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IMPACT OF TELECOMMUNICATION SECTOR ON NIGERIA ECONOMIC GROWTH

 Format: MS-Word   Chapters: 1-5

 Pages: 53   Attributes: Secondary Data

 Amount: 3,000

 Aug 26, 2018 |  09:17 am |  4580

CHAPTER ONE

INTRODUCTION

1.1  Background to the Study

Telecommunication sector is today the fastest growing sector in Nigeria. The sector has remained a major driver of innovation and transfer of technology to economic growth in Nigeria. The telecommunication sector has grown rapidly over the last three decades representing one of the most intriguing stores of technology diffusion. Since 2002 telecommunication subscribers had exceeded the number of fixed lines in Nigeria generating enough revenue for the telecommunication sector which resulted to growth in the Nigerian economy as at 2004 (Oyeyinka and Adeya, 2002).

In the full swing of globalization process the world is now a global village. The advance in technology and newer innovation to develop the existing technology is the key to make it happen. The overall economic activities of financial institutions, credit market, stock market etc largely depend on the utilization of the advanced technology of communication geared towards achieving economic growth.

Ndukwe (2004) posited that the continuous day to day economic activities from government to private sectors largely depend on the availability of information to achieve the desired level of economic growth. Telecommunication technology contributes to rapid economic growth and development in the economy as it creates channels to aid communication among markets both internal and external.

The telecommunication sector enhances the economic growth of a country by connecting not only the international financial market but also the domestic financial market and commodity market. As a result telecommunication ensures the continuous flow of the additional value in the Gross Domestic Product in term of Gross Domestic Product growth or increase in Gross Domestic Product per capita (World Bank, 2004).

Mohamed (2014) viewed economic growth as a sustained expansion of potential output as measured by the increase in Real Gross Domestic Product over certain period of time. Telecommunication through investment plays a vital role in the Nigerian economy because of its contributions to economic growth. The expansion of telecommunication sector has been observed to have both direct and indirect benefits to economic growth. The world has become a global village with telecommunication being an indispensable tool in the entire process of globalization towards achieving the desired level of economic growth for nation (Lee, Levendiz and Gutierrez, 2009).

Growth in the telecommunication sector is very essential to any economy. In the study (Jahangard and Pourahmadi, 2013), he concluded that telephone per capita have a significant impact on Gross Domestic Product (GDP) per capita towards achieving a sustainable level of economic growth. Generally, until deregulation and competition were introduced, government considers telecommunication services to be so vital to national interest and economic growth and so the government controls it directly in most countries (Asogwa, Ohaleme and Ugwuanyi, 2013).

According to Ding and Haynes (2006) the sources of funding telecommunication infrastructure were being diversified with primary sources incorporation from the mid 1980s. The result of this was later seen in the development of the sector. World Telecommunication Development Report (2002) noted that at the beginning of 2002 more than half the countries in the world had fully or partly privatized their incumbent telecom operators. Sridhar and Sridhar (2007) asserted based on data from 45 countries the impact of telecommunication on growth was found to have more effect in the less developed economies and less effect in the more developed economies.

Nandi and Dholakia (1994) further stressed that the emergence of telecommunication has brought a new era in communication sector. The internet, mobile phone and computer, have brought about a fundamental shift in patterns of communication and human relationships geared towards achieving economic growth. Communication revolution has also brought about amazing social, economic, cultural and psychological transformation. It has reduced the globe into a village through reduction of time and space (Keil and Johnson, 2005& Offurum, 2009). These recent advances in telecommunication technology have been an important vehicle in permitting information exchange to develop as a valuable commodity for moving the country into post industrial and information based economic growth. In this present world, a modern telecommunication infrastructural development is not only essential for domestic economic growth, but is a prerequisite for participation in increasingly competitive world markets and for attracting new investments.

Nigeria today has not been left out of rapid development of telecommunication industry in the world. The nation’s telecommunication sector was advanced with the return of democracy in 1999. This led to the granting of Global System for Mobile Telecommunication (GSM) licences by the Nigerian Communication Commission (NCC) to three providers: Econet, MTN, and M-tel. This was followed by the licensing of the Second National Operator (SNO), in 2003; that is, Globacom and Universal Access Service licenses of 2006 which include fixed telephony, VSAT and internet service providers. Also, in March 2008, the NCC gave license to another GSM operator known as Etisalat (Aigbinode, 2008).

Although a number of studies have attempted to identify telecommunication as an essential component of the economic infrastructure, fostering productivity and economic growth in developed countries. This particular study seeks to identify the impact of Telecommunication on economic growth in Nigeria. Efficient flow of information reduces communication and transaction costs and an accelerated information diffusion enhance market efficiency and competition as well as the potential for technological catch-up. The Nigerian economy has been driven by gains made in the oil and gas sector. Although Nigeria has clearly made great gains from her abundance of oil, it is clear that oil is a non sustainable resource and in order to ensure effective industrialized economy, Nigeria must diversify her economy without depending solely on oil sector and consider the growth and gains that can be culled in her other sectors. The Telecommunications growth and explosion was a clear indication that there was much gain to be made outside the oil industry. This was because in the year 2007, the percentage share of telecommunications to economic growth was 1.77% (National Bureau of Statistics, 2007).

From all the above, the study shall examine the impact of telecommunication sector on economic growth in Nigeria using Gross Domestic Product as a proxy for economic growth (the dependent variable) and teledensity, telecommunication sector revenue and investment in telecommunication sector, for independent variables.

1.2 Statement of the Problem

Telecommunication creates an avenue to maintain quick and effective communication with trade partners to sustain trade competitiveness towards achieving economic growth. However, Telecommunication sector in Nigeria is by no means free from the problem of the fall in economic growth that technically led Nigerian economy into recession in the year 2016 (Bankole, Osei-Bryson and Brown, 2015).  According to NBS (2016), this was because telephone density or teledensity which is the number of telephone connections for every hundred individuals living within an area in Nigeria year in year out was clear evidence that the people had been subscribing to the services of the GSM service providers, but the contribution of telecommunication to Gross Domestic Product for the economy to achieve her desired level of economic growth was still not encouraging. 

According to NBS (2016), the revenue from telecommunication services alone was estimated at US$1.6 trillion as at 2016. Rapid growth had been experienced around the world in telecommunications, but the case of the Nigerian economy is still different as a result of the economy that technically went into economic recession in the year 2016. 1.4 billion lines were connected worldwide in 1990 with 490 million being mobile lines and 905 million being fixed which had grown to nearly 2.5 billion lines in 2003 (1.33 billion mobile and 1.21 billion fixed), (Ndukwe, 2003).

 Between 1998 and 2008 mobile penetration rates in Africa increased from 0.6% to 32%, yet there is nothing to write home about the economic growth of Nigeria that actually led the nation’s economy into doom (Williams, Mayer and Minges, 2011).

According to Kenny (2016), over the last two decades the growth of telecommunication industry around the world was quite aggressive. In the emerging economies like Nigeria, the telecommunication sector will be able to play a significant role in the economic growth by enhancing the productivity level in economic activities which in turn influenced many macroeconomic factors such increasing GDP growth rate and enhancing foreign direct investment. Nevertheless, Nigerian economy is yet to attain that status to achieve the desired level of economic growth. This is because about 90% of Nigerians in 2013 live within GSM signal range and the sector has attracted more than US$25 billion, private capital. It is estimated that capital investments in mobile networks and operations since 2001 have accounted for 80% of total telecommunications foreign capital investments, yet this did not translate into sustainable economic growth in the Nigerian economy (NCC, Strategic Management Plan (SMP), 2014)

1.3 Research Questions

The following research questions were formulated to guide the research work.

       i.            What is the effect of teledensity on economic growth in Nigeria?

     ii.      What is the relationship between telecommunication sector revenue and economic growth in Nigeria?

  iii.  What impact does investment in telecommunication sector have on economic growth in Nigeria?

1.4 Objectives of the Study

The main objective of the study was to examine empirically the Impact of telecommunication sector on economic growth in Nigeria. The specific objectives of the study were:

       i.         To determine the contribution of teledensity to economic growth in Nigeria

     ii.            To ascertain the relationship between telecommunication sector revenue and economic growth in Nigeria.

  iii.            To examine the impact of investment in telecommunication sector on economic growth in Nigeria.

1.5 Research Hypotheses

The following research hypotheses were stated to guide this research work.

       i.            Ho: Teledensity has no contribution to economic growth in Nigeria

H1: Teledensity has contribution to economic growth in Nigeria

     ii.            Ho: There is no relationship between telecommunication sector revenue  and economic growth in Nigeria

H1: There is relationship between telecommunication sector revenue and economic growth in Nigeria

  iii.            Ho: Investment in telecommunication sector has no impact on economic growth in Nigeria.

H1: Investment in telecommunication sector has impact on economic growth in Nigeria.

1.6 Significance of the Study

The impact of telecommunication sector on economic growth of any nation cannot be overemphasized; since the amount of telecommunication sector activities contribute to Gross Domestic Product in Nigeria. This work will be of great importance to the general public, the government and its agencies in the telecommunication sector. Furthermore, this study will be very important to other researchers as it will form the basis for further research. The study will also be of great importance to the academia as it will add to the existing literature in terms of providing additional materials on the impact of telecommunication sector on economic growth in Nigeria.

1.7 Scope and Limitations of the Study

The study focused on the Impact of telecommunication sector on economic growth in Nigeria. The study covered a period of 30 years; from 1986-2016. The choice of 1986 as the base year is due to the fact that the researcher intends to investigate the impact of telecommunication sector on economic growth during the period of Structural Adjustment Programme (SAP) in Nigeria. The year 2016 was chosen because this period witnessed fall in economic growth which technically led the Nigerian economy into economic recession. Furthermore, a period of 30 years (1986-2016) was considered long enough to generate good result for the study. The researcher encountered a number of constraints in the course of this work. One of the limitations of the study was none availability of up to date data and data inconsistency due to poor nature of information management in Nigeria. Other constraints were time and financial constraints.

1.8 Structure of the study

This research work comprised five chapters. Chapter one is introduction and is composed of the background to the study, statement of problem, research questions, objectives of the study, justification for the study, research hypotheses, scope and limitations, and structure of the study. Chapter two is mainly concerned with the review of relevant literature which comprises definition of key variables, theoretical literature review, empirical literature review, gaps in literature and theoretical framework of the study. Chapter three deals with methodology of the study which includes types and sources of data, model specification, and estimation methods. Chapter four deals with presentation and discussion of result, while chapter five comprised the summary, recommendations, conclusion, and suggestions for further research.

 

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