TRADE LIBERALIZATION, SHOCKS AND ECONOMIC GROWTH IN NIGERIA

Mohammed Nuhu; Olabisi Julius Olaposi

Mohammed Nuhu University of Benin, Benin City.
Olabisi Julius Olaposi UNIVERSITY OF JOS- NIGERIA.

Keywords: Shocks, trade openness, economic growth, vector autoregressive (VAR)

Abstract

The motivation for this study is to find the impact of trade openness, shock emanating from the economic growth of Nigeria. The vector autoregressive (VAR) methodology was applied to analyse the data collected from the Central Bank of Nigeria (CBN) Statistical Bulletin from 1961 -2014. The results show that the causality tests confirm the fact that exchange rate, inflation rate, trade openness, manufacturing output, and the size of public sector all have carnal relationship with output growth. Similarly, trade openness, inflation and the manufacturing output significantly affect the exchange rate; it was also observed that only the size of the public sector causes the inflation to change. While the shocks from inflation do not influence the output growth, shocks from exchange rate affect output growth seriously. Also, shocks from trade openness affects the output growth significantly, implying that volume of international trade significantly affect output of Nigeria. It is recommended that monetary authority should watch closely at the movement of price level so as to avoid its rapid movement, 'gyrations in exchange rates have the capacity to harm the economy and should be avoided by the monetary authority. Finally, since manufacturing sector is the hub of Nigerian economy, every effort should be geared to boosting the sector. The conclusion drawn from this study is that trade is also an important sector that should grow Nigerian economy and should attract serious attention.

Author Biographies

Mohammed Nuhu, University of Benin, Benin City.

Department of Economics and Statistics,

Olabisi Julius Olaposi, UNIVERSITY OF JOS- NIGERIA.

Department of Economics

References

Ajayi, F. O & Atanda, A. A. (2012): Globalization and Macroeconomic Stability in Nigeria: An Autoregressive Adjustment Analysis, European Journal of Globalization and Development Research, 3 (1): 175-193 Alimi, O. Y. & Atanda, A. A. (2011): Globalization, Business Cycle and Economic Growth. African Journal of Scientific Research, 7 (1): 17-29. Anowor, O. F, Ukweni, N.O &lkeme, M. (2013). "The Impact of Trade Liberalisation on Nigeria Agricultural Sector", Journal of Economics and Sustainable Development, 4 (8):14- 24. Daumal, M. &Ozyutt, S. (2011).'The Impact of International Trade Flows on EconomicGrowth in Brazilian States’’, Review of Economics and Institutions.2 (1): 61-73, article 5, University of Perugia. DOI http://dx.doi.0rg/ 10.5202/rei.v2il.5 Djeri-Wake, N. (2009). 'The Impact of Chinese Investment and Trade on Nigeria Economic Growth', ATPC Work in progress No. 77 Economic commission for Africa. Effiomet, E. Ubi, P.S., Okon, E.O. & Itam, E.E, (2011). Trade Liberalization and Human Capital in Nigeria: A Vector Autoregressive Analysis. European Journal of Economics, Finance and Administrative Sciences, (40): 154-168. Grossman, G.M. & E. Helpman, (1992).Innovation and Growth: Technological Competition in the Global Economy, MIT Press, Boston. Harrison, A. (1996). "Openness and Growth: A Time Series, Cross-Country Analysis for Developing Countries", Journal of Development Economics (48): 419- 447. Kareem, O. I. (2007) 'Globalization and Employment in Developing Countries: The Nigerian Experience', paper presented at the 46th Annual Conference of Nigerian Economics Society, Abuja (November). Krueger, A. (1980). Trade Policy as an Input to Development", The American Economic Review, 70 (2): 185-199. Lincer, P. & Williamson, J. (2001), "Does Globalization Make the World More Unequal?" NBER Working Paper 8228.
12
Okodua, Henry & Alege, Philip O. (2014). Household Welfare Survey on Impact of Trade Liberalization in Nigeria: A Computable General Equilibrium Model", Journal of Economics and Sustainable Development, 5 (28):41-52. Osabuohien, E. S. (2007). 'Trade Openness and Economic Performance of ECOWAS Members: Reflection from Ghana and Nigeria, African Journal of Business and Economic Research, 2 (2&3): 57-7. Oyejide, T. A. (1990). "Supply Response in the Context of Structural Adjustment in Sub-Saharan Africa", AERC Special Paper 1, Nairobi: Initiatives Publishers. Rodriguez, F. & Rodrik, D. (2001). "Trade Policy and Economic Growth: A Skeptic's Guide to the Cross-National Evidence". In Bernanke B. & Rogoff, K. S. (eds.). Macroeconomics Annual 2000. Cambridge, MA: MIT Press. Srinivasan, T.N., and Bhagwati, J. (1999) "Outward-Orientation and Development: Are the Revisionists Right?" Yale University Economic Growth Center Discussion Paper No. 806. Summers, R., Heston, A. and Aten, B. (2001). Penn World Table Version 6.0, Center for International Comparisons at the University of Pennsylvania (CICUP). Wacziarg, R. (2001), "Measuring the Dynamic Gains from Trade", World Bank Economic Review, 15 (3):393-429.