Trade liberalization and economic performance in Nigeria: Evidence from agricultural and manufacturing sectors

Abstract

This study examines the impact of trade liberalization on performance in the  Nigerian economy, with special reference to agricultural and manufacturing sectors. Simultaneous models were developed to capture the joint effects of trade  liberalization on the two sectors. The Generalized Method of Moment technique was used to estimate the role of trade liberalization on the performance of the selected sectors. The study shows a significant positive impact of trade liberalization on the output of agricultural sector while a negative but significant relationship exists  between measures of trade liberalization and manufacturing output in Nigeria. The study also reveals that exchange rate exerts a positive but insignificant impact on agricultural output while the effect of inflation on agricultural output is positive and significant within the study period. Unlike the agricultural output, both exchange rate and inflation have negative impact on manufacturing sector’s output. Moreover,  finding from the study also confirmed the possibility of substantial economic linkage between the two sectors, as their magnitudes were positive and significant which suggests some significant level of interdependence between them in the Nigerian economy. The study concludes that government should embark on programmes that promote local production to fully harness the opportunity presents by trade liberalization.

Keywords: Trade liberalization, agriculture, manufacturing, Generalized Method of Moment and Nigeria.