Impact Of Trade Liberalization On Economic Growth In Nigeria

Type Project Topics
Faculty Administration
Course Economics
Price ₦3,000
Key Features:
- No of Pages: 75
- No of Chapters: 5
- Tables
- Graph
This study was embarked upon with a view to assess the economic effects of trade liberalization and other trade-related policies in developing countries with special focus on Nigeria. The study focus is to examine the impact of trade liberalization on economic growth in Nigeria from 1980 - 2017. The broad objective of the study is to examine the impact of trade liberalization on economic growth. The data was analyzed with the help of the Ordinary Least Squares (OLS) regression technique. In executing this study secondary data was collected on import, export, exchange rate, inflation rate, gross fixed capital formation and total labour force and regressed on Real Gross Domestic Product (RGDP) - sourced from Central Bank Of Nigeria Statistical Bulletin, and were analyzed using Error Correction Mechanism, Granger Causality Test and co integration techniques.The empirical results revealed that that trade liberalization policy has significant impact on the economic growth of Nigeria. In line with the findings of the study, some policy options were recommended in order to ensure that trade liberalization is beneficial to the Nigerian economy and to improve the international trading position of Nigeria. Thus, the study recommended that there is a need for the country to properly fund her export promotion agencies. There is a need of developing more domestic industries and attracting more investors in the economy.
Table of Content:
Title Page i
Certification ii
Approval iii
Dedication iv
Acknowledgements v
Table of Content vi
Abstract viii
1.1. Background to the Study 1
1.2. Statement of Problem 3
1.3. Research Questions 3
1.4. Objectives of the Study 4
1.5. Research Hypotheses 4
1.6. Significance of the Study 4
1.7. Scope of and Limitations of the Study 5
1.8. Organization of the Study 5

2.0 Introduction 6
2.1 Review of Conceptual Literature 6
2.1.1 Economic Growth 7
2.2 Theoretical Review 8
2.2.1 Endogenous Growth Theory 9
2.2.2 Theory of Absolute Advantage 10
2.2.3 Theory of Comparative Advantage 11
2.3 Review of Other Theoretical Issues 13
2.3.1 Trade Policies of Nigeria 13
2.3.2 Pre - Sap Trade Policies in Nigeria 13
2.3.3 Post - SAP trade Policies in Nigeria 15
2.3.4 Determinants of Trade 17
2.3.5 Trade and Economic Growth 18
2.4 Review of Empirical Literature 19
2.5 Summary of Literature Reviewed 22

3.0 Introduction 24
3.1 Method of Data Collection 24
3.2 Model Specification 24
3.3 Theoretical Framework 25
3.4 Estimatation Techniques and Procedures 26 3.41 Unit Root Tests 26
3.4.2 The Co - integration Test 27
3.4.3 Error Correction Mechanism 28
3.4.4 Granger - Causality Test 29
3.5 Evaluation of Estimates 29
3.6 Test of Research Hypotheses and Decision Rule 33

4.0 Introduction 35
4.1 Result Presentation and Analysis 35
4.2 Evaluation of Research Hypotheses 46
4.3 Discussion of Findings 47
4.4 Policy Implication of Findings 47

5.0 Introduction 49
5.1 Summary 49
5.2 Conclusion 50
5.3 Recommendations 51
5.4 Contribution to Knowledge 51
5.5 Suggestion for Further Studies 52
References 53
Appendices 55
Trade liberalization can be described as a process that tries to enhance free trade, by removing trade barriers and allowing goods and services to shift more freely across borders (World Bank, 1991). Historically, trade has acted as an important engine of growth for countries at different stages of development, not only contributing to a more efficient allocation of resources within countries, but also transmitting growth from one part of the world to another. Over the past several decades, the economies of the world have become increasingly linked, through expanded trade. International trade has often played a central role in the historical experience of the developing world. Government often become involved in trade with the goal of producing a particular economic outcome for their countries.
Trade liberalization started in 1947, after the Second World War, with the inception of the General Agreement on Tariff and Trade (GATT). The GATT was negotiated in 1947 by 23 countries of which 12 are industrialized countries and 11, developing countries. The main focal point of the GATT was to lower trade barriers. GATT was later replaced by World Trade Organization (WTO) 1994. Basically, the main purpose of trade liberalization is to allow countries to export those goods and services that they can produce efficiently and import the goods and services that they produce inefficiently.
As a matter of fact, Nigeria has been romancing with the idea of ‘openness is good for growth’. Key government officials, as expected, see trade as ‘an indispensable engine for economic growth’. Considering the economic condition on trade liberalization, the important point to make in this introduction is that the issue for developing countries in general, and Nigeria in particular, is not so much whether trade, but what to trade, and the terms on which trade should take place with the developed countries of the world ( or between themselves).
The Nigerian main trade policy instrument shifted remarkably away from tariffs to quantitative import restrictions, particularly import prohibition and import licensing from the mid 1970’s. This gave rise to the Nigerian custom legislature establishing an import prohibition list for trade items and an absolute import prohibition list for non-trade items, Oyedeji (1975). The customs legislation empowered the government to modify this list at its discretion by adding or subtracting items through customs and excise notices and government announcement and over the years there have been several modifications on the list targeted to protect existing domestic industries and reducing the country’s independence on imports.
There are three international organizations that have expressed views on Nigerian’s import prohibition policy, these are the World Trade Organization, the World Bank and the International Monetary Fund. They have advisory role with respect to trade and other policy matter in Nigeria. Prior to the introduction of Structural Adjustment Programme(SAP) in 1986 in Nigeria, import were subjected to quantitative controls implemented through a combination of ban on agricultural and some manufactured goods and a licensing system. But under SAP, import and export licensing was abolished, price and distribution control on agricultural export was removed and the prohibited list of import was reduced encompasses structural reforms that denote both import tariff and export tax. Trade liberalization is central to the Structural Adjustment Programmes being implemented by most countries in Sub-Saharan Africa including Nigeria. The cornerstone of the SAP-induced policy was the opening up of domestic economies to face increased competition in order to ensure efficiency in resource use, removal of wastages, elimination of persistent misalignment in the external and domestic sectors which ensured continuous balance of payments disequilibrium, and a general redirection of the economy to the path of recovery and growth.
One of the striking features of developing countries that embrace trade liberalization is the acceleration of growth while at the same time on the road to catch up with the rich countries. Countries that chose to pursue inward-looking policies are on the bottom rung of the economic ladder. Developing countries that espoused trade liberalization have had large increase in trade: 104 percent, compared to 71 percent for rich countries. Trade liberalized countries have experienced growth rate from 1.4 percent in the 60s to 2.9 percent in the 70s, 3.5 percent in the 80s and 5.0 percent in the 90s. Developing nations that failed to pursue trade liberalization had a decline in the average growth rate from 3.3 percent per year to 0.8 percent in the 80s and 1.4 percent in the 90s (Mattoo et al, 2001). However, the issues of whether trade liberalization would lead to economic growth have become a debate for both pro-traders and protectionists.
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