Nigeria’s Economic Growth and International Trade – An Econometric Analysis

Abstract

International trade has been regarded as an engine of growth for developing nations as it contributes greatly to the improvement of human capacity and expands opportunities for industrialization, advanced transportation and outsourcing etc. Hence this study through the means of econometric analysis examined “the Nigerian Economy in Relation to International Trade”. The study employed secondary data sourced from the Central Bank of Nigeria (CBN) and Would Bank Database for world development indicators from 1985 – 2021. The data were checked for stationarity using the Unit Root Test. And the Ordinary Least Square (OLS) regression analysis (through the E-view package) was carried out to ascertain how international trade has contributed to the growth of the Nigerian economy. From the stationarity result Gross Domestic Product (GDP) and Foreign Direct Investment (FDI) were integrated of order 1(0) while Export (EXT) and Import (IMP) were integrated of 1(1). The regression analysis was carried out following the order of integration of the variables. The results showed that EXT and IMP were not rightly signed while FDI was rightly signed. However, only FDI had significant relationship with GDP – proxy of economic growth. It was observed that the joint effect of the explanatory variables (depicted by the R2 Adjusted) on GDP was very poor. The study concluded that, there is a weak relationship between economic growth and international trade in Nigeria, which could be attributed to poor management of the gains of international trade. Therefore the study recommended among others that the government should endeavour to invest the proceeds of international trade wisely, possibly invest greater part of it in the real sector of the economy.

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