International Trade and Economic Growth in Nigeria

Abstract

Nigeria is a third world economy that places great emphasis on trade both domestic and international. This research work was aimed at determining the impact of international trade on the economic growth. Variables used in the measurement of international trade include: Imports, exports, balance of trade and trade openness while real gross domestic product was used as a measure for economic growth using periodic data from the years 1985-2015. The econometric tests employed made use of the Unit Root Test to establish stationarity of the variables, the Johansen Co-integration Test was used to determine the long run relationship between the variables while the Vector Error Correction Model (VECM) was used to analyze the data so as to determine the speed of adjustment of the variables. The result showed that there is a long run relationship between international trade and economic growth, import and trade openness are both insignificant in the short run but significant in the long run while export and balance of trade are significant in both the short and long run. The granger causality test showed that economic growth is independent of imports, exports and balance of trade but economic growth is unidirectional with trade openness. Therefore, the study recommends that government should increase its exploration of finished goods and reduce importation of finished goods to increase economic growth.