Impact of International Trade On Economic Growth: The Granger Causality Test Approach

The study analyzes the impact of international trade on economic growth in Nigeria. The study’s specific objectives were used to achieve this, which is to investigate the impact of Nigeria’s trade openness on the country’s economic growth; to examine the extent to which trade balance has an impact on economic growth; and to find out how exchange rate affects economic growth. The time series data used for this study was sourced from CBN 2021. Using Granger Causality test it indicates that trade balance does not Granger cause real gross domestic product at 5% level of significance. It also indicates that the degree of trade openness does not Granger cause real gross domestic product at 5% level of significance. The regression result shows that trade is not statistically significant to economic growth. Also, the result shows that trade openness is not statistically significant to economic growth. It is recommended that there is need for effective foreign exchange management capable of ensuring optimal productivity in the critical sectors of the economy. This can be achieved by diversification of the economy away from oil with a view to expanding export of non-oil goods and services to strengthen naira exchange rate under the managed float regime. Keywords: International Trade, Economic growth, Trade openness, Granger Causality test, Foreign exchange, Economic diversification