TRADE LIBERATION AND THE MANUFACTURING SECTOR IN NIGERIA 2000-2009
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TRADE LIBERATION AND THE MANUFACTURING SECTOR IN NIGERIA 2000-2009
Chapter one
Introduction
Background of the study.
International trade has existed for most of history, and its rationale is based on the reality that the distribution of natural, human, and capital resources differs between economies. Different technologies or resource allocations are required for efficient production of various types of traded commodities and services.
Furthermore, tastes for exchanged commodities and services differ among countries. As a result, international commerce has enabled countries to broaden their variety of accessible commodities and services while compensating for those goods and services that they are not better off providing.
This has resulted in an ever-increasing web of market linkages, opening up new opportunities for improving economic activity. It has enabled global sourcing strategies, providing new opportunities for enterprises to compete in the global market while also supplying a wide range of goods and services at affordable prices.
This engagement of countries in the global economy has been proposed as an important means for countries to enhance economic growth and development (Rondinelli, 2003).
The spread of industrialization from Europe to the Americas, Asia, and Africa, as well as massive technological advances in transportation and communications, have steadily reduced the cost of moving goods, technology, capital, and people around the world (Cairncross, 1997).
The development of steamships, the construction of railroads, and the innovation of telegraphs, automobiles, aeroplanes, and the internet have all contributed significantly to the world becoming a “global village”.
They have broadened the scope of international trade. While trade liberalisation had little influence on the early growth of international trade from the 16th to the 20th centuries, by the second half of the twentieth century, trade liberalisation had taken centre stage (WTO, 2013).
The earliest activities towards trade liberalisation may be traced back to the 1820s and 1840s, when freer trade happened as a result of bilaterally agreed reciprocal tariff reductions, where agreements with other nations on mutual tariff reductions were made.
However, beginning in the late 1840s and continuing until the second part of the twentieth century, countries began to make unilateral decisions to reduce trade barriers.
The abolition of Britain’s Corn Laws in 1846 marked the end of tariffs used to safeguard farmers and industry from foreign competition.
The manufacturing sector’s vital role is based on its ability to operate as a growth engine by broadening the economy’s productive and export base, reducing unemployment, halting rural-urban drift, and contributing to poverty reduction.
Nigeria is an open economy. As a result, international trends have far-reaching ramifications for the country’s industrial sector development. Trading with countries has been intended to provide enhanced and more secure access to international markets.
This is designed to allow the country to explore economies of scale beyond the limits of its domestic market and to promote access to foreign money for financing crucial imports required for growth (Adenikinju, 2002).
It is true that trade and trade policy have a significant impact on economic success. International commerce provides opportunity for improved specialisation, increased capacity utilisation, and the import of commodities and services.
In the Nigerian context, there has been a substantial amount of discussion on the interrelationship between trade policy reforms, economic performance, and the manufacturing sector.
Statement of the Problem
Nigeria’s trade policy has been liberalised with the expectation of a positive effect in terms of increasing the share of manufacturing in GDP, the share of manufactured exports in total merchandise exports, and manufacturing sector capacity utilisation in line with the government’s projections from 1997 to 2010.
Given the specified performance measures for 2015, concerns have been raised about the impact of freer trade on Nigerian manufacturing performance.
Adenikinju and Chete (2002) conducted a literature review and offered firm-level evidence on the effects of trade liberalisation on productivity in Nigeria’s manufacturing sector from 1988 to 1990.
Beyond 1990, the Nigerian government took deliberate efforts towards increased trade liberalisation, the intended impacts of which are unknown, demanding further research. According to Rankin, Soderbom, and Teal’s (2006) study on Sub-Saharan Africa, enterprises that participate in exports have higher productivity.
Nonetheless, their study only provides evidence for the impact of productivity on the likelihood of exporting, not on the proportion of sales exported. Furthermore, whereas Goldar and Aggarwal (2005), Wong (2007), and Sheikh and Ahmed (2011) found support for the import-discipline hypothesis in India, Ecuador, and Pakistan, respectively, there is no evidence of this association in Nigeria.
The objectives of the study
The study’s aims are:
To assess the impact of trade liberalisation on the productivity of Nigerian manufacturing enterprises.
This study aims to investigate how productivity affects firms’ export participation in Nigeria’s manufacturing industry.
The purpose of this study is to determine how trade liberalisation affects the competitiveness of Nigerian manufacturing enterprises.
Research Hypotheses
Three major theories are developed throughout this study.
Hypothesis One.
Ho: Trade liberalisation has no effect on Nigerian manufacturing firms’ productivity levels.
Ha: Trade liberalisation affects the productivity of Nigerian industrial enterprises.
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