Impact of trade openness on economic development in Nigeria

Abstract

The study explores the relationship between trade openness and economic growth in Nigeria. This study aims to suggest ways to utilize the substantial human resource we have in Nigeria in a productive way for wealth creation to increase the welfare and standard of living. The variables used were gross domestic product (GDP) as the dependent variable, real exchange rate, degree
of trade openness (import and export as independent variables) within the period of 1980 to 2020. The study used Augmented Dickey-Fuller (ADP) and Philips Perron (PP) unit root test. The co-integration test of Autoregressive Distributed Lags (ARDL) bound test also utilized during estimation process. The result shows that there is positive and significant long-run impact of export and exchange rate on economic growth, while negative impact of import on economic growth in Nigeria. The results recommend that the government should focus on the other sectors in Nigeria, such as the agricultural and manufacturing sectors other than the petroleum sector alone. Additionally, the government should promote import liberalization by reducing import tariffs to prevent or discourage smuggling activities. The import of consumable and intermediate goods should be reduced for easy flow of imported goods and trade restrictions to encourage the local industries to produce such goods. Finally, the government should refocus its policies towards the external sector and make export more favorable.