Empirical relationship between international trade and economic growth in Nigeria

Abstract

Empirical studies have shown contradictory and/or inconclusive findings between international trade and economic growth in Nigeria and this necessitated this study. The study empirically examined the relationship between international trade and economic growth in Nigeria from 1986 to 2021 and used the Autoregressive Distributed Lag Model. Augmented Dickey-Fuller unit root test result established that, at levels and first difference, some variables were stationary while others were not. The Bounds test of co-integration showed a long run equilibrium relationship among the variables. The result further revealed that trade openness had negative and insignificant relationship with economic growth in Nigeria, because of the country’s narrow production and export base dominated by low value products such as primary commodities. Foreign direct investment was positively and significantly related to economic growth, implying that foreign direct investment was a major determinant of economic growth in Nigeria. Exchange rate was positively insignificant to economic growth in Nigeria, due to exchange rate volatility. The study recommended that, government should strengthen trade openness by dismantling trade barriers, add value to their exports and provide a level playing field for trading partners to achieve the desired gains from international trade vis-à-vis a sustainable economic growth in Nigeria.