FOREIGN TRADE AND ECONOMIC GROWTH IN NIGERIA: AN EMPIRICAL ANALYSIS

Abstract

This study empirically examine the impact of international trade on economic growth in Nigeria from 1970-2010. Being a time series data, to avoid spurious regression result, the first step was to test for stationary of the data by using Phillips Peron unit root test. Then Johansen (1988) technique was used to establish if the non-stationary variable are cointegrated. The result of stationary and normality test reveals that the model is fairly well specified and could be used for policy analysis. Empirical investigations reveal that three variables are statistically significant at 5% and these variables are export, foreign direct investment and exchange rate and they are positively related to real GDP while other variables such as import, inflation rate, openness exert a negative influence on real GDP. The study demonstrates that increase participation in global trade helps Nigeria to reap static and dynamic benefit of international trade despite non conformity of the coefficient of the openness. Both international trade volume and trade structure towards high technology export result in positively effect on Nigeria economy. We therefore recommend that the government should design appropriate strategy by diversifying the economy through export promotion, stimulating foreign direct investment and exchange rate stability in order to boost productivity of Nigeria economy by raising the standard of living of the citizens.