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IMPACT OF
INTERNATIONAL TRADE ON THE ECONOMIC GROWTH OF NIGERIA
ABSTRACT
Several
statistical approaches were implemented to carry out this research, inwhich
Central Bank of Nigeria (CBN), Nigeria Institute of Economic Research(NISER),
National Bureau of Statistics (NBS) were involved, information were adequately collected and analysed
respectively. The purpose of the study is to evaluate the effect of trade and
finance evaluates the effort of Nigerian economy on the on economic growth and
development in Nigeria and its impacts on development.
The findings
however, showed that trade and finance has a direct impact on the economic
growth and development in Nigeria.
The
philosophical and logical framework of this study is based on
the"hypothesis that trade and finance plays veritable role in
sustainabledevelopment- whether in the developed or growing economy. Both
thecontrollable and non controllable variables were subjected to strict and
criticalanalysis in line with the research question.
The findings
of this work clearly showed that no nation can do without trade and commerce.
Another interesting finding of the work is that finance enables and facilitates
efficient and effective home and international trade therebypromoting
sustainable economic development.
It is very
instructive to point out that trade and finance impacts significantlyto the
wheel- of commerce. In summary therefore it is believed that the effect of
trade and finance cannot be over-emphasized here due to the findings ofthis
work which corresponds to previous findings of both the various authorsand the
statistical records of the Central Bank of Nigeria and World Bankrespectively,
which indicated that Nigeria with fast growing population will benefit greatly
from the availability of sufficient capital and internationaltrade.
CHAPTER ONE
1.0
BACKGROUND OF THE STUDY
This study
is basically under taken to take an objective view of the impact of
international trade, initially with predominately a grain product, but
presently dominate by petroleum products. Since the discovery of oil in
commercial quantity at Oloibiri in the present day Delta State, Nigeria has
been an important player in world affairs, economically and other wise,
particularly being the 6th largest producer of crude oil in organization of
petroleum exporting counties (OPEC). Unfortunately, these blessing by nature to
Nigerians didn't reflect in total overall welfare of the citizen, made worse,
by the collapse of world oil "market as a result of glut in 1981. For
example, crude oil prices, which rose rapidly from 120.94 Dollars per barrel in
1979 to $36.95 Dollars in 1980 and $40.00 Dollars in 1981, fell to $ 29.00 in
1983 and low level $14.85 in 1986. (Anyanwu, Oyefusi, Oaikhenan 1997). Exchange
receipt which rose form. $ 15.7 billion dollars in 1981, fell to $ 5.2 billion
dollars. (Anyanwa etal).
The above
does not mean that there have been absolutely no gain from Nigeria's
participation in the arena of international trade, the point is that the gains
have been normal, not in real terms, because a nation where over 40% of the
population live below poverty line, cannot be said to have prospered in real
economic terms.
This study
is going to take a position, whether Nigeria's economic under development can
be attributed to international trade or whether her relative economic
prosperity, in -terms of growth and development can be attributed to her taking
part in the field of international trade. In other words, how effectively has
trade contributed to Nigeria's economic growth and development? This is the
important question which this study attempts to answer.
1.1 STATEMENT OF RESEARCH PROBLEM
The
importance of international trade in the development process has been of
interest to development economist and policy makers alike. Imports and exports
are key part of international trade and the import of capital goods in
particular is vital to economic growth.
This is so
because imported capital goods directly affect investment, which in turn
constitutes the motor of economic expansion. Economic refund is expected to
affect imports as part of the strategy to restore external balance. However,
unless policy makers know what the major components of import-are and how
determine, such a policy decision can be harmful to investment if domestic
production relies on imports.
In Nigeria,
some people are in favour of protectionist and highly regulated economy and
have even criticized the pervious Nigerian government, for signing treaty of
the world Trade Organization (WTD), claiming that, Nigeria was not adequately
represented in the negotiations and should push for a fairer deal. As regards
to this statement, some people, particularly economists pushed for the
implementation of the Structural Adjustment Programme (SAP) in 1986 which
brought about deregulation of formerly regulated areas of the economy, so that
the country could reap the benefit of economic openness.
The main
thrust of this research is to take an objective view regarding the controversy
of the role of international trade, in the progress of a country in terms of
economic growth of Nigeria. It has been eluded 'by the dissenting voices in the
21st century, that trade could be negative in terms of acting as a catalyst of
economic growth and development, being a retrogressive force, in the journey to
Economic independence. But ironically, past experience has proven the potency
of trade as a catalyst of economic progress, with regards to growth and
development.
1.2 PURPOSE
OF THE STUDY
International
trade has, by and large, been an "engine of growth" for global
economy. But there have been large disserting voices in the 21st century,
claiming that international trade only perpetuates the under-development of
poor countries due to the fact that there are disproportionate shares of gains
from trade that accrues to industrialized centuries. This research work focuses
on, the following objectives:
.
i.
To examine the impact of
international trade on the economic growth of Nigeria.
ii.
To determine the extent to which trade policies have impacted on the
growth process of Nigerian economy.
iii.
To assess the trade policies of Nigeria over the years
iv.
To evaluate the trade and exchange reforms in Nigeria over the years.
v.
To identify the factor that hinders the international trade progress of
Nigeria and make suggestion on how they could be resolved.
1.3 RESEARCH
QUESTIONS
The research
questions, which guide this research work, are as follows:
1. Does international trade
stimulate economic growth in Nigeria?
2. To what extent does the
exchange rate impact on the growth process in Nigeria?
3. Does external reserve of the
country affect it economic growth?
4. What are the factors that
hinder international trade in Nigeria?
1.4
SIGNIFICANCE OF THE STUDY
This study
makes use of the econometric procedure in estimating the relationship between
international trade components and economic growth in Nigeria. The Ordinary
Least Square (OLS) technique is employed in obtaining the numerical estimates
of the coefficient in different equations.
Ordinary
Lease Square (OLS) method is chosen because it possesses some optimal
properties: its computational procedure is fairly simple and it is also an
essential component of most other estimate techniques. The estimation period
covers the last thirty-nine years since the data needed are available for this
period. The data for this study are obtained mainly from secondary sources,
particularly Central Bank of Nigeria (CBN) publications.
MODEL
SPECIFICATION
GDP = ao+a1
Imp + 92 open + Ui
Where GDP =
Gross Domestic Product
Imp = Volume
of Import
E open =
Economic Openness (Expressed as (import + export I gdp)
ao, a1 and
a2·- parameters
Ui = Error
term
A' PRIORI
EXPECTATION
ao>O; a1
<0 and a2 <0 or a2 >0
The constant
is expected to be positive because there are number of other factors which
determine the gross domestic product aside the ones stated in model. It is a
fact in macro economics theory that import is a withdrawal from the economy and
so, is expected to impact negatively on economic activities in the country.
The effect
of economic openness is based on the principle .of comparative advantage by David
Ricardo, which advocates specialization and exchange of goods and services
among nations. The economic specialization could either be positive or negative
depending on the values of export, import and the gross domestic product. If
the values of the export and gross domestic product outweigh the value of
import, then economic openness would affect economic growth positively and
vice-versa.
MODEL II
Gdp = bo + b I Exp + b2 open + ui
Where
gdp = gross domestic product
Exp = volume of export
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