Cross-border Trade and Economic Growth in Nigeria
Following recent innovations to foreign trade policies of the Nigerian government, this study investigated the relative impacts of export earnings, import value, and trade openness on the Nigerian economy using annual time series data for the period 1981-2022. The preliminary unit root test from the Dickey-Fuller test indicated that the series are integrated of order one. This was confirmed by further tests using the Phillips-Perron and the Zivot-Andrews tests. However, a cointegration test using the Engle-Granger test indicated that the series are not cointegrated towards long-run equilibrium. Results from the vector autoregression (VAR) were unconvincing prompting us to employ the Kernel-based regularized least squares (KRLS). We found that GDP growth rate increases by 0.044% for every 1% increase in the value of exports; a percentage growth of imports value results in a 0.131% increase in GDP growth rate; and -0.18 percentage loss of GDP growth is associated with a one per cent increase in the index of trade openness. This implies that greater trade openness hurts the Nigerian economy. The study concludes that the Nigerian economy will benefit more meaningfully from international trade by prioritizing exports over imports. The federal government of Nigeria should therefore implement economic policies that stimulate macroeconomic stability, which will help increase the country’s competitive edge in the global economy.
