Trade Liberalization and Economic Growth in Nigeria; A cointegration Analysis
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Date
2013
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Abstract
Trade liberalization is one of the most controversial policies in
international economics and finance. Copious of arguments have
been put forward about if free trade and reduction of trade
barriers will help the economy or not. Those in favour of the
policy believe that it can stimulate economic growth of African
economies while others maintained that trade liberalization may
not provide positive contribution to long run growth of African
economies. This study adopts the ordinary least squares in
estimating the influence of trade liberalization on economic
growth in Nigeria between1970 and 2012 with a view to
examining whether a long term relationship exists between the
two and also to check for structural change that may have
occurred with the implementation of a free trade regime in
1986.Trade liberalization was conceived as openness and
proxied as the ratio of total trade to GDP. Time series data
sourced from the World Development indicator (WDI) of the
World Bank and the Central Bank of Nigeria (CBN) statistical
bulletin and annual reports were analysed. Result shows that
liberalization supports economic growth in Nigeria with an
evidence of a long run relationship. Strong evidence was found
to support a structural change taking place in 1986 with the
adoption of free trade policy. However export was reported to be
negatively related to growth. The study concluded by
recommending that an enabling environment that will engender
further growth such as better infrastructural base, adequate
financing support adherence to international best practice in
export and sound institutional structure be put in place for
sustainability.
KEYWORDS
Openness, trade liberalization,
economic growth and structural
change.