Lafia Journal of Economics and Management Sciences: Volume 8, Issue 1; 2023

ISSN: 2550-732X
Published by Department of Economics, Federal University of Lafia, Nigeria

Impact of International Trade on Economic Growth in Nigeria

Sunday Benjamin Shido-Ikwu1, Ali Madina Dankumo2, Flora Monyuy

Pius3 & Esther Yachit Fazing4
1&2
Department of Economics and Development Studies, Federal University
of Kashere, Gombe State, Nigeria
3&4
Department of Economics, University of Jos, Plateau State, Nigeria
Corresponding Email: [email protected]

Abstract
This study investigates the impact of international trade on Nigeria's
economic growth spanning from 1981 to 2019, using the Autoregressive
Distributive lag (ARDL) approach to evaluate the connection between
international trade and the economic growth of Nigeria. A long-run
equilibrating link between all of the variables was verified by the ARDL
bound test approach and the model contained three long-run vectors.
Further, the model results of the short-run and long-run estimations indicate
that import trade and foreign direct investment and the exchange rate have
a negative and insignificant impact on economic growth in Nigeria; whilst
export trade established a direct and significant impact on Nigeria's
economic growth over the study period. The study revealed that
international trade had an insignificant impact on Nigeria's economic
growth during the study period under review. The study, suggests that the
government should encourage the export of goods and services while
discouraging imports by granting subsidies and tax concessions to local
producers. Furthermore, FDI should be enhanced by dealing with the
instability of the polity (unrest, Boko haram, kidnapping etc.) by running an
inclusive government that accommodates our individualities and realities
while making conscious efforts in providing friendly foreign trade policies
that would enhance more export and curtail import which is now a burden
to the Nigerian economy. Lastly, a viable exchange rate regime should be
put in place to achieve a double-digit exchange rate for our currency, all to
expand and energize the country's international trade which contributes to
the growth of the economy.
Keywords: Economic Growth, Import, Export
JEL Classification Codes: B22, F19, F13

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1. Introduction
No country can exist in isolation, as evidenced by the nature of the
relationships that exist among the various nations of the world. This suggests
that the degree of integration with other economies around the world
determines the growth and development of any economy (Yusuff, Adekanye
& Babalola, 2020). In light of this, trade's importance in fostering global
growth cannot be overstated. Trade is possible both locally and
internationally. The exchange of goods and services among nations is
referred to as international trade. International trade coordinates
socioeconomic success and provides opportunities for less developed
countries; it is concerned with the interaction between nations in an
economic and financial sense. (Adeleye, Adeteye & Adewuyi, 2015).
However, its contribution to economic growth can be influenced by several
factors such as exchange rate and governance (Dankumo et al., 2018;
Dankumo et al., 2020).
According to Mike and Okojie (2012), Nigeria has an open
economy, with a sizable share of its total output coming from overseas
exchanges. From 2015 to 2017, the total amount of trade has, however,
significantly decreased. This may not be unrelated to the decline in global
demand for crude oil. The decrease in crude oil demand worldwide over the
2015–2017 era may have led to weaker export trade, however with little to
no substantial influence on imports. Crude oil is the principal export of the
economy. The variations in the overall volume of trade represent how the
policy space, influenced by many economic, social institutional and political
elements, impacts the incorporation of Nigeria’s economy via trade. (Omoke
& Opuala–Charles, 2021).
Several trade theorists, including Adam Smith, David Ricardo, Ali
Hechscher, Bethel Ohlin, and others, think that countries trade in areas
where they possess absolute, comparative cost, and/or factor endowment
advantages to stimulate economic growth. (Appleyard & Field, 1998). From
a theoretical standpoint, however, certain trade economists, including Hans
Singer, Raul Prebisch and Myrdal, hold opposing views, they assert that
while global trade promotes economic growth in wealthy nations, it results
in permanent underdevelopment in underdeveloped nations (Ezindu et al.,
2020). However, recent empirical study evidence is not conclusive. Many
studies have found a significant direct link between economic growth and
trade openness (Keho & Wang, 2017; Sakyi et al., 2015; Shahbaz, 2012),
but in other research, there has been no link and some studies even found an
inverse interaction (Malefane & Odhiambo, 2019).
According to statistical data, the Nigerian economy saw negative
growth rates in the years 1982, 1983, 1984, 1991, 2016, and 2020, with

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respective growth rates of -1.79%, -7.58%, and -0.51%, -0.55%, -1.58%,

and -6.10% (Central Bank of Nigeria [CBN], 2017; National Bureau of
Statistics [NBS], 2020). Therefore, can we thus blame the slow growth of
the Nigerian economy on its poor performance in international trade? given
that it is an open economy that depends on the earnings from petroleum
exports, which accounts for a sizeable share of her total output? Given this
background, this study seeks to assess the impact of international trade on
Nigeria’s economic growth.

2. Review of Related Literature

2.1 Conceptual Issues
2.1.1 Concept of International Trade
Abebefe (1995) averred that trade consists of numerous exchanges
of products carried out through market interactions. If a transaction occurs
outside the jurisdiction of a sovereign state, it is regarded as international.
Accordingly, Nordhaus (2002) posited that the system in which countries
import and export products, capital and services is known as international
trade. They distinguish between domestic and global trade based on three
factors: increased possibilities for trade, sovereign nations, and exchange
rates, noting that these differences have significant practical and economic
implications. The drivers driving foreign trade are that trade encourages
specialization and that specialization boosts production. (Ingram & Dunn,
1993; Nordhaus, 2002) According to Mannur (1995), the exchange of
products and services between citizens of several countries is referred to as
international trade. As a result, it serves as a tool for bridging global service
flows, commodities trading, and factor fluctuations. As was previously
mentioned, foreign trade is founded on the reality that no nation can supply
all of the commodities and services that its population need to survive on its
own because of resource limitations and differences.
Foreign trade plays a critical part in economic expansion. The
classical and neo-classical economists saw the importance of foreign trade
as a country's process of development and as a source of growth. Through
globalization and outside trade, the nations of the world have become
increasingly interconnected in recent years. According to Afolabi, Danladi
and Azeez (2017), the most significant and enduring aspect of a country's
international economic connections is its foreign trade.

2.1.2 Concept of Economic Growth

Lipsey (1986) averred that a long-term rising trend in a nation's total
output is known as economic growth. This suggests that the Gross Domestic
Product (GDP) will continue to grow steadily for a long period. Gross

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domestic product (GDP), a metric of the economy's total output of goods

and services, is the term most frequently used to describe economic growth.
Just like all other economic variables, the GDP must be stated in real terms
if it is to be used as a gauge of economic growth. To put it another way, it
needs to be rebased, as Nigeria did in 2015, to consider the impacts of
inflation and give accurate measures of growth over time. Increases in the
quantity of commodities and services over time are used to quantify
economic growth.
2.2 Empirical Review
There have been several attempts to experimentally assess the link
between global trade and economic growth, and the results of this research
have been conflicting.
Omoke and Opuala–Charles (2021) by taking institutional quality
into account, explored the link between trade openness and Nigeria’s
economic growth. Total trade, import trade, and export trade are the three
indices of trade openness considered in the study, which spans the years
1984 to 2017. ARDL bounds testing technique was deployed to assess
cointegration between the variables. According to the estimations, import
trade has a significant negative influence on economic growth whilst export
trade has a significant positive impact on economic growth. The results also
show that the negative long-term effects of import trade on economic growth
increase when institutional quality in Nigeria becomes less pronounced. This
study emphasizes the necessity of raising the level of governance in the
nation. The benefits of trade openness can be directed toward initiatives that
promote economic growth with the support of strong institutions and good
governance.
Yusuff, Adekanye and Babalola (2020) examined how foreign trade
impacts the expansion of the Nigerian economy from 1986 to 2017. The
Ordinary Least Square (OLS) approach was deployed in the study to assess
how trade openness impacts Nigeria’s economic growth. The results
indicated that, during the study period, there is a negative connection
between foreign trade and GDP per capita. The study
recommended that government should implement a crucial trade-oriented
policy to stimulate economic growth through high exports and amass more
foreign revenues to increase production growth in the nation.
Agbo, Agu and Eze (2018), with the express intent of identifying
the effects of import and export trade on the Nigerian economy, their study
assessed how international trade had an impact on the growth of the nation's
economy. They applied multiple regression analysis to analyze the
relationship. The study's findings demonstrated the importance of export

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trade to Nigeria's economic expansion. The study showed also that the
import trade had no significant effects on the expansion of the Nigerian
economy. The study advised that deliberate efforts be made by the
government to adjust the various macroeconomic factors in order to create
an enabling environment for stimulating international trade by increasing
export and minimizing import.
Afolabi, Danladi and Azeez (2017) examined the key elements
driving economic growth via international trade, the study analyzed how
foreign trade affected economic expansion in Nigeria. The degree of the
significant link between the rate of economic growth and foreign trade was
tested with the aid of the Ordinary Least Square (OLS) technique. The
outcome indicated that government spending, interest rates, imports, and
exports are all favourably significant factors in the growth of the Nigerian
economy, however, the exchange rate and foreign direct investment are
adversely insignificant. The study opined that the Nigerian government
should place more focus on agricultural specialization in order to diversify
her production and export base and allow the nation to profit from all the
benefits of trade, including economic growth.
Abiodun (2017) examined the link between international trade and
economic growth. The study looked at how international trade contributed
to Nigeria's economic growth. A uni-directional relationship was found for
several of the variables, and to evaluate the relationship between the
dependent and independent variables, Granger Causality was also applied.
The findings show that economic expansion and foreign trade are generally
related positively. The study suggests that government should develop an
environment that is favorable to commerce and foreign direct investment in
light of the findings. Additionally, initiatives should focus on enhancing
spending and guaranteeing exchange rate stability.
Arodoye and Iyoha (2014) looked at the relationship between
international trade and economic growth in Nigeria and adopted quarterly
time-series data from 1981Q1 to 2010Q4. A vector autoregressive model is
used to completely take into account feedback. The findings indicate a
consistent, long-term link between international trade and economic
expansion. The variance decomposition results reveal that Nigeria's
economic growth variation is mostly caused by internal shocks and
innovations in overseas trade. According to the study, exchange rate policies
that support export growth and are compatible with Nigeria's status as a
small open economy should be promoted.
Erarwoke and Eshanake (2012) used the growth granger causality
method to study foreign direct investment granger and Nigerian growth.
They concluded that growth (GDP) and FDI had a strong positive

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connection. However, they discovered that FDI did not directly affect GDP.
The study suggests that government should always create an environment
that is favorable for foreign investment in order to boost economic growth
in Nigeria.

3. Methodology
The experimental approach will be used to examine how global
trade has affected economic growth in Nigeria. Being a study that seeks to
look into the type of connection between economic growth and international
trade quantities, the experimental design comes in handy and is more
powerful in such kind of study.
Annual time series data from secondary sources of information
covering the years 1981 to 2019 were used in this investigation. Data on the
real gross domestic product (RGDP) was extracted from the Central Bank
of Nigeria (CBN), Statistical Bulletin, while data on import trade, export
trade, foreign direct investment, and exchange rates was obtained from
World Development Indicators.
The co-integration method known as Autoregressive Distributive
Lag (ARDL) which was created by Pesaran and Shin (1999) and Pesaran,
Shin and Smith (2001), was adopted in this study. Researchers employ the
ARDL estimator owing to its numerous benefits, including the fact that all
the data series under consideration do not need to have the same order of
integrations, regardless of whether the regressors have an I(0) or I(1) order
of cointegration. Pesaran and Shin (1999) averred that in the event of a small
sample and contrast to the co-integration method used by Johansen and
Juselius, ARDL estimators yield the proper parameters, and coefficients
from the ARDL estimations are extremely consistent in smaller sample
sizes. As a result, in this instance, when we have a data series with 39 yearly
observations, this is more pertinent. Likewise, because the ARDL model
lacks residual correlation, endogeneity poses less of a challenge. The ARDL
technique is capable of distinguishing between dependent and independent
variables, and the estimate is still feasible even when the variables that
explain the result are endogenous, as demonstrated by Pesaran and Shin
(1999); (Pesaran & Pesaran, 1997; Pesaran et al., 2001). When evaluating
the effect of foreign trade on Nigeria's economic growth, this is an essential
subject matter.

3.1 Model Specification

This study builds on Feder (1982), which examined how export
sector performance affected economic growth, and Solow (1957), which
deployed the function of aggregate production as a starting point to analyze

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how international trade affects economic growth in Nigeria. These models

were modified and specified as follows:
𝑅𝐺𝐷𝑃 = 𝑓 (𝐼𝑀𝑃𝑇, 𝐸𝑋𝑃𝑇, 𝐹𝐷𝐼, 𝐸𝑋𝑅) (1)
Where:
RGDP is the Real Gross Domestic Product; RGDP is used as a stand-in for
Nigeria’s economic growth. IMPT is import trade, EXPT is export trade,
FDI is a foreign direct investment while EXR is the cost or rate at which one
currency is valued against another. IMPT, EXPT, FDI and EXR represent
the international trade of Nigeria. The econometrics estimable equation is
specified thus:
𝑅𝐺𝐷𝑃𝑡 = 𝛽0 + 𝛽1 𝐼𝑀𝑃𝑇𝑡 + 𝛽2 𝐸𝑋𝑃𝑇𝑡 + 𝛽3 𝐹𝐷𝐼𝑡 + 𝛽4 𝐸𝑋𝑅𝑡 + µ𝑡 (2)
The estimated variable coefficients of the model are  i i =1, 2,
3 and 4. The white noise process is represented by the error term  t
. On apriori ground β1, β4, are anticipated to be negative (β1, β4 < 0),
β2 β3 are anticipated to be positive (β2, β3 > 0).
Pesaran et al., (2001) model of Autoregressive Distributed Lag
(ARDL) is as follows for equation (2):
ρ ρ
∆lnRGDPt = α0 + ∑i=1 α1 ∆lnRGDPt−1 + ∑i=1 α2 ∆lnIMPTt−1 +
∑i=1 α3 ∆lnEXPTt−1 + ∑i=1 α4 ∆lnFDIt−1 + ∑ρi=1 α5 ∆lnEXR t−1 +
ρ ρ

λ1 lnRGDPt−1 + λ2 lnIMPTt−1 + λ3 lnEXPTt−1 + λ4 lnFDIt−1 +

λ5 lnEXR t−1 + εt (3)
The range of values from λ1 to λ5 on the right-hand side shows how
the variables are related over the long term, whereas the range of values from
α1 to α5 with the summing signs shows how the variables change over the
short term. α0 represents the drift constant and µt is the disturbance term
when considering the other hand of the equation. H0: λ1 = λ2 = λ3 = λ4= λ5 =
0 represents the null hypothesis in equation 3. This suggests that long-term
relationships are therefore nonexistent. H1: λ1≠ 0, λ2≠ 0,λ3 ≠ 0,λ4 ≠ λ5≠ 0
represents the alternative hypothesis. This study uses the critical values of a
smaller number of samples derived from Narayan (2005) for bound testing
to prevent size bias. If the calculated F-value is greater than the upper critical
value, regardless of whether the variable is I(0) or I(1), the null hypothesis
of no co-integration will be rejected. The error correction model and short-
run dynamics are modelled below.
ρ ρ
∆lnRGDPi = β0 + ∑i=1 δi ∆lnRGDPt−1 + ∑i=1 ∅i ∆lnIMPTt−1 +
∑i=1 ωi ∆lnEXPTt−1 + ∑i=1 λi ∆lnFDIt−1 + ∑ρi=1 λi ∆lnEXR t−1 +
ρ ρ

αECMt−1 + Ut (4)
Following the model's short-run aberration, the ECM assesses how
quickly equilibrium returns in the long run (Onisanwa, Shido-Ikwu &

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Mercy, 2018). In the long term, the system can only reach equilibrium,
according to Narayan (2005), if the error correction model's coefficient is
negative and smaller than zero.
To make sure the model fits the data well after the diagnosis, post-
diagnostic tests are run. These tests look at the selected model's serial
correlation and normalcy. Additionally, Pesaran and Pesaran (1997) advise
applying Brown, Durbin and Ewans (1975) stability test to determine the stability
of the regression coefficient. If the CUSUM statistics plots remain within
the critical bounds of a 5% level of significance, the null hypothesis that all
stable coefficients in the given regression are stable cannot be rejected.

4. Results and Discussion

Table 1 showed the unit root results for the model's variables. This
is because stationarity analysis is necessary to draw inferences from time
series analysis results. As a result, ADF and PP unit root tests were used to
thoroughly assess the time series' attributes. Before running the unit root
tests, the real gross domestic product was transformed into a natural
logarithm.

Table 1: Unit Root Test results

Variables ADF test PP test

Intercept Intercept with trend Intercept Intercept with trend
I(0) I(1) I(0) I(1) I(0) I(1) I(0) I(1)

LRGDP -1.9901 -6.1019*** -1.8877 -6.0704*** -2.0303 -6.1038*** -1.9327 -6.0802***

IMPT -2.2891 -7.6392*** -2.9810 -7.5294*** -2.1661 -15.857*** -2.9828 -15.287***

EXPT -2.7435* -8.2321*** -2.6218 -5.4916*** -2.7435* -9.1707*** -2.4742 -15.388***

FDI -3.9333*** -8.0198*** -3.8511** -7.9730*** -3.8586** -13.982** -3.7635** -17.988***

EXR 1.4000 -4.2576*** -2.0797 -4.5045** 1.3487 -4.1576*** -1.5110 -4.2484***

Note: *, ** & *** indicates 10%, 5%, or 1% significance level respectively. The results of
the ADF and PP tests are the t-statistics used to test the null hypothesis that the series has a
unit root.
Source: Author's calculation employing Eviews 10

According to the ADF and PP results, every variable other than

Export Trade (EXPT) and Foreign Direct Investment (FDI) were
discovered to be non-stationary when evaluating intercept without trend
at level; at 10% and 1% levels of significance, respectively, it was
discovered that EXPT and FDI remained stationary. However, the log of
Real Gross Domestic Product (LRGDP), Import Trade (IMPT), and Export
Trade (EXPT), When considering intercept without trend, after adjusting

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for the first difference, it could be seen that Foreign Direct Investment (FDI)
and Exchange Rate (EXR) were stationary at a 1% level of significance.
Accordingly, every variable other than FDI was discovered not to
be stationary at a level in ADF and PP tests when taking intercept with trend
into account; at a 5% level of significance, FDI was discovered to be
stationary. Meanwhile, following the adjustment to the first difference;
LRGDP, IMPT, EXPT, FDI and EXR became stationary at a 1% level of
significance respectively.

4.1 ARDL Bounds Co-integration Test

Co-integration between the series is established if the resultant F-
statistic surpasses the upper critical values at any common levels of
significance. Nevertheless, if the value of the F- statistic is discovered to be
smaller than the lower critical bound value, the long-run relationship is not
present. Additionally, utilizing the ARDL bound co-integration approach, If
the projected F-statistic value lies between the lower and higher bounds of
the range, the long-run relationships are not evident.

Table 2: Results of the ARDL Bound Co-integration Test

Variables (Vectors) F-Statistics Significance Critical Values

Level I(0) I(1)

LRGDP 8.0781*** 10% 2.66 3.838

IMPT 4.3342* 5% 3.202 4.544
EXPT 3.400 1% 4.428 6.25
FDI 3.9919*
EXR 0.5937

Note: *, ** & *** means significance levels at 10%, 5% and 1% respectively. Due to the
study's short sample size, the case study III of Narayan (2005) for T = 30 is a basis for the
critical values.
Source: Author's calculation employing Eviews 10

Three distinct co-integrating vectors are present in the model, as

shown in Table 2. When LRGDP was taken into account as an explanatory
variable, co-integration was discovered at a 1% level of significance.
Additionally, co-integration was found at a 10% level of significance when
FDI and IMPT were utilized as dependent variables. We can therefore
conclude that the link between import trade, export trade, foreign direct
investment, exchange rate, and Nigeria’s economic growth is one of long-
term equilibration.

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4.2 Results of Short Run Estimate

Despite having different sizes, the short-run coefficients' signs are
nearly identical to what was found during long-run estimation. This result
suggests that the variables of interest have a greater influence on Nigeria’s
economic growth in the long run compare to the short run.

Table 3: Model Result for ARDL Short Run Dynamics and Error
Correction
Variable Coefficient Std. Error t-statistic Prob.

C 0.0186 0.0410 0.4555 0.6520

D(LRGDP) (-1) 0.8411 0.4139 2.0321 0.0511
D(IMPT) (-1) -0.0123 0.0097 -1.2743 0.2123
D(EXPT) (-1) 0.0133 0.0063 2.1073 0.0436
D(FDI) (-1) -0.0106 0.0281 -0.3775 0.7084
D(EXR) (-1) -0.0021 0.0021 -1.0176 0.3170
ECM(-1) -0.9605 0.4497 -2.1360 0.0410
Source: Author's calculation employing Eviews 10

Error Correction Model (ECM) coefficient determination is the

most significant result of the short-run dynamics. The coefficient of ECMt-
1 depicts how quickly the long-run equilibrium is restored following a short-
run shock. This leads to the conclusion that the distortion which developed
during a short run can return to equilibria in the long run at a velocity of
96% within a year. The model will return to equilibrium at a pace of 96%
over the course of a year, according to the model's ECT value of -0.960. As
a result, the ECM coefficient's negative nature and significance support the
model's predictions about the long-term relationship between economic
growth and its drivers.

4.3 Results of Long Run Estimate

Table 3 displays the estimated model's long-run output. Import,
export, foreign direct investment, exchange rate, and real gross domestic
product are the relevant variables.

Table 4: Model Result for ARDL Long Run Estimates

Variable Coefficient Std. Error t-statistic Prob.

C 3.5554 1.8570 1.9145 0.0645

LRGDP (-1) 0.7844 0.1135 6.9115 0.0000
IMPT (-1) -0.0086 0.0105 -0.8243 0.4158
EXPT (-1) 0.0117 0.0066 1.7750 0.0854
FDI (-1) -0.0215 0.0329 -0.6554 0.5169
EXR -1.7300 0.0004 -0.0376 0.9702
Source: Author's calculation employing E-views 10

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The long-run relationships between the study's variables and

Nigeria's economic growth are shown by the ARDL long-run results in
Table 4. The result reveals that the coefficient of Import Trade (IMPT) is
negatively signed and statistically insignificant in influencing economic
activities in Nigeria. The coefficient’s sign conformed to the a priori
expectation posed by the study. By implication, this result shows that
Nigeria is an import-dependent nation that imports more than it exports. It
indicates that a percentage increase in imports will cause Nigeria's economic
growth to slow down by 0.8 percentage points. The result conforms to the
findings of Omoke and Opuala–Charles (2021) and Agbo, Agu and Eze
(2018) who discovered a poor and insignificant link between import trade
and Nigerian economic growth.
Additionally, it was discovered that the export trade coefficient
(EXPT) has a statistically significant positive sign and impacts Nigeria's
economic growth. This shows that export trade is an important factor to be
considered when describing Nigeria's level of economic activity. In terms of
magnitude, it indicates that a 1% rise in export trade would result in a 2%
boost in Nigeria's economic growth. This finding conforms with the work of
Omoke and Opuala–Charles (2021) revealed a positive and significant link
between export trade and Nigeria's economic growth.
Furthermore, the coefficient of Foreign Direct Investment (FDI)
was observed to be negative and statistically insignificant. The conclusion
of this for explaining Nigeria's level of economic growth is that there is not
enough foreign investment in the country's economy to result in real
economic growth. Youth unrest, oil theft or bunkering, and an environment
unfavourable to effective investment (such as Boko Haram, Militant,
Herdsmen, and Kidnappers among others) are a few variables that could be
to blame for this. This outcome is consistent with the findings of Eravwoke
and Eshenake (2012), who discovered that foreign direct investment does
not necessarily lead to growth in Nigeria, particularly when there is a
problem with the country's external image.
The exchange rate was discovered to be negative and statistically
insignificant in impacting Nigeria’s economic growth. This suggests that a
rise in the exchange rate will cause Nigeria's economic activity to decline.
The coefficient’s magnitude reveals that a percentage point increase in the
exchange rate would result in a 1.7% contraction of Nigeria's economic
activity. The findings of Afolabi et al., (2017) are supported by this result
which determined that the exchange rate had an insignificant negative
impact on Nigeria’s economic growth.

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4.4 Diagnostic Analysis

This study also looked at the stability of the estimates' coefficients
utilizing Brown et al., (1975) recursive residuals as well as the chi-square
and Lagrange Multiplier (LM) tests. At the 5% level of significance, none
of the test statistics for each null hypothesis could be rejected. Therefore,
serial correlation and heteroscedasticity are absent. As a result, the
diagnostic test's findings show that serial correlation and heteroscedasticity
issues are not related to the calculated model's coefficients.

Table 5: Diagnostic Tests

Test Statistics Probability Value
χ2(Serial correlation LM test) 0.2163
Heteroscedasticity 0.1282
Source: Author's calculation employing Eviews 10

A cumulative sum of recursive residuals (CUSUM) was used in the

study's final step to assess the stability of the predicted coefficients. The
obtained results imply that the coefficients have remained constant
throughout the study period. This is supported by the fact that all of the series
are inside the critical boundary at a 5% level of significance as demonstrated
in Figure 1. The coefficients can thus be trusted to explain Nigeria's
economic growth since they are stable, consistent, and dependable.
16

12

-4

-8

-12

-16
90 92 94 96 98 00 02 04 06 08 10 12 14 16 18

CUSUM 5% Signific anc e

Figure 1: Cumulative Sum of Recursive Residual (CUSUM)

Source: Author's calculation employing E-views 10

5. Conclusion and Recommendations

International trade is one of the core determinants of economic
growth, especially in developing countries like Nigeria that is endowed with
abundant resources – human and natural. But whenever export is less than
import, the impact always becomes disastrous and negative to the growth of

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the economy. This study found that the long-run and short-run influence of
international trade is insufficient to cause the economy to grow. Also, the
study notes that possible causes for this situation include: dependence on oil
and negligence of agriculture, poor exchange rate regime, and unfavourable
conditions for profitable investment (political instability) posed by the
activities of Boko Haram, bandits, militant, herdsmen and kidnappers and
so on. Furthermore, the study posits that international trade had no
significant impact on Nigeria’s economic growth during the period under
review.
Therefore, based on the findings of this study, the government
should encourage the export of goods and services while discouraging
imports by granting subsidies and tax concessions to local producers. Also,
FDI should be enhanced by dealing with the instability of the polity (unrest,
Boko haram, kidnapping and so on) by running an inclusive government that
accommodates our individualities and realities while making conscious
efforts in providing friendly foreign trade policies that would enhance more
export and curtail import which is now a burden to the Nigerian economy.
Lastly, a viable exchange rate regime should be put in place to achieve a
double-digit exchange rate for our currency. Once these recommendations
are taken, they will expand and energize the country's international trade
which contributes to the growth of the economy.

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