Trade Openness and Economic Growth in Nigeria

This study empirically determined the effect of trade openness on economic growth in Nigeria from 1985 to 2022. The research comprised trade openness proxies including the degree of trade openness, real exchange rate, foreign direct investment, and official development assistance, while Real Gross Domestic Product was utilized as indicator economic growth. The research utilised yearly time series data obtained from the Central Bank of Nigeria (CBN) statistics bulletin and the World Development Indicators (WDI) of the World Bank. The data analysis methods utilised comprise descriptive statistics, correlation matrix, Augmented Dickey-Fuller (ADF) unit root test, bounds cointegration, and Autoregressive Distributed Lag (ARDL) approach. The ADF unit root test outcome indicated mixed stationarity across all variables. That is, a combination of [I(0)] and [I(1)]. The ARDL bounds cointegration test result indicated the presence of a long-run link among the variables. Ultimately, the ARDL estimation results indicated that trade openness and FDI exert a positive and significant effect on Real GDP in both the long run and short run. Conversely, the real exchange rate has a negative yet significant impact on Real GDP in both time frames, while official development assistance demonstrates a positive but non-significant effect on Real GDP in both the long and short run. The research concluded that trade openness substantially drives and enhances economic growth in Nigeria. The researchers proposed that the government undertake measures to promote trade facilitation by streamlining customs processes, cutting tariffs, and investing in trade-supporting infrastructure, including ports, roads, and logistics. This will enhance Nigeria's trade openness and strengthen its inclusion into the global economy.