Trade liberalization and trade inflows: A study of Nigeria’s economy using ARDL model approach

C. Alugbuo Justin; O. Uremadu Sebastian

doi:10.30574/gscarr.2020.4.1.0057

Authors

C. Alugbuo Justin Lecturer, Department of Economics, College of Management Sciences (COLMAS), Michael Okpara University of Agriculture, Umudike, Abia State, Nigeria.
O. Uremadu Sebastian Professor, Department of Banking and Finance, College of Management Sciences (COLMAS), Michael Okpara University of Agriculture, Umudike, Abia State, Nigeria.

DOI:

https://doi.org/10.30574/gscarr.2020.4.1.0057

Keywords:

Trade Liberalization, Trade Inflows, Trade Openness, Economics Growth

Abstract

In Nigeria, despite the success of implementation of trade liberalization measures, and the persistent signs of economic recovery as seen from reduction in external debt and debt service payments, some macroeconomic pointers still showed poor performance of the overall economy and it is against this backdrop, that this study investigated effect of trade liberalization and trade inflows in Nigeria covering the period 1981-2018 with the help of the ARDL model of estimation. Based on the issues covered in the literature review, empirical investigations were carried out on the effect of trade liberalization and trade inflows in the Nigeria. Results showed that trade openness (TOP) had a negative relationship with economic growth in both the current year and in the long run. Similarly, import volume index (IMPVID) had a negative relationship with real gross domestic product (RGDP) for the current year and in the long run, while export volume index (EXPVID) had a positive impact on RGDP but was insignificant in the previous year’s lags. The result from the ARDL Bounds Test for co-integration test indicated evidence of long run relationship among the variables of interest while trade openness and RGDP had a non-directional causality between them. Based on these findings, the study recommended that government should encourage import liberalization through reduction in tariff rates, gradual removal of non-tariff barriers (NTB), outright banning of certain goods which will ensure that domestic imports, following trade liberalization, are directed mainly on intermediate and capital goods.

Metrics

Metrics Loading ...

References

Echekoba FN, Okonkwo VI and Adigwe PK. (2015). Trade liberalization and economic growth: The nigerian experience (1971-2012). Journal of Poverty, Investment and Development, 14, 51-72.

Edwards S. (1998). Openness, Productivity and Growth: What Do We Really Know?The Economic Journal, 108(447), 383–398 .

Eleanya KN. (2013). Openness and Economic Growth in Nigeria. Journal of Education and Practice, 4(1), 68-73.

Ijeoma NB. (2013). Trade Liberalization in Nigeria: An Examination of Impact and Policy Strategies. International Journal of Scientific & Engineering Research, 4(12), 1277-1283.

Winters A. (2002). Trade Policies for Poverty Alleviation. In Hoekman, Bernard, Mattoo, Aaditya and English, Philip (eds). Development, Trade and the WTO, A Handbook. World Bank, Washington D.C.

Babatunde MA. (2009). Can Trade Liberalization Stimulate Export Performancein Sub-Sahran Africa. Journal of International and Global Economic Studies, 2(1), 68-92.

Greenway MD, Wynn C and Wright P. (2002). Trade Liberalization and Growth in Developing Countries. Journal of Development Economics, 67(1), 229-244.

Felix A. (2014). The Impact of Trade Liberalization on Economic Growth in Tanzania. International Journal of Academic Research in Business and Social Sciences, 4(5), 514-532.

Grossman G and Helpman E. (1995). Technology and Trade. Handbook of International Economics, Vol Ill, 1279- 1337.

Mkubwa M, Mtengwa H and Babiker SA. (2014). The Impact of Trade Liberalization on Economic Growth in Tanzania, International Journal of Academic Research in Business and Social Sciences, 4(5), 514-532.

Vaquez D. (2002). Institution, Trade and Growth: Revisiting the Evidence. Journal of Monetary Economics, 50, 133-162.

Winters AL. (2004). Trade Liberalization and Economic Performance: An overview. The Economic Journal, 114 USA.

Parikh A and Stirbu C. (2004). Relationship between Trade Liberalization, Economic Growth and Trade Balance: Hamburgisches Welt-Wirtschafts-Archiv (HWWA).

Umoru D. (2013). Trade Liberalization and Industrial Growth in Nigeria. Journal of Poverty, Investment and Development, 1, 148-156.

Echekoba FN, Okonkwo VI and Adigwe PK (2015). Trade liberalization and economic growth: The Nigerian experience (1971-2012). Journal of Poverty, Investment and Development, 14, 51-72.

Ikenson DJ. (2006). Bhagwati versus Bhagwati on Trade Liberalization. Cato at Liberty: Cato Institute.

Bhagwati J. (2010). Fair Trade versus Free Trade: The American Interest. Greenway, P et al (1998), Iran: Lonely Planet Publications.

Iyoha M and Oriakhi L. (2002). ‘Explained African Economic Growth Performance: the case of Nigeria’, African Economic Research Consortium. Nairobi

Okpako GU. (2005). Public finance, Ikeja: Tivolick.

Atoyebi KO, Akinde JO, Adekunle FO and Edun F. (2012). Foreign trade and economic growth in Nigeria: an empirical analysis. American Academic and Scholarly Research Journal, 4(5), 211-223.

Utkulu. (2004). Does Trade Liberalization Cause a Long Run Economic Growth in Turkey, Economic Change and Restructuring, 37(3), 245-266.

Nwosa PI, Saibu MO and Fakunle OO. (2012). The effect of trade liberalization on trade tax revenue in Nigeria. African Economic and Business Review, 10(2), 28-43.

Manni UH and Ibne Afzal MN. (2012). Effect of trade liberalization on economic growth of developing countries: A case of Bangladesh economy. Journal of Business, Economics and Finance, 1(2).

Feder G. (1983). Exports and Economic Growth. Journal of Development Economics, 12, 59-73.

Helpman E and Krugman PR. (1985). Market structures and foreign trade. Cambridge: MIT Press.

Krugman P. (1994). The Myth of Asia’s Miracle. Foreign Affairs (Nov-Dec), 62- 78.

Esfahani HS. (1991). Exports, Imports and Economic Growth in Semi-Industrial Countries. Journal of Development Economics, 35, 93-116.

Lucas RE. (1988). On the Mechanics of Economic Development. Journal of Monetary Economics, 2(2), 3-42.

Alisna A and Rodrik D. (1999). Distributive Politics and Economic Growth. Quarterly Journal of Economics, 109, 443-465.

Ejike DC, Anah SA and Onwuchekwa FC. (2018). Trade Liberalization and Economic Growth in Nigeria: A Cointegration Analysis (1980-2015). IJRDO -Journal of Business Management, 4(5), 81-94.

Ojeyinka TA and Adegboye AA. (2017). Trade Liberalization and Economic Performance in Nigeria: Evidence from Agricultural and Manufacturing sectors. African Journal of Economic Review, 5(3), 1-14.

Afolabi B, Danladi JD and Azeez MI. (2017). International Trade and Economic Growth in Nigeria. Global Journal of Human-Social Science: Economics, 17(5), 29-39.

Nwinee BF and Olulu-Briggs OV. (2016). Trade Openness, Financial Development, and the Nigerian Economy. American International Journal of Contemporary Research, 6(3), 170- 183.

Adeleye JO, Adeteye OS and Adewuyi MO. (2015). Impact of International Trade on Economic Growth in Nigeria (1988-2012). International Journal of Financial Research, 6(3), 163-172.

Pesaran MH and Y Shin. (1995). Long-Run Structural Modeling un-published manuscript, University of Cambridge.

Ajayi FO and Atanda AA. (2012). Monetary policy and bank performance in Nigeria: A two-step co-integration approach, African Journal of Scientific Research, 9(1), 462 –476.

Monisola OJ. (2014). Public Policy and Trade Liberalization in Nigerian Economic Development. Research on Humanities and Social Sciences, 4(15), 91-96.

Soi N. (2013). Effect of International Trade on Economic Growth in Kenya. European Journal of Business and Management, 5(10), 131-137.

Olatunji L and Shahid MC. (2014). FDI and Economic Growth in Nigeria: A co-Integration Analysis. Business and Economic Research, 5(1), 243-261.

Adeleke KM, Oluwe SO and Fasesin OO. (2014).Impact of Foreign Direct Investment on Nigerian Economic Growth. International Journal of Academic Research in Business and Social Science, 4(8).

Olukoyo FO. (2012). Foreign DirectInvestment and Economic Growth: A Case of Nigeria. Bvimere’s Journal of Management Research, 4(1).

Omoke PC and Ugwuanyi CU. (2010). ―Export, Domestic demand and Economic Growth in Nigeria: Granger Causality Analysis. European Journal of Social Sciences, 13(2).