Foreign Trade And Economic Growth In Nigeria: A Cointegration Approach

Abstract

The relationship between foreign trade and economic growth is a subject of intense debate among economic researchers and policymakers. This study analyze this relationship in Nigeria using advanced statistical techniques which is the Auto Regressive Distributed Lag (ARDL) model bounds test. The study covers the period from 1981 to 2023 and includes pre and post-estimation diagnosis tests to ensure the accuracy of the model. The results indicate the presence of a long-run relationship among foreign trade and economic growth, as confirmed by ARDL bounds test. In the short run, there is a significant association between foreign trade and economic growth. The Granger causality test reveals a bidirectional causality between economic growth and foreign trade. Based on these findings, it is suggested that the Nigerian government needs to moderate its trade policy as the economy seems too weak to absorb the adverse shocks from external trade. Most importantly, the problem that arises from exchange rate should be tackled and put in place to offset the likely negative effects of exposing the economy to external influences.