Trade Openness and Economic Growth in Nigeria

Udude Celina Chinyere1

Anthony O. Amadi2
3.
Apoloian Amadi
1 ,2
Department of Economics, Ebonyi State University, P.M.B. 053 Abakaliki, Ebonyi State,
Nigeria
3.
Federal University of Science and Technology, (FUTO), Owerri, Imo State.
Corresponding email: [email protected]

Journal of Policy and Development

Studies (JPDS)
Abstract

This study examined trade openness and economic

growth in Nigeria for the period 1981- 2019. The study Vol. 13 Issue 3 (2022)
adopted time series econometrics analysis to examine ISSN(p) 1597-9385
the relationship between trade openness and economic ISSN (e) 2814-1091
growth in Nigeria. The empirical analysis that was Home page
carried out to achieve the objectives mentioned above htttps://www.ajol.info/index.php/jpds
were; Unit root test, ARDL Test and ordinary least
square (OLS), in which changes in GDP were regressed ARTICLE INFO:
on trade openness (TOP), exchange (EXR), inflation Keyword:
(INF) using annual time series data from CBN Trade openness, exchange rate, inflation
statistical bulletin 2019. The result of unit root test rate and gross domestic product.
showed that, there is mixed order of integration. This
implies that some variables were stationary at level Article History
whereas others were stationary at first difference. The
ECT of 40% showed speed of adjustment both in the Received:
short and long run annually. The study showed that, 10thDecember,2021
there is a significant relationship between trade Accepted:
openness and economic growth of Nigeria. The Durbin
Watson result showed absence of autocorrelation. 20thFebruary, 2022
Based on the findings above, the study recommended
among other things that: government should to
maintain a stable exchange rate in relation with other
countries’ currencies in order to boost economic
growth in the country. Monetary authorities should try
as much as possible to maintain a low and stable
inflation rate in order to increase the economic growth
in Nigeria.

101
 1.Introduction
The interaction and integration among individuals, companies and governments worldwide
isgradually transforming world into a single marketwhich makes things better and much
easier. The advancement of technology has made inter-boarder movement of capital, goods,
services, technology and information easier (global village). This implies that distance is no
more a barrier to transact goods and services among the member countries which is referred
as economic globalization and helps to promote countries economic activities than what was
witness in olden day. This means that the world has become so intertwined that it has become
apparently difficult, if not impossible, for any economy to function in isolation (Chuke &
Nwonye, 2016).

Trade openness refers to the degrees to which a country or an economy engages in trade with
other countries or economies and is what determines the smooth flow of capital, labor, goods
and technology across borders of the engaging partner countries or economies. Globalization
according to Vasiliki Fischer(2003) is ongoing process of greater economic interdependence
among countries which reflected in the increasing amount of inter-cross-border trade of
goods and services, the increasing volume of international financial flows and increasing
flows of labor. Trade openness is believed to stimulate economic growth because of its
influence in integrating world economies. Over the years, there have been a continued
collapse of trade borders and a blend of the world into one large market (Gullespie & Kalu,
2016). Never in the history have economic and trade doors been made as wide open as what
we have in the world today.

Economists generally see the concept of trade openness as the integration among the nations
of the world. According to Igudia (2004) trade openness it is likened to open the world
economy where nations link together to the extent that they have free trade, free movement of
capital and financial activities. Economic analysis informs that openness to trade, flow of
factors, ideas and information stimulate economic and political progress (Reich, 1998;
Aboagye, 2006). Similarly, Obadan, Uwatt, (2004) noted that openness to trade can be said to
be the platform of globalization while trade, finance, investment and entrepreneurs constitute
the heart. This implies that trade openness involves continued trading among countries
without barrier to movement of goods, financial and human resources. It also involves
economic liberalization that has generated new markets for various economic actors within
the global space and it has simultaneously brought about intense competition among them.
The inability of developing countries to fully embrace trade openness in their economic and
developmental process is making them to participate somewhat marginally in the world
economy.

The modes and indicators of trade openness include the rapid growth of international trade,
foreign direct investment (FDI) and international flows of capital and information. This could
be one of the reasons for the formation of various regional economic groups around the world
such as European Union (EU), Organization of Economic Co-operation and Development
(OECD), Organization of Petroleum Exporting Countries (OPEC), with a view to
harmonizing policies in order to reap the gains of economies of scale. Hence, the countries in
West Africa have come under one umbrella Economic Community of West African States
(ECOWAS), to maximize their potentials in order to reap the gains of trade openness.

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Today, Nigeria is regarded to have the largest economy in sub-Saharan Africa, excluding
South Africa. In the last four decades there has been little or no progress realized in
alleviating poverty despite the massive effort made and the many programmes established for
that purpose. Indeed, as in many other sub-Saharan African countries, both the number of
poor and the proportion of poor have been increasing in Nigeria. In particular, the 1998
United Nations human development report declares that 48% of Nigeria’s population lives
below the poverty line. According to the report (UNDP, 1998).The bitter reality of the
Nigerian situation is not just that the poverty level is getting worse by the day but more than
four in ten Nigerians live in conditions of extreme poverty of less than N320 per capita per
month, which barely provides for a quarter of the nutritional requirements of healthy living.
This is approximately US 8.2 per month or US 27 cents per day.

During the period 1980-2014, Nigeria’s growth rate of per capita GDP of 1.45% compares
unfavorably with that reported by other countries, especially those posted by china and the
Asian Tigers such as Hong Kong, Singapore, Taiwan, and South Korea. Viewed in this
comparative perspective, Nigeria’s per capita income growth has been woefully low and
needs to be improved upon (Iyoha and Oriakhi, 2002). In like manner, Ogujiuba, Oji and
Adenuga (2004) wrote that the Nigerian economy has severally been described as a difficult
environment for business with a population growth of about 3%, it has been acknowledged
that the current average economic growth rate of less than 4% will see the country being
poorer in the next decade.

According to Iyoha and Oriakhi (2002)revealed that there is decline in Nigeria’s per capita
GNP between 1964 to 2014 which rose steadily from US$120 to US$780 in 1981, thereafter,
it fell almost steadily to US$280 in 2014. Thus, between 1964 and 1981, income per capita
increased by 550% or at an annual average rate of 32.3% while between 1981 and 2014, it
fell by 64.1% or at an annual average rate of 4%. It is worth noting that if income per capita
had continued to increase beyond 1981 as it did before then, Nigeria’s GDP per capita would
have equaled US$1,279 in 2014. The difference between US $280 and US$1,279, i.e.,
approximately, US$1,000.00, is a rough measure of the cost to the average Nigerian of
domestic macroeconomic policy mistakes and adverse international economic shocks.
Likewise in 1980 agricultural exports accounted for only 2.6%. Exports of other commodities
like tin and processed goods amounted to 26.6% of total exports. By 1970 agricultural
exports only accounted for 33% of total exports while petroleum exports had started to
establish dominance by exceeding 58% of total exports. By the time the oil boom began in
earnest in 1974, petroleum exports accounted for approximately 93% of all exports. The
relative share of agricultural exports in total exports had shrunk to 5.4% while other products
accounted for the remaining 1.9%. Since 1974, with the exception of 1978 when the relative
share of petroleum in total exports has exceeded 90%. Indeed, since 1990, the relative share
of petroleum in total exports has exceeded 96%.

Agricultures contribution has fluctuated between 0.5% and 2.3% while the share of other
products has fluctuated between 0.5% and 1.7%. Thus petroleum exportation has totally
dominated the economy and indeed government finances since the mid-1970s. Hence, the
advancement of technology over the recent years has not reflected on the Nigeria export
product of goods and services as its export still remain low when compared to other countries
of the world. This implies that the globalization which has limitation of a country in
participating in the global market has not been fully utilized by Nigeria economy. Thus, there
is need to embrace the moving trend in order to exploit the potential in global market.

103
1.2 Problem Statement
Nigeria as a country has join the trend of globalization and trade liberalization in the global
economic system, as member of and signatory to many international and regional trade
agreements such as international monetary fund (IMF), world trade organization (WTO),
economic community of West African States (ECOWAS) and so many others. The policy
response of such economic partnership on trade has been to remove trade barriers, reduce
tariffs, and embark on outward-oriented trade policies. Despite all her effort to meet up with
the demands to these economic partnerships in terms of opening up her border, according to
the 2007 assessment of the trade policy review, Nigeria’s traded freedom was rated 56%,
making her the world’s 131st freest economy while in 2009, it was ranked 117th freest
economy. The country’s GDP was also ranked 161st in the world in February, 2009.

The economy has struggled vigorously to stimulate growth through openness to trade; In fact,
it seems that as the country put greater effort to boost her economic growth by opening up to
trade with the global economy the more she becomes worse-off relative to her trading
partners in terms of country economic growth. In view of the above observations, this study
aims at empirically investigating the relationship between trade openness and Nigeria
economic growth. Based on the above, the following research question will be answered; i.
does trade openness has any significant impact on economic growth in Nigeria? Ii. Is there
any significant impact of exchange rate on economic growth in Nigeria? Iii. Does inflation
rate has any significant effect on economic growth in Nigeria?. The study aimed to achieve
the following objectives; i. to determine if there is significant impact of trade openness on
economic growth in Nigeria. ii. to find out whether there is significant impact of exchange
rate on economic growth in Nigeria and iii. to determine if significant effects exist between
inflation rate and economic growth in Nigeria.

2.Review of Related Literature

Theoretical Review
Theory of Customs Unions and Free Trade Areas
The attempt to promote trade through the creation or adoption of international and regional
trade agreements in the form of custom unions and free trade areas has started since the end
of the second World War. Free trade area is a form of economic union in which all members
of the group remove tariffs on each other’s products, while at the same time each member
retain its independence in establishing trading policies with non-members. In other words, the
members of a free trade area can maintain individual tariffs and other trade barriers on the
outside world. That is to say, in a free trade area, barriers to trade are brought down within
the area, but there is no common external tariff. Also, free trade areas create trade, but the
extent of trade diversion is likely to be much less, with the presumption that on narrow
economic grounds free trade areas are superior. On the other hand, a customs union is a form
of economic integration in which all tariffs are removed between members and the group
adopts a common external commercial policy toward non-members. Furthermore, the group
acts as one body in the negotiation of all trade agreements with non-members. The existence
of the common external tariff takes away the possibility of transshipment by non-members.
Customs unions create trade, but also divert it from lower cost suppliers to higher cost
suppliers within the union. Thus, the question is whether the benefits of trade creation exceed
the costs of trade diversion.

104
Apart from trade creation and trade diversion, customs unions may also have other important
effects associated with the enlargement of the market which are neglected by the static
analysis. Firstly, the larger market may generate economies of scale. Secondly, integration is
likely to promote increased competition which is likely to affect favorably prices and costs,
and the growth of output. Thirdly, the widening of markets within a customs union is likely to
attract international investment. Producers will prefer to produce within the union rather than
face a common external tariff from outside. Finally if the world supply of economic is not
infinitely elastic, there are terms of trade effects to consider. Specifically if there is trade
diversion, the world price of the good will fall, moving the terms of trade in favor of the
customs union. This term of trade effect represents a welfare gain which may partly offset the
welfare loss of trade diversion.

Models of Export –Led Growth

The three main models of export-led growth that will be discussed are the neo classical
supply –side model, the balance of payments constrained model which is also known as the
Hicks super-multiplier model, and the virtuous circle model.

The Neoclassical Supply-Side Model: This model shows the relationship between exports
and growth, and assumes that the export sector confers externalities on the non-export sector,
because of its exposure to foreign competition; and secondly that the export sector has a
higher level of productivity than the non-export sector. Thus, the share of exports in GDP,
and the growth of exports, matter for overall growth performance. Feder (1983) was the first
to prove a formal model of this type to explain the relation between export growth and
economic growth. The economics of the export growth sector is assumed to be a function of
labour and capital in the sector, the economics of the non-export sector is assumed to be a
function of labour, capital and the economics of the export sector (so as to capture
externalities), and the ratio of respective marginal factor productivities in the two sector is
assumed to deviate from unity by a factor d. Feder tests the model taking a cross section of 19
semi industrialized countries and a larger sample of 31 countries over the period1964-73. He
finds that there are substantial differences in productivity between the export and non-export
sector are also evidence of externalities.

The externalities conferred are part of the dynamic gains from trade which are associated
with the transmission and diffusion of new ideas from abroad relating to both production
techniques and efficient management practices. The cross-section work on exports and
growth assumes, however that all countries in a sample conform to the same model, with the
same intercept and coefficient parameters linking exports and growth. In practice, this is
highly unlikely to be the case; and it transpires, in fact, that when time series studies are
conducted for individual countries, the relation between exports and growth is much weaker.

Balance of Payments Constrained Growth Model:

No country can grow faster than rate consistent with balance of payments equilibrium on
current account in the long run, unless it can finance ever-growing deficits which, in general,
it cannot. Ratios of deficit to GDP of more than 2%-3% to make the international financial
markets nervous and all borrowing eventually have to be repaid. A country’s balance of
payments equilibrium growth rate can be modeled by stating the balance of payments
equilibrium condition specifying multiplicative (constant elasticity) import and export
demand functions in which imports and exports are a function of domestic and foreign
income, respectively, and of relative prices, and substituting these functions in the

105
equilibrium conditions. Since imports are a function of domestic income, the model can be
easily solved for the growth of income consistent with balance of payments equilibrium.
Nureldin-Hussain (1995) applied this model to Africa to contrast the experience of slow
growing African countries with the faster growing countries of Asia over the period 1970-90.
He uses an extended model which also includes terms of trade effects and the effects of
capital flows. The major explanation of the difference in growth rates between Africa and
Asia turns out to be the difference in the growth of exports. He finds that the average growth
of the African countries, excluding oil exporters, was 3.4 percent per annum, and of the Asian
countries 6.6 percent. The contribution of export growth in Africa was 1.99 percentage points
and in Asia 5.91 percentage points.

Differences in capital flows and terms of trade movements made only a minor contribution to
growth rate differences. Thus, he concluded that exports are unique as a growth inducing
force from the demand side because it is the only component of demand that provides foreign
exchange to pay for the import requirements for growth. In this sense, it allows all other
components of demand to grow faster in a way that consumption-led growth or investment-
led growth does not.
Empirical Review
Duodu (2020) carried out a study on the condition of Ghana in terms of trade and
incorporating the role of institutional quality from 1984 to 2018. The study used
autoregressive-distributed lag model (ARDL) to test for short-run and long-run which
suggested that trade openness and quality of institutions had a significantly positive impact
on economic growth while the interaction between the two variables has an insignificant
impact.
Similarly, Nwadike (2020) conducted a study on trade openness and economic growth in
Nigeria for the period of 1970 to 2011. The study found out that there is a significant positive
impact of trade openness on economic growth in Nigeria for the period 1970–2011.
Again, Babatunde, Emmanuel, Okoduaand Oluwasogo (2020) investigated the effect of FDI
inflows into Nigeria on real gross domestic product (RGDP) growth and how these external
inflows can bring about achieving Goal-17.3 of mobilizing additional financial resources for
developing countries from multiple sources. The study discovered that labour quality has a
positive and significant effect on RGDP in line with theory.
Omodero and Alpheaus (2019) examined significant effect of foreign debt on economic
growth in Nigeria. The result revealed that foreign debt exerts a significant negative influence
on economic growth while foreign debt servicing has a strong and significant positive impact
on economic growth.
Elijah and Ahmed (2019) investigated trade liberalization and economic development in
Nigeria from 1986-2016, according to World Development Report, irrespective of under
unfavourable or favourable environment open economies perform better compared with
closed economy. The study findings revealed that trade liberalization did not cause growth
during the period of the study.
In the same vein, Osabohien, Akinpelumi, Matthew, Okafor, Iku, Olawande and Okorie
(2019) examined impact of agricultural export on Nigeria's economic growth. The results
from the ARDL technique revealed that agricultural exports significantly affect Nigeria's
economic growth this suggests that, a 1percent increase in -agricultural export will boost
economic growth in Nigeria by approximately 25percent.
Malefane and Odhiambo (2019) conducted a study on the dynamic of trade openness on
economic growth in Lesotho from 1979 to 2013. The study used ARDLapproach to test long-
run analysis and four measures of trade openness, capturing the role of total trade, exports,
imports, and country size and geography in trade, the study shows that openness of the

106
economy to trade has no significant impact on economic growth in Lesotho. This economic
condition exists for both short-run and long-run analyses and remains the conclusion of the
study irrespective of the measure of trade openness considered.
Tang (2019) carried out investigated on the trade openness and economic growth in Mauritius
over the period 1963 to 2013. The results show that trade openness contributes to economic
growth in the small island economy. However, the coefficient of trade openness in the
empirical analysis shows that the positive economic growth effect of trade openness is weak
and import-led. There are also other findings on the interaction between trade openness and
economic growth that should be noted.
In (2018), Onuorah conducted a research on trade liberalization and economic growth in
Nigeria. The study revealed that the independent variables: DOP. INF. FDI. BOT and NEXP
have positive significant impact on GDP while EXR and BOP shows a negative impact.
Osidipe, Onuchukwu, Otto and Nenbee (2018) assessed the impact of Trade Liberalization on
some selected manufacturing sectoral groups. The results of analysis led to the conclusion
that trade liberalization does not have significant impact on FBT, CKM, and BM in Nigeria.
FDI is positively signed and thus have direct impact on the three- sub-sectors.
Okeowo and Aregbeshola (2018) reviewed a study on trade liberalization and performance of
the Nigerian textile industry. Findings revealed that the effect of simple tariff rate on textile
industry is negative and statistically significant in the long-run while trade liberalization
policy measure through simple tariff rate has a lag effect before it can be effective in the
textile industry. In both short and long run, real effective exchange rate depreciation worsens
the performance of the textile industry in Nigeria.
Muhammad and Benedict (2018) in their Empirical study have shown that openness is linked
to economic growth. This study has empirically examined the impact of openness on
economic growth in Nigeria using GDP as the dependent variable and degree of openness,
foreign exchange and per capita income as independent variables from 1981-2017. Data
analysis revealed that relationship exists between openness and economic growth, and all the
components of trade exerted positive and significant effect on growth. Furthermore, the result
shows that all the regressors were statistically significant at 5% level of significance; this
implies that degree of openness within the period of study has impacted positively on growth.
Agbo, Agu and Eze (2018) reviewed the impact of international trade on the economic
growth of Nigeria in Enugu, Nigeria. The results of the study showed that there is a
significant impact of export trade on the Nigerian economic growth. The study also revealed
that there is no significant impact of import trade on the Nigerian economic growth.

Methodology
The study examines the impact of trade openness on Nigeria economic growth, from 1981-
2018. The methodology of this study is essentially econometric analysis which will be used
to estimate and analyze the Influence of the explanatory variables; Trade Openness (TOP);
exchange rate (EXR) and Inflation rate (INFR) on Gross Domestic Product (GDP). For this
study, ex post facto research design is adopted. This is because the study attempts to explore
cause and affect relationships where causes already exist and cannot be manipulated. Ex-post
facto research is systematic empirical inquiry in which the researcher does not have direct
control of independent variables because their manifestations have already occurred or
because they are inherently not manipulated. Inferences about relations among variables are
made, without direct intervention, from commitment variables of independent and dependent
variables. This research work embraces the use of secondary time series data in examining
the macroeconomic impact of trade openness on the economic growth of Nigeria.

107
3. Model Specification
To empirically analyze the relationship between trade openness and economic growth in
Nigeria within the period under review, this study modified the model of Afaha and
Oluwatobi (2012) in which gross domestic product is the dependent variable, while the
independent variables are; trade openness (OPEN), exchange rate (EXCR), export (XP)
value, import value (IP) and per capital income (PI). The current study removed per capita
income (PI), export and import and included Inflation rate (INFR) as a control variable.
The functional notation of our model is given as: RGDP = f (TOP, EXR, INFR) .
Where:RGDP = Real Gross Domestic Product, TOP = Trade Openness, EXR =Exchange
Rate (₦:$) and INFR = Inflation rate.
In a linear form, the model is represented as follows,
RGDPt= β0 + β1TOPt + β2EXRt + β3INFRt + Ut

Economic Criteria (A priori expectation)

b1>0, b2 and b3< 0
b1 If the values of export outweigh the value of import then, trade openness would affect
economic growth positively and if the values of import outweigh the value of export then,
trade openness would affect economic growth negatively.
b2 is expected to be negative because when foreign exchange rate increase, worth of the local
currency is expected to decrease, this will bring about inflation and eventually reduces GDP
and vice versa.
b3 is expected to be negative since inflation is negatively related to economic growth in the
long run.

4. Results
The attempt to study trade openness on Nigeria’s economic growth led the researcher to
collect data related to the study in question. Data collected were first subjected to series of
advanced econometric tests including Unit Root Test using, cointegration tests, granger
causality test and Auto Distributive Lab Model (ARDL) etc was employed to estimate the
relationship existing among the variables specified.

Unit Root Test

The use of time series data for estimating the parameters of economic relationship among
variables is predicated upon some assumptions one of which is that such a data series is
stationary. In this context, testing for stationarity or otherwise of the employed data sets
becomes of essence in this analysis. Augmented Dickey-Fuller (ADF) was employed to test
for the existence of unit roots in the data using trend and intercept. The test result is presented
below.
T able 1: Augmented Dickey Fuller Unit Root Test Results (Trend and Intercept @
level)
Series ADF 5% critical values Remarks
Test Statistic

LGDP -0.028507 -3.533083 Not Stationary

TOP -2.284130 -3.533083 Not Stationary
EXR -2.077581 -3.536601 Not Stationary
INF -4.019832 -3.536601 Not Stationary
Sources: Researchers’ compilation from E-view (version 9.0)

108
T able 2: Augmented Dickey Fuller Unit Root Test Results (Trend and Intercept @ 1st
difference)
Series ADF 5% critical values Remarks
Test Statistic

LGDP -3.208447 -2.943427 Stationary

TOP -5.912391 -3.544284 Stationary
EXR -4.509501 -3.536601 Stationary
Sources: Researchers’ compilation from E-view (version 9.0)
Table 1 and 2 showed the summary of Augmented Dickey-Fuller (ADF) unit root test. The
result revealed in table 1 that the variables employed GDP, TOP and EXR were not stationary
at level. This is because, the absolute values of ADF test statistics of all the variables are less
than their critical values at the 5 percent level of significance but become stationary at first
differencing while the inflation rate (INF) was stationary at level. However, the ADF test
result of the stationarity of the variables used for the study revealed that, there exists a mixed
order of integration among the variables used in the study and none of the variables was
stationary at the second difference.

ARDL Bounds Test of cointegration

Table 3:
ARDL Bounds Test of cointegration

Model F-Statistics Lower Bound Upper Bound

GDP=(TOP, EXR, INF) 11.71751 2.79 3.67
@ 5% level of significance Source: Researcher`s compilation from E-view 9)
Under the bounds test, it is assumed that the model comprises both 1(0) and 1(1) variables
and two levels of critical values are obtained. The first level is calculated on the assumption
that all variables included in the ARDL model are integrated of order zero, while the second
one is calculated on the assumption that the variables are integrated of order one. The
procedure is to estimate the equation by ordinary least squares and test for joint significance
of the lagged levels of the variables. The null hypothesis of no cointegration is rejected if the
F-statistic is higher than the critical value of both the I(0) and I(1) regressor, and not rejected
if otherwise (Belloumi 2014). The use of this test is guided by the short data span (20
observations), therefore, critical values given in Narayan (2004, 2005) will be use.
The comparisons indicate that the null hypotheses of no cointegration are rejected at all
levels, respectively, as there are unique cointegrating relationships among the variables in the
models. Thus, the ARDL Bound test result presented in table 4 disclosed that there is a
presence of a long-run relationship existing at 5% level of significance between trade
openness and economic growth product in Nigeria during the period of the study. On the
other hand, it means that trade openness and economic growth in Nigeria are co-integrated in
the long run.

The long-run relationship existing between them is a result of the fact that the value of the F-
statistic as presented in table 4 which has the value of 11.71751 is greater than the value of
the upper bound boundary of 3.67 at 5% level of significance. To this end, the hypothesis of
no long-run relationship existing between trade openness and economic growth product is
rejected at a 5% level of significance and accept the alternate hypotheses and conclude that
there is long run relationship between trade openness and economic growth product.

109
 Table 4: Long Run Coefficients

Variable Coefficient Std. Error t-Statistic Prob.

TOP 0.271504 0.086237 3.148341 0.0056
EXR 0.013188 0.006829 1.931286 0.0693
IFR 0.060239 0.031910 1.887796 0.0753
C 6.030655 0.920090 6.554418 0.0000
Source: Researcher’s Estimate from Eview 9.0 (2021)
The long-run coefficients of the variables used in this study as presented in table 6 revealed
that the coefficient of trade openness was positive and statistically significant on economic
growth in Nigeria. The result also disclosed that exchange rate was positive and statistically
significant on economic growth in Nigeria. Finally, the coefficient of inflation rate was
positive and statistically significant on economic growth in Nigeria.

However, the coefficients of the long-run impacts of trade openness on economic growth are
stated as follows:
 A percentage increase in trade openness brings about a 27% increase in economic growth in
Nigeria.
 One percentage increase in exchange rate brings about a 1% increase in economic growth in
Nigeria.
 One percentage increase in inflation brings about 6% increase in economic growth in Nigeria.

5. Recommendations
The following recommendations are made based on the findings of this study:
 Since an increase in trade openness bring about an increase in economic growth in Nigeria at
the time of this study, the researcher recommends that the government should as much as
possible increase the volume of trade and as well open new trade agreement with other
countries of the world in order to increase the values of economic growth in the country.
 Since an increase in exchange rate bring about an increase in economic growth in Nigeria at
the time of this study, the researcher recommends that the government should to maintain a
stable exchange rate in relation with other countries’ currencies in order to boost economic
growth in the country.
 Since an increase in inflation bring about a increase in economic growth in Nigeria at the
time of this study, the study recommend that the monetary authorities should try as much as
possible to maintain a low and stable inflation rate in order to increase the economic growth
in Nigeria.

Conclusion
This study examined the impact of trade openness on economic growth in Nigeria. To this
end, the role of trade openness as a contributing factor to the growth of Nigeria’s economy
cannot be overemphasized. However, it is on this ground that the researcher is motivated to
find out the extent to which trade openness impacted on economic growth in Nigeria from
1981 – 2019.

The study employed the ARDL model to estimate the impact of trade openness on economic
growth in Nigeria.
To this end, the empirical evidence from the ARDL – Bound test analysis disclosed that there
is a long-run equilibrium relationship existing between trade openness and economic growth
in Nigeria within the period of the study. On the other hand, the coefficient of ECM was
110
 statistically significant and negatively signed indicating the sign of a return to long-run
equilibrium. However, the long-run impacts of the variables used in the study are stated as
follows:
 A percentage increase in trade openness brings about a 27% increase in economic growth in
Nigeria.
 One percentage increase in exchange rate brings about a 1% increase in economic growth in
Nigeria.
 One percentage increase in inflation brings about 6% increase in economic growth in Nigeria.

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