Interaction Effect of Tourism and Foreign Exchange Earnings on Economic Growth in Nigeria

Abstract

Deteriorating nature experienced in the level of economic activities in Nigeria is evident in most sectors of the economy, including the tourism sector. But there is a need to develop the tourism industry because of its potentials for job creation, and the Nigerian government should make vital efforts to diversify the economy from oil production to other viable sectors in order to create wealth for the nation. Against this backdrop, this study examined the interaction effect of tourism and foreign exchange earnings from the tourism industry on economic growth in Nigeria. The study engaged time series data sourced from the World Development Indicators for the period 1980–2016 and employed the fully modified ordinary least squares (FMOLS) and Johansen cointegration econometric technique of analysis. The empirical results from the FMOLS showed that revenue generated from tourism have a significant and positive effect on Nigeria’s economic growth; the interaction effect of tourism and foreign exchange earnings on economic growth in Nigeria is positive which implies that an increase in the tourism and foreign exchange earnings will lead to an increase in economic growth. Thus, based on these findings, the study recommended that as a matter of priority, the Nigerian government should encourage diversification through tourism promotion to achieve the desired level of economic growth and ensure that foreign exchange earnings from tourism transmits to the improvement of amusement parks and recreational centres which will significantly open new opportunities for tourism patronage and hence boost economic growth.

Tourism and Economic Growth in African Largest Economy

“…The Granger causality test also confirms that tourism receipt is not strong enough in Nigeria to granger cause economic growth. Unlike the findings of Tang and Abosedra (2014); Matthew et al (2018) and Omodero (2019); this finding is consistent with the results of Chiu and Yeh (2017) regarding countries that exhibited different conditions and experience on the relationship of tourism and economic growth.…”

“…In a similar study on the interaction of tourism and foreign exchange earnings on economic growth in Nigeria by Matthew et al (2018), fully modified OLS and Johansen cointegration technique were employed to analyze the time series data on GDP per capital and tourism revenue receipts for the periods of 1980 to 2016. The result of the study showed that both tourism and foreign exchange earnings have positive interactive effect on Nigerian economic growth.…”

“…The inconsistency in findings was rather common with the quantitative studies (Ovat, 2002;Yusuff and Akinde, 2015;Asuquo et al 2016;Ogbeba et al 2016;Matthew et al (2018;Omodero, 2019). Essentially, studies that utilized a range of much older statistical data tend to establish positive relationship between tourism and economic growth in the country (Matthew et al 2018;Omodero, 2019).…”

“…Most other studies had focused on the national impact of tourism on the economic advancement of the country using various parameters and methodologies as evident in the work of Ovat (2002); Esu (2013); Ayeni (2013); Yusuff and Akinde (2015); Ogbeba et al (2016); Asuquo et al (2016) and Eneji et al (2016) among others. In this category, the empirical findings of Otu (2015); Yusuff and Akinde (2015); Matthew et al (2018) and Omodero (2019) have established a case for tourism as driver of economic growth in Nigeria. Whereas, other findings such as Ovat (2002); Adeleke (2008); Asuquo et al (2016) and Ogbeba et al (2016); Yusuff (2016) are at variance with this position.…”

“…The inconsistency in findings was rather common with the quantitative studies (Ovat, 2002;Yusuff and Akinde, 2015;Asuquo et al 2016;Ogbeba et al 2016;Matthew et al (2018;Omodero, 2019). Essentially, studies that utilized a range of much older statistical data tend to establish positive relationship between tourism and economic growth in the country (Matthew et al 2018;Omodero, 2019). Whereas, recent studies in other countries and continents tend to focus on more recent data ranging within 10-25 years for more realistic results (Ivanov and Webster, 2013;Shakouri et al 2017;Yalcinkaya et al 2018).…”