International Journal of Research and Innovation in Social Science (IJRISS) | Volume IV, Issue VIII, August 2020 | ISSN 2454–6186

Impact of International Trade on the Growth of the Nigerian Economy

YUSUF Lateef Olarotimi, NCHOM Humphrey, OSUJI Paulinus, UDEORAH Sylvester Alor F.

Institute of International Trade and Development, University of Port Harcourt, Nigeria

Abstract: The paper examined the impact of international trade on economic growth in Nigeria. The objectives of this study were to ascertain the impact of foreign direct investment (FDI) inflow, net-export (NEX) and foreign exchange rate (EXR) on the growth of the Nigerian economy (GDP). Dynamic Ordinary Least Square (DOLS) multiple regression analysis technique was employed to estimate the various data collected via the central bank of Nigeria statistical bulletin covering the period of 1980 to2018. The results showed that all the explanatory variables except exchange rate were positively linked with economic growth. More so, all the explanatory variables were statistically significant with economic growth except net export. The Durbin Watson statistics value of 1.81 suggested that the explanatory variables in the model are not serially correlated. Thus, the model is good for policy implementation. Based on the findings, the paper recommended that; Government should maintain a good market driven exchange rate policy in order to encourage local production that will lead to increase in international competiveness which in turn will result to increase in economic growth. Also, government should implement efficient and specific macroeconomic policy geared toward improving safe business environment that will attract more foreign investment in order to increase the growth of the Nigerian economy.

Key Words: International, Trade, Economic Growth, FDI, DOLS

I. INTRODUCTION

Economists have long been concerned with the factors which cause diverse countries to grow at different rates and accomplish various levels of wealth. One of such factors is trade. However, while trade between nations may engender growth generally, there are no guarantees that its cumulative benefits are distributed evenly among trading partners (Obadan & Okojie, 2012). This has been the experience of Nigeria since the independence even though the composition of trade has changed over the years. Thus, international trade is the existence of absolute independence of countries in terms of goods and service produced and consumed (Gbanador, 2005).

The importance of external trade to economic improvement cannot be over emphasized. This is because both the classical and neoclassical financial analyst were of the opinion that foreign trade serves as the life wire of any developed nation. Over the past three centuries, the world economy have become greatly connected through globalization. It plays a central role in the development of a modern global economy.