transport infrastructure develop in all federation. However, inadequate of credit facilities has been identified as a major obstacle for improving transport in Nigeria. The federal government in its desire to encourage the development of transport sector has put in place certain facilities to the transport sector through various schemes and policy guide lines.
Transportation infrastructures (roads, rail, airports and seaports) are the arteries for the free flow of people, goods and information, three things necessary in a manufacturing and export economy. If eyes are the light to human soul, then the airports and seaports are the eyes that international business travelers see a country with. How important there transportation infrastructures are to the manufacturing economy is as good as anybody can gives. But that will not stop me from talking about it.
The domestic need for transportation infrastructure brings with the possibility to become an important link in the regional transportation system in the movement of goods manufactured in the rural areas (where most manufacturing facilities should be located anyway). There is a need of there transportation infrastructures it cannot continue, the age – living neglect of these transport systems. Also there is a need to revive water way and railway transportation. The age – long neglect of these transportation if Nigeria wants to become a manufacturing economy. A country cannot become a manufacturing giant without well – connected inner perimeter roads xxxx airports, seaports and railroad stations.
Government cannot display possibly all these without the involvement of private entrepreneurs in the building of transportation infrastructures, such as the management of airports, railroads, seaports, and state collection of tolls of the maintenance of perimeter roads and highways. For Nigeria to reach the goal of becoming a manufacturing economy in 2020 (what we at Nigerian Entrepreneurial Leadership call 24 hours economy) the country must attend to the glaring and urgent needs of using water and rail means of transport to reduce pressure on the road system and boost productive activities and employment country wide, especially in the rural areas.
The neglect of rail and waterways for decades has contributed to the nation’s dependence on food importation, as agricultural produce from one part of the country cannot be transported cheaply to other parts. Lack of cheap means of transportation has discouraged many farmers whose harvests perished because they could not access the market. Also, the nation has continued to reduce the same socio-economic loss from the future to expand railway network to all the states, so that agricultural produce could be moved cheaply to urban markets. Rural development proclamation will just be that, proclamation, unless transportation infrastructure network is build to encourage free flow of people and goods.
More disappointing is the inability to maintain the existing north-south colonial rail truck for the movement of goods. This is major reason for the amalgamation of the north and the south by the colonial masters for their easy management of movement of goods. Nigerian’s should debate more on the economic manufacturing necessity of the north and south areas, as well as the east-west areas; rather than the political undertone. Consequently the decline in rural economic activities is largely responsible for high rates of joblessness, crime and declining quality of life, as the urban areas become overpopulated resulting in environment problems, such as over-flow of garbage, lack of proper drainage system.
The Nigerian Railways Corporation (NRC) monopoly law should be abrogated and a regulatory framework set up to guide private instruments in the rail transportation infrastructure. The lack of interest, and failure to provide incentives, might have discouraged the private sector from investing in rail and water transportation. Because of the importance of this sector in a manufacturing economy, a form of enterprise fund should be created with the purpose of promoting private sector development in the rail and water transportation.
International business travelers must agree that Airport security and foreign investment go hand in hand. Travel is a basic necessity for business to be conducted between countries, while symbolizing a deeper connection that is fundamental to a country’s economic fixture. Aviation is the travel mode of the world; the first and last impression is your airport. Foreign investment is going to come from people who fly. It is vital if Nigeria is going to become a manufacturing export economy that encourages business people will doubt whether Nigerian’s airport and airspace can attain international standards. These recent misshape give a bad impression not only of Nigeria airport, but also of Nigeria as a whole, and the lack of structural management system. The bottom line is that if you can’t get there, you can’t trade. Improving airport security is so critical for international trade. The attract travelers and commercial shippers, air travel to Nigeria must be safe and secure.
This project is not meant to provide solution to the ailing transportation infrastructure, as to modernization of equipment types, and types of industry management training, but to raise awareness of the importance of the transportation industry problems in equipment and training is left to the consultants, who often a critical study, diagnosis, and analysis of the sector’s current situations. Any seemly solutions to the problems presented in this project are peripheral as I do not give free in-depth solution in my project. Lecletus Olebune (2010).
The research questions for this study are:
1. What is the impact of transportation on the Nigerian economy?
2. What are the domestic needs for transportation infrastructure?
3. How does inadequate of credit facilities affect improvement of transport in Nigeria.
1.3 Objective Of The Study
1. To determine the impact of the economic growth.
2. To get to know the influences of transportation in developing countries.
3. To get the aggregate level of the waste caused by poor transportation system in the Nigerian economy.
1.4 Statement Of Hypothesis
Transportation has no significant impact on the Nigeria economic growth.
1.5 Significant Of the Study
The study of the transportation system in the Nigerian economy is of great importance as the study will create an insight to the study will create an insight to the causes of those transportation problems and also suggest solutions through policies that helps in reducing these problems. This essay therefore is expected to shed more light on the appraisal of revenue role as regards to product management and efficient services to the transport sector. Efficiency in the transportation sectors of the Nigeria economy through a reduction of elimination of some vital problems will have a positive effect on the national economy. The constitution of new roads proper, check on vehicle worthiness will to a large extent revive the transportation sector and in torn boost activities in the economy as the transport sector is invaluably the backbone of all other sector in every economy. This work also tends to check whether or not revenue from the government has contributed significantly to the development of transportation system in the Nigeria economy.
1.6 Scope and Limitation of The Study
This research will be conducted within and outside the caritas community. This research covers the entire economy so as to obtain enough data they will avoid research is the difficulty together information and data needed for the study. This research also consumed a lot of time, and other resources constraint cost consideration also posed a serious problem.