Project Materials

TRADE OPENNESS AND OUTPUT GROWTH IN NIGERIA: AN ECONOMETRIC ANALYSIS (1970-2007)

ABSTRACT

This study examines the relationship between trade openness and output growth in Nigeria to determine the country’s global competitiveness. Using time-series data from 1970 to 2007, we show that the Nigerian economy’s production growth is determined by two sets of shocks: (i) external shocks (openness and real exchange rate), and (ii) internal shocks (real interest rate and unemployment rate). A non-monotonic and an ANCOVA econometric model are proposed to capture the structural pattern of the link between openness and production growth, as well as the policy influence of the structural adjustment program (SAP). The findings reveal that there is an inverted U-shape (non-monotonic) relationship between openness and output growth in Nigeria, with the optimal level of openness for the economy estimated to be around 67%. Also, the SAP’s liberalisation strategy has a beneficial economic impact on output growth. The ECM suggests that 79% of the equilibrium mistake will be fixed in the next session. We determined that unfettered openness may have a negative impact on Nigeria’s real GDP growth.