International Journal of Research and Innovation in Social Science (IJRISS) | Volume VI, Issue VII, July 2022 | ISSN 2454–6186
Trade Openness and Economic Growth (A Comparative Study Between Nigeria and Ghana)
Ehoda, Samuel Ngbede1, Onoja, Deborah Enecheojo2, Adefioye, Edumaretola Gabriel1, Bisong, Anthony Ekpang1
1Department of Economics, Federal University Lafia, Nasarawa State, Nigeria
2Department of Economics, Benue State University, Makurdi, Benue State
Abstract: This study examines the impact of trade openness on economic growth in Nigeria and Ghana covering the period of SAP and POST-SAP from 1986-2016. The study made use of the following theories; Comparative Cost Advantage Theory and Endogenous Growth Model (New Growth Theory). Secondary data were sourced from OECD/World Bank Statistical Publications, CBN Statistical Bulletin, Nigerian Bureau of Statistics and other research publications on the following variables; RGDP which is the dependent variable is used as a proxy for economic growth while TOP, GFCF, FDI and EXR are the explanatory variables. Both descriptive and econometrical techniques such as Unit Root Test and ARDL Bounds Test were employed. The Unit root test reveals that all variables were stationary at first difference while ARDL Bounds test indicated a long-run relationship among the variables. From the findings of this study, trade openness has an insignificant positive relationship on economic growth in Nigeria and Ghana under the period of study. This research work therefore recommends that policies of exchange rate stability and structural trade oriented policies should be adopted in Nigeria and Ghana in order to boost output growth in the economy. In addition, the Ghanaian government needs to invest heavily on infrastructural development and transport related cost. Finally, the government of both economies should create an investment friendly environment and also restructure its financial market so as to propel FDI in the economy.
Keywords- Trade openness, and Economic Growth
I.INTRODUCTION
Economists have long been interested in factors which cause different countries to grow at different rates and achieve different levels of wealth. One of such factors is trade openness. One of the basic interests in development and international economics is to check if trade openness promotes economic growth. With regards to globalization, two major trends are visible: first is the emergence of multinational firms with strong presence in different, strategically located markets; and the second is the convergence of consumer tastes for the most demanded products, not minding from which country they are produced (World Bank, 2002).
The openness of a nation influences a country’s growth rate by impacting upon the level of economic activities and facilitating the transfer of resources across borders. Nigeria is basically an open economy with international transactions constituting a significant proportion of her output (Emeka, Frederick & Peter, 2012), so also is Ghana’s economy (Bawumia, 2010). Their trade openness has increased the