Trade Liberalization and Economic Growth In Nigeria; A Cointegration Analysis

Authors : Felix Gbenga Olaifa, Kolawole Subair, Musa Ilias Biala

Pages : 43-52

View : 13 | Download : 8

Publication Date : 2013-09-01

Article Type : Other

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. * Corresponding Author: FELIX GBENGA OLAIFA. +2347031942274 E-mail Address: deleconns@yahoo.com, felix.olaifa@kwasu.edu.ng
Keywords : Openness, trade liberalization, economic growth and structural change.