ACTIVIDADES ESENCIALES DEL CONSEP

DR. OKOLO UDUMAGA EBERE.

Institute of Ecumenical Education, Thinkers Corner, Emene, Enugu.

(Phone no.-08037794806. E-mail: [email protected]) DR. OKOLO VALENTINE CHIMAOBI

Enugu State University of Science and Technology.

(Phone [email protected]) DR EUNICE C. OKPALAOJIEGO

Institute of Ecumenical Education, Thinkers Corner, Emene, Enugu Phone no-07038141816

Abstract

In a time of declining oil price, the need for diversification for an oil dominated economy such as Nigeria cannot be overemphasized. Boosting the wholesale and retail trades could cushion the adverse effect of low oil price on her gross domestic product (GDP). The paper assessed the influence of the wholesale and retail trade on the growth of the Nigerian economy. Ordinary least square regression technique was employed to measure the extent to which the GDP increase was influenced. Wholesale and retail trade contributed significantly and positively (89%) to the growth of the economy. Specific government development of new institutions and products should be channeled to wholesale and retail facilities such as providing state owned malls with outlets for wholesale and retail traders and traditional market stores.

Keywords—Gross domestic product, retail, trade, wholesale.

Introduction

Middle men (wholesalers and retailers) in the chain of distribution bridge a gap between the producers and consumers. Being closer to the consumers spread across the nation, they speed up sales and increase production. While they contribute to employment and production by increasing sales and reducing distribution cost for the producers, they increase the prices of products, bringing the cost burden on the consumers. Although the cost burden is spread on the prices of more than one product,

consumers still decide whether to purchase and what quantity to purchase at the whole sale and retail prices. Their decision is largely influenced by their need, the amount of their disposable income, their spending habit and the level of money stock in the economy.

Wholesalers and retailers in Nigeria are mainly small and medium enterprises, categorized as distributive trade and service industries, which have over 10% share of the gross domestic product of Nigeria (according to the National Bureau of Statistics). Small and Medium

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Dr. Okolo Udumaga Ebere, Dr. Okolo Valentine Chiomaobi & Dr. Eunice C. Okpalaojiego Vol. 1, pp. 161-167

Enterprises in Nigeria are classified as businesses with asset size ranging from -N- 5,000,000 to -N-500,000,000 (Central Bank of Nigeria, 2012).However, these small and medium enterprises are the bedrock of any country's development and constitutes 96% of Nigerian businesses (Oyelaran and Oyeyinka, 2012) and more than 80% of a country's economic growth (Jagoda, 2010). This report discusses wholesale and retail sector in light of its effect and contribution to economic growth in Nigeria.

The Central Bank of Nigeria (CBN) Statistical Bulletin 2012 released showed that sectorial distribution of commercial bank loans and advances to domestic trade ceased after the year 2003. Also, secondary data of bank loan to the wholesale and retail sector is unavailable.

Nevertheless, commercial banks loans to small and medium scale enterprises as percentage of total credit stood at an average of 0.14% as against 27.04% in the year 1992. Large number of wholesalers and retailers belong to the small and medium enterprises group. As a result of the effect of the bank consolidation in 2004, surviving commercial banks turned to big customers leaving the care of this group to microfinance banks (Iloh,Okolo and Ani, 2013).

To gain a fore understanding of the subject matter, National bureau of Statistics (NBS) 2005, defined wholesale trade as “re-sale, without transformation of new and used goods to non-final consumers. The bureau also defined retail trade as “re-sale, without transformation, of new and used goods for personal or household consumption or utilization. The scope is confined to services rendered to households and enterprises. These are services provided by establishments which can be regarded as stores, hotels, restaurants, theatres, shops and offices. It excludes the producers of government services, producers of private non-profit services, financial institutions, insurance and some other

services rendered by individuals (professionals, artists, authors, servants, etc.)”.

Furthermore, Business Day, (2013) reported that the wholesale and retail trade contributions to the gross domestic product of Nigeria increased from 16.2% in 2007 to 19.4% in 2011 and that consumption expenditure on food, clothing/footwear and household goods in 2009/2010 stood at 74.1%. In addition, 84 million of Nigeria's population are under the age of 20 and will account for 52% of the country's population by 2015, making Nigeria the largest consumer market in Africa (Business Day, 2013). Social media and the advantage of mobile commerce are increasing the trend of online retail.

While a mass market with low levels of disposable income drives demand for Nigeria's large fast moving consumer goods (FMCG) and agro-industrial products, new malls are catering to an emerging middle class. Despite the limited development of consumer finance, demand has grown for formal retail. Retail market research in Nigeria remains largely limited to fast moving consumer goods and agro-industrial goods (Oxford Business Group, 2010). The group presented that wholesalers play a crucial role in the distribution system as they supply independent and informal retailers. Going further, the group explained that the wholesalers supply neighboring countries taking advantage of price corridors caused by exchange rate fluctuations between the West African franc and the Nigerian naira.

Awe, Sholotan, and Asaolu, (2010) assert that one other key success factor of the fast moving consumer goods sector, which is largely distributed by retail and wholesale trade is product reach. To ensure adequate market penetration, companies in the sector have emplo yed various approaches for the

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Dr. Okolo Udumaga Ebere, Dr. Okolo Valentine Chiomaobi & Dr. Eunice C. Okpalaojiego Vol. 1, pp. 161-167

distribution of their products. Some employ dedicated main distributors covering different geographical regions with a regional manager to ensure that products are placed, priced and sold at stated terms. Others on the other hand, adopt a combination of key distributors (wholesalers) and a merchandising force. They further explained that Nigeria presents one of the best opportunities for consumer goods businesses given their growing youthful population, estimated at about half of its entire population.

In a sectorial analysis of the Nigerian economy, FinIntell, (2013) asserts that the non-oil sector (notably Agriculture, Wholesale and Retail Trade) was mostly affected by the floods and weaker consumer demand. She further explained that the agricultural sector suffered declines due to the floods, which also affected the Wholesale and Retail sector (as key inputs in the sector are fro m the agricultural sector).However, wholesale and retail trade caused growth in the non-oil sector of the economy by 11.8% (Odukoya, 2013). Coffey (2012) says that the 11.5% contribution of the wholesale and retail sector to Nigeria's gross domestic product could be attributed to high population growth, urbanization and increased incomes. They explained that while Nigeria's wholesale and retail sector grows quickly, inefficiencies within the chain of distribution resulted in lower prices for producers, lower wages for employers, lower profits for businesses and a higher cost of living for consumers.

Additionally, Distributive trade and service industries [DTSI] account for a substantial proportion of economic activities in every country, whether they are measured in terms of

segments of the Nigerian economy are w h o l e s a l e a n d r e t a i l t r a d e , a n d telecommunication and post. Explaining further, the author said that they account for almost 35% of total output.

Having shown direct impact on the consumers and producers of commodities, an econometric analysis of the significance of this sector to the economy at large is necessary to reveal prospects for an oil dominated country to diversify.

Methods

The study employed econometric analysis, using the simple linear regression method to examine the influence of the wholesale and retail trade on gross domestic product increase for the growth of Nigerian economy. Secondary data was used for the analysis. The data was sourced from the Central Bank of Nigeria (CBN) Statistical Bulletin (2005).The model employed;

GDP = f (WRT) Therefore;

GDP = B0 + B1WRT + ì… ... (1) Where,

GDP = Gross Domestic Product WRT = Wholesale and Retail trade contribution to GDP

ì = error term

B0, B1, B2… = denotes unknown parameters to be estimated

Discussions Unit Root Test

Philip Perron unit root test for stationarity of data showed that gross domestic product and wholesale and retail trade data passed at 1^stand contributions to the GDP or share of total 2^nd difference respectively. Additionally, the employment” (National Bureau of Statistics,

Nigeria, 2005). Agreeing to this, Taborda, (2013) revealed that the fastest growing

variables were controlled (logged) and used for analysis. The results are presented below.

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Dependent Variable: LNGDP Method: Least Squares Date: 12/25/13 Time: 15:02 Sample: 1990 2012

Included observations: 23

Variable Coefficient Std. Error t-Statistic Prob.

C 3.598329 0.199257 18.05872 0.0000

LNWRT 0.890628 0.014635 60.85762 0.0000

R-squared 0.994362 Mean dependent var 15.65264 Adjusted R-squared 0.994093 S.D. dependent var 1.352957 S.E. of regression 0.103981 Akaike info criterion -1.606282 Sum squared resid 0.227052 Schwarz criterion -1.507543 Log likelihood 20.47224 F-statistic 3703.649 Durbin-Watson stat 1.668534 Prob(F-statistic) 0.000000 Source: Authors E-view computations

The test conducted at 5% significance level showed that wholesale and retail trade made a significant contribution (89%) to gross domestic product. Wholesale and retail trade had significant and positive effect on the gross domestic product increase. The positive effect implies that gross domestic product increases as wholesale and retail trade increases. Modeled against other factors that influence the gross domestic product, wholesale and retail trade would have made a lesser contribution (< 89%) to gross domestic product in Nigeria. This only implies the strength of the effect of wholesale and retail trade, holding other factors constant.

However, drawing from the secondary data sourced from the Central Bank of Nigeria (CBN) Statistical Bulletin (2005), wholesale and retail trade in Nigeria contributed 15.5% to gross domestic product in 2012. The adjusted R² of 99.4% implies that variation in gross domestic product can be attributed to the variation in wholesale and retail trade in Nigeria.

Conclusions

Over the years, wholesale and retail sector in Nigeria has been on an upward trending line, despite few glitches. This implies that there is huge prospect in the sector for investors. Citing example from Angolan banks, credit to wholesale and retail trade, hotels and restaurants increased from 3.9 in 2010 to 4.0 in 2011 and to 4.3 in 2012 (European Investment Bank, 2013).

The bank further revealed that loans go predominantly into the retail and wholesale trade sector (19.4% of total), agriculture (12.9%), mining (12.5%), building and construction (8.7%) and transport and communication (7.9%), showing that Angolan government considers the sector fundamental to economic growth. The same cannot be said for Nigeria. The Central Bank of Nigeria (CBN) Statistical Bulletin 2012 released showed that sectorial distribution of commercial bank loans and advances to domestic trade ceased after the year 2003. Going further, secondary data of bank loan to the wholesale and retail sector is unavailable. However, commercial banks loans to small and medium scale enterprises as 164 JOURNAL OF RESEARCH IN SCIENCE AND VOCATIONAL EDUCATION (JRSVE)

Dr. Okolo Udumaga Ebere, Dr. Okolo Valentine Chiomaobi & Dr. Eunice C. Okpalaojiego Vol. 1, pp. 161-167

percentage of total credit stood at an average of 0.14% as against 27.04% in the year 1992. A large number of wholesalers and retailers belong to the small and medium enterprises group. Given the effect of the bank consolidation in 2004, surviving commercial banks turned to big customers leaving the care of this group to microfinance banks (Iloh,Okolo and Ani, 2013). Notwithstanding, microfinance bank loans and advances to the transport and commerce sector stood at 74.6% in 2012.

This report has shown that the wholesale and retail sector play significant role in the economy both in wealth creation and employment.

However, Nigeria being a developing country, proper effectiveness of the wholesale and retail sector needs to be harnessed for the continuous growth trend. It is recommended that; 1. An oil dominated country such as Nigeria should prioritize the wholesale and retail sector in a bid to solve the unemployment problem of the country, boost commerce, local production and decongest an already crowded oil sector. 2.

References

Awe, O. Sholotan, O. and Asaolu, O. (2010),

“Consumer goods businesses to do well in Nigeria,Frontier Market Int e lli gen c e. Ret rieved from:

http://www.tradeinvestnigeria.com/feat ure_articles/357260.htm 25th August, 2019

Business Day, (2013), “Wholesale and retail t r a d e i n N i g e r i a ” . R e t r i e v e d from:http://businessdayonline.com/201 3/08/wholesale-and-retail-trade-in- nigeria/on 23^rd December 2018

Central Bank of Nigeria, (2012), “Commercial Bank Loans to Small and Medium ScaleEnterprises”, Central Bank of Nigeria Statistical Bulletin, retrieved on 23^rd December 2012.

Central Bank of Nigeria, (2012), “Sectorial Distribution of Commercial Bank Loans andAdvances”, Central Bank of Nigeria Specific government development of new

institutions and products should be channeled to wholesale and retail facilities such as providing

Statistical Bulletin.on 23^rd 2012.

December

state owned malls with outlets for wholesale and retail traders and traditional market stores. 3.

Furthermore, in line with the cashless society campaign by the Central Bank of Nigeria, government should encourage mo bile commerce of the fast moving consumer goods, given that the velocity of cash movement for the consumer goods. This will save time, boost commerce and reduce physical cash in circulation and cash theft. 4. Lastly, financial institutions should be encouraged to make available more credit to the wholesale and retail sector given their significant contribution to the economy.

Central Bank of Nigeria, (2012), “Summary of A s s e t s a n d L i a b i l i t i e s ofCommunity/Microfinance Banks”, Central Bank of Nigeria Statistical Bulletin.on 23^rd December 2012.

Coffey, (2013), Increasing Incomes and Employment Opportunities in the Wholesale and RetailSector in Nigeria.

R e t r i e v e d from:http://www.coffey.com/Projects/B usinessProject.aspx?aProjId=487on 25^thAugust 2019

European Investment Bank, (2013), “Banking in Sub-Saharan Africa – Challenges and O p p o r t u n i t i e s ” . R e t r i e v e d

JOURNAL OF RESEARCH IN SCIENCE AND VOCATIONAL EDUCATION (JRSVE)

Dr. Okolo Udumaga Ebere, Dr. Okolo Valentine Chiomaobi & Dr. Eunice C. Okpalaojiego Vol. 1, pp. 161-167

from:http://www.eib.org/infocentre/pub lications/all/index.htmon 25^th Dec 2019 FinIntell, (2013), “Sectoral Analysis of

N ig e r ia ' s E co no my. R e t r ie v e d from:http://www.myfinancialintelligen ce.com/banking-and-finance/sectoral- a na l ys is - n ig e r ia % E 2 % 80 % 99 s- economy23^rd December 2019

Iloh, J.V.C., Okolo, V.C., and Ani, W. U., (2013).

The Effect of Bank Consolidation on Lendingto Small and Medium Scale Enterprises in Nigeria, 3^rd International Conference on Management, Hydro Hotel, Penang, Malaysia. Retrieved

f r o m :

http://www.internationalconference.co m.my/proceeding/icm2013_proceeding /016_088_3rdICM2013_Proceesing_p 264.pdfon 25^thDec 2019

Jagoda.K.,(2010) The use of electron ic Commerce by SMEs. Entrepreneurial Practice

Review, 1, (3) 36-47.

Nat io nal Bureau of St at ist ics (NBS) (2005).“Distributive Trade and Service Industries Statistics”. Retrieved from:http://www.google.com.ng/url?sa

=t&rct=j&q=&esrc=s

Odukoya, T. (2013), “Nigeria GDP Grows By 7 . 6 8 % ” . R e t r i e v e d fromhttp://www.proshareng.com/news/

1664523^rdDecember 2018

Oxford Business Group, 2010), The Report:

N i g e r i a 2 0 1 0 . R e t r i e v e d from:http://books.google.com.ng23^rdDe cember 2018

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f r o m :

http://www.cenbank.org/fss/wed/SME_

Issues,%20Challenges%20and%20Pros pect s_Oye yinka%20Ba nji.pd f23 ^{r d} December 2018

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Appendix

Table1: Data used for analysis

year

Wholesale & retail

trade GDP

1990 41,045.59 472,648.75

91 47,948.46 545,672.41

92 72,278.29 875,342.52

93 118,119.40 1,089,679.72 94 186,618.81 1,399,703.22 95 324,104.27 2,907,358.18 96 423,021.10 4,032,300.34 97 464,952.47 4,189,249.77 98 526,961.49 3,989,450.28 99 575,913.58 4,679,212.05 2000 625,619.64 6,713,574.84 2001 762,736.95 6,895,198.33 2002 916,825.97 7,795,758.35 2003 1,094,638.04 9,913,518.19 2004 1,484,422.36 11,411,066.91 2005 1,930,779.52 14,610,881.45 2006 2,741,794.53 18,564,594.73 2007 3,044,773.87 20,657,317.67 2008 3,503,181.70 24,296,329.29 2009 4,082,351.76 24,794,238.66 2010 4,648,696.98 33,984,754.13 2011 5,385,815.10 37,409,860.61 2012 6,284,923.68 40,544,099.94

Source: Central Bank of Nigeria (CBN) Statistical Bulletin

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