Reevaluating the linkage between trade openness and economic growth in Nigeria

Yusuf Abdulkarim ()
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Yusuf Abdulkarim: Nigeria Police Academy

SN Business & Economics, 2023, vol. 3, issue 7, 1-33

Abstract: 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.

Keywords: ARDL; Economic growth; Non-oil exports; Non-oil imports; Oil exports; Oil imports (search for similar items in EconPapers)
JEL-codes: E30 F10 F14 F19 F43 F49 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (1)

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DOI: 10.1007/s43546-023-00511-7

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