IMPACT OF TRADE LIBERALIZATION ON POVERTY ALEVATION IN NIGERIA.
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IMPACT OF TRADE LIBERALIZATION ON POVERTY ALEVATION IN NIGERIA.
Chapter one
INTRODUCTION
1.1 Background of the Study
Trade has served as an essential economic engine for countries throughout history and at all stages of development, not only by contributing to more efficient resource allocation inside countries, but also by spreading growth from one region of the world to another.
Over the last several decades, trade expansion has brought the world’s economies closer together. International trade has frequently played a significant role in the history of the developing nations.
Because of the economic impact that commerce has always had on civilizations, governments frequently engage in trade with the intention of achieving a specific economic outcome for their own countries.
There are both static and dynamic gains from international trade, but nothing in trade theory suggests that the gains are evenly distributed (Echekoba, Okonkwo, and Adigwe, 2015).
Trade liberalisation began in 1947, following the Second World War, with the establishment of the General Agreement on Tariffs and Trade. The GATT was negotiated in 1947 by 23 countries, 12 of which are industrialised and 11 are developing.
The primary goal of the GATT was to reduce trade obstacles. GATT was later replaced by the World Trade Organisation (WTO) in 1994. Fundamentally, trade liberalisation allows countries to export commodities and services that they can create efficiently while importing things and services that they cannot produce efficiently. The preceding phrase applies to the principle of comparative advantage.
Traditional interpretations of commerce as “the engine of growth” and its impact on economic development are based on the comparative advantage concept (Echekoba et al., 2015).
The issue of trade liberalisation and its influence on poverty has been debated in a number of contexts, both worldwide and local. The lack of scientific underpinnings linking trade liberalisation to poverty has exacerbated this argument.
Trade liberalisation is the elimination or lowering of trade obstacles that allow products and services to move freely between countries. Trade liberalisation has an impact on poverty’s direct causes, including consumption, employment, and income.
McCulloch et al. (2010) attempted to draw a link between trade liberalisation and poverty. In their work, they demonstrate that one important avenue by which trade liberalisation affects poverty is trade producing liberalisation, which has economic consequences for price changes in traded goods, labour market, and government revenue.
All of these factors have an impact on household consumption, income, and endowment levels. Cicowiez and Conconi (2012) offer a useful perspective on the trade-poverty relationship;
they argue that poverty is a public policy challenge that must be addressed, whereas trade liberalisation is an important component of a policy package that can be used to stimulate economic growth and potentially reduce poverty.
Cloutier et al. (2012) go on to explain that, from an income standpoint, trade liberalisation tends to effect incomes because it affects resource allocation in the economy; hence, any changes in factor remunerations affect household incomes.
As a result, if the characteristics that households use the most are positively changed, earnings tend to rise. Furthermore, trade liberalisation influences the structure of consumption via prices;
if households consume more items at lower prices, consumption tends to rise, depending on the type of the good in issue. The income and consumption consequences will determine whether poverty rates climb or fall.
Ravallion (2013) investigates the link between trade openness and poverty. He stated in his research that trade openness is a powerful influence in alleviating poverty in emerging countries.
Dollars and Kraay (2011) used regression to select the most globalised countries’ growth rates against their trade openness and discovered that increases in trade volumes had an impact on the poor’s growth and living standards.
In their analysis, they determined that trade openness promotes growth, which increases the income of the poor. To put it another way, commerce opens up opportunities for poverty reduction.
1.2 Statement of the Problem
Despite the growth benefits of trade liberalisation, some experts have found that it has a negative impact on the poor’s living standards. Agenor (2012) observed that trade liberalisation can lead to a reduction in unskilled labour.
His observation is founded on the notion that technological openness has the potential to substitute the role of thumb or manual labour, because trade liberalisation promotes an autocentric society, resulting in a reduction in the usage of unskilled workers.
This decrease in demand for unskilled workers will raise unemployment rates, particularly among the unskilled poor, who lack the ability to compete in modern sectors of employment.
Vasquez (2012) emphasised the negative impact of commerce on the poor’s well-being. Winter (2010), a contributor to this intellectual inquiry, discovered that maize liberalisation in Zambia resulted in the closure of maize markets in rural communities, increasing hardship for impoverished rural farmers.
Trade liberalisation is widely praised for promoting growth and alleviating poverty. On the basis of its strength, the Nigerian government made a realistic attempt to increase its international trade engagement while also engaging in domestic policies and projects to combat poverty.
Nigeria’s important involvement in the drive for trade liberalisation in Africa and its sub-region has not alleviated poverty in Nigeria, which was previously ranked as one of the poorest countries in the world (Aremu, 2016), with its population living on less than one dollar per day.
Against this backdrop, this study will investigate whether trade liberalisation inhibits the government’s efforts to alleviate poverty in Nigeria. Also, if trade liberalisation restricts the establishment of emerging industries that the government’s poverty-reduction initiatives and activities aim to foster.
These and many other issues will be evaluated in light of the intersection of government policies and initiatives designed to combat or alleviate poverty among the people.
1.3 GOALS OF THE STUDY
The primary goal of the study is to investigate the influence of trade liberalisation on poverty alleviation in Nigeria. Hence, the following are the precise aims.
To investigate the trend and pattern of poverty rates in Nigeria.
To examine the various government schemes employed in poverty alleviation in Nigeria.
To investigate the influence of trade liberalisation on poverty reduction in Nigeria.
To propose policy recommendations for the government to alleviate and improve the poverty condition in Nigeria.
1.4 RESEARCH QUESTIONS.
The following research questions will be answered based on the study’s objectives:
What is the trajectory and pattern of Nigeria’s poverty rate?
To what extent does the government use various programmes to alleviate poverty in Nigeria?
What influence does trade liberalisation have on poverty reduction in Nigeria?
1.5 Research Hypothesis
The hypotheses listed below will be investigated in the investigation.
Null Hypothesis (Ho): Trade liberalisation has no meaningful influence on poverty reduction in Nigeria.
Alternative Hypothesis (H1): Trade liberalisation has a major impact on poverty reduction in Nigeria.
1.6 SCOPE OF THE STUDY
The study on the impact of trade liberalisation on agriculture in Nigeria will focus solely on Nigeria from 1986 to 2016. The primary goal of this study is to assess the impact of trade liberalisation on poverty alleviation across the Nigerian economy as whole.
The Ordinary Least Squares estimate approach will be used to investigate the relationship between the variables in the study. However, Poverty Alleviation in Nigeria is the dependent variable that will be measured using the Poverty Rate, whilst Trade Liberalisation is the independent variable that will be measured using Trade Openness and the Exchange Rate.
Because data is primarily from secondary sources, the researcher may confront limited data constraints and, as a result, resources.
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