Impact of Trade Liberalization on Poverty Reduction in Nigeria

Abstract

This study examines the Impact of Trade Liberalization on Poverty Reduction in Nigeria. The Annual data of macroeconomic indicators including Poverty Rate, Trade Ratio, Import, Export, Gross Domestic Product and Real Exchange Rate was used to investigate the impact of trade liberalization on poverty reduction for the period of 38 years (1980-2018). The study applied Unit root test for stationarity. The Autoregressive Distributed Lag (ARDL) techniques were employed. The bounds test for co-integration result show that there is a long-run relationship between trade liberalization and poverty reduction in Nigeria. The empirical results showed that trade ratio proxy trade liberalization, import, export and real exchange rate had a significant impact on poverty rate in Nigeria, in the long run during the period of study. Trade ratio proxy trade liberalization had a positive (5.75) and significant at (5%) while import had a negative (-2.32), export had a negative (-3.44) and real exchange rate had a negative (-0.13) and significant at (5%) respectively and (10%) impact on poverty rate in Nigeria, in the long run. However, Gross Domestic Product had no significant impacts on poverty rate in Nigeria in the long run. The study concludes that trade liberalization plays an important role on poverty reduction in Nigeria. It is therefore, recommends that there is a need for the government to take policy measures on export and import with keen interest, since it was found that export and import have significant and long run impact on poverty reduction.