TRADE LIBERALIZATION AND PERFORMANCE OF THE NIGERIAN TEXTILE INDUSTRY
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ABSTRACT
The Nigerian textile industry is characterized by a number of issues, including smuggling, excessive red tape, ineffective financial incentives, political unpredictability, severe power shortages, inadequate infrastructure, and severe power shortages.
The Nigerian government currently provides incentives to local enterprises in acknowledgment of the significance that industrialization plays in the overall growth process. This is achieved through the implementation of a wide range of government initiatives and the establishment of a large number of agencies.
All of these methods were devised with the intention of resolving these problems and enhancing the performance of the textile sector with the objective of diversifying the productive base of the economy and boosting its output for both local and foreign revenue.
Because of these problems, it was necessary to investigate how the performance of Nigeria’s textile industry was affected by the liberalization of trade.
The research resulted in a modification of the endogenous growth model through the application of autoregressive distributed lagged model time series estimation techniques (ARDL). The time period covered by the data was from 1986 to 2015, and four separate models were examined.
According to the findings, every estimated model exhibited a co-integrated link. This was the case with all of the models. However, a simple tariff rate trade liberalization policy measure has a lag effect before it can be effective in the textile industry.
More specifically, the long-term effect of a simple tariff rate on the textile industry is negative and statistically significant. The performance of Nigeria’s textile industry is negatively impacted both in the near term and in the long term by the real effective exchange rate depreciation.
However, short-run results indicate that trade liberalization policy measures that are implemented via weighted tariff rate have a lag effect before they can affect the performance of the textile industry in Nigeria.
This is similar to how the effect of weighted tariff rate on the textile industry is negative and statistically insignificant. Specifically, a 1% increase in the past weighted tariff rate value (trade liberalization policy) increases the performance of the textile industry by approximately 0.99%, whereas the current increases in tariff rate improve textile industry performance by 1.19% over the period of analysis, despite the fact that the difference is not statistically significant.
A one percentage point rise in trade openness would result in a performance decrease for the textile industry of about 17.49% over the long term. Therefore, the success of the textile industry in Nigeria is affected by factors such as the simple tariff rate, variations in the exchange rate, the openness of trade, as well as the inputs of labor and capital.
In a similar vein, causality studies demonstrated that there is a one-way relationship between trade liberalization (in both its broad and narrow forms) and the performance of the textile industry.
According to the findings of the study, trade liberalization had both delayed and large effects on the performance of the textile sector in Nigeria between the years 1986 and 2015. It was suggested that the government should make active efforts to give the textile sector with a business climate that is friendly and adaptable to its needs.
TRADE LIBERALIZATION AND PERFORMANCE OF THE NIGERIAN TEXTILE INDUSTRY
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