Empirical Analysis of the Service Sector and Economic Growth Nexus in Nigeria

Abstract

This paper did an empirical analysis of the service sector and economic growth nexus in Nigeria. Background: Service sector’s contribution to GDP has declined slightly from average of 50% between 1982 and 1985 to 45% between 2020 and 2023. The disregard of the service sector and preference of the oil sector seem to be limiting the sector’s greater productivity. Aims: This study specifically sought to ascertain the nexus between trade; transportation & storage; information & communication; financial & insurance; real estate and GDP in Nigeria for the period 1981 to 2023. Methodology: This study adopted the ex-post facto research design. Annual time series data was obtained from CBN bulletin, 2023 and analyzed using descriptive statistics, ADF unit root test and OLS. The hypotheses were tested at 5% level of significance. This study considered the Fisher’s model of the stages of economic growth (Allen Fisher, 1939). Findings: There was no unit root among the variables. Trade had a significant effect (0.0165); Transportation & storage had a significant effect (0.0000); Information & communication had a significant effect (0.0000); Financial & insurance had a significant effect (0.0088); Real estate had a significant effect (0.0000) on GDP for the period reviewed. Also, the probability (f-statistic) was 0.000000, Durbin-Watson was 1.610388 while adjusted R2 value was 99.82%. Conclusion: The services sector is jointly significant and contributes to GDP of Nigeria. Recommendations: The government should continue the diversification of the economy, ensure that we produce more for consumption and export so as to better the GDP.