TRADE LIBERALIZATION AND PERFORMANCE OF THE NIGERIAN TEXTILE INDUSTRY (1986 – 2015)
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TRADE LIBERALIZATION AND PERFORMANCE OF THE NIGERIAN TEXTILE INDUSTRY (1986 – 2015)
ABSTRACT
Ineffective incentives, political uncertainty, acute power shortages, insufficient infrastructure, smuggling, and red-tape bureaucracy are among the challenges confronting Nigeria’s textile industry. However, the Nigerian government, which recognises the importance of industrialization in the growth process, is now motivating enterprises.
This is accomplished through various government programmes and the formation of numerous entities. All of these strategies were intended to solve these issues and improve the performance of the textile industry in order to diversify the economy’s productive base and raise output for both domestic and export earnings. These issues demanded an investigation into the impact of trade liberalisation on Nigeria’s textile sector performance.
The study changed the endogenous growth model using Autoregressive Distributed Lagged (ARDL) time series estimation techniques. The data ranged from 1986 to 2015, and four distinct models were investigated. The results demonstrated a co-integrated link for all models considered.
In particular, the effect of a simple tariff rate on the textile industry is negative and statistically significant in the long term; however, trade liberalisation policy measures implemented through a simple tariff rate have a lag effect before becoming effective in the textile industry. In both the short and long run, real effective exchange rate depreciation harms Nigeria’s textile industry.
Similarly, the effect of weighted tariff rates on the textile sector is negative and statistically insignificant, although short-run results show that trade liberalisation policy measures such as weighted tariff rates have a lag effect before influencing textile industry performance in Nigeria.
Specifically, a 1.0% increase in previous weighted tariff rate value (trade liberalisation policy) boosts the level of textile performance by around 0.99%, but current tariff rate increases improve textile sector performance by 1.19% during the time of investigation, albeit not significantly.
In the long run, a 1.0% increase in trade openness reduces textile industry performance by around 17.49%. Thus, basic tariff rates, currency rate changes, trade openness, and labour and capital inputs in Nigeria all have a short-run impact on textile industry performance.
Similarly, causality studies revealed unidirectional causality between trade liberalisation (both measures) and textile industry performance.
The analysis indicated that trade liberalisation had both delayed and major effects on the performance of Nigeria’s textile sector between 1986 and 2015.
It was advised that the government make concerted efforts to provide a favourable and conducive business environment for the textile industry to thrive.
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