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Reevaluating the linkage between trade openness and economic growth in Nigeria

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  • Yusuf Abdulkarim

    (Nigeria Police Academy)

Abstract

Theoretical arguments show that, although trade openness increases economic efficiency, trade liberalization may have a negative impact on particular nations due to market imperfections, differences in technology, and endowments. The objective of this research is to interrogate the dynamic interface between trade openness and economic growth in Nigeria using data from 1980 to 2020 along with the Autoregressive Distributed Lag bounds co-integration and Granger causality tests approach. The study adopted an extended Cobb–Douglas production function with disaggregated trade openness measures such as oil and non-oil exports, oil and non-oil imports while foreign direct investment inflows, domestic capital formation, nominal exchange rate, and labor force were used as control variables. The findings indicate a compelling co-integration relationship among the study variables, as well as a noticeable debilitating effect of oil exports and imports on Nigerian economic growth while non-oil imports supported long-term inclusive growth by providing domestic enterprises access to foreign innovations and intermediary goods. The causality tests results indicated an outstanding one-way causal relationship running from oil and non-oil imports and exports, domestic capital formation and labor force to economic growth and a bi-directional causality between foreign direct investment inflow and economic growth. As a result, the study advocated for diversifying exports from oil to viable non-oil products and the effective use of liberal and protectionists trade policy to limit imports and improve domestic industries global competitiveness.

Suggested Citation

  • Yusuf Abdulkarim, 2023. "Reevaluating the linkage between trade openness and economic growth in Nigeria," SN Business & Economics, Springer, vol. 3(7), pages 1-33, July.
    • Handle: RePEc:spr:snbeco:v:3:y:2023:i:7:d:10.1007_s43546-023-00511-7
    DOI: 10.1007/s43546-023-00511-7
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    References listed on IDEAS

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    1. Robert M. Solow, 1956. "A Contribution to the Theory of Economic Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 70(1), pages 65-94.
    2. Zivot, Eric & Andrews, Donald W K, 2002. "Further Evidence on the Great Crash, the Oil-Price Shock, and the Unit-Root Hypothesis," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(1), pages 25-44, January.
    3. M. Hashem Pesaran & Yongcheol Shin & Richard J. Smith, 2001. "Bounds testing approaches to the analysis of level relationships," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(3), pages 289-326.
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    5. Tafirenyika Sunde & Blessing Tafirenyika & Anthony Adeyanju, 2023. "Testing the Impact of Exports, Imports, and Trade Openness on Economic Growth in Namibia: Assessment Using the ARDL Cointegration Method," Economies, MDPI, vol. 11(3), pages 1-12, March.
    6. Abdulkarim Yusuf & Saidatulakmal Mohd, 2023. "Nonlinear effects of public debt on economic growth in Nigeria," SN Business & Economics, Springer, vol. 3(4), pages 1-31, April.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    ARDL; Economic growth; Non-oil exports; Non-oil imports; Oil exports; Oil imports;
    All these keywords.

    JEL classification:

    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • F10 - International Economics - - Trade - - - General
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F19 - International Economics - - Trade - - - Other
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • F49 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Other

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