ABSTRACT
This research study examined the impact of
international trade on the economic growth of Nigeria from 1981-2016. Annual
figures of RGDP, export, import, exchange rate and balance of payment were used
and ordinary least square (OLS) technique were employed for its estimation. The
work is divided into five chapters: chapter one gives a general introduction to
the subject matter, chapter two gives the general review of literature in the
subject matter, chapter three states the methodology and specifies the model
used for testing. Chapter four runs the required tests and provides the result
as well as the interpretation and chapter five concludes the findings in the
test. The evidence from the findings was that within the period studied, import
has a positive and significant impact on economic growth, exchange rate has
positive but did not significantly contribute to economic growth and export and
balance of payment are both negative and insignificant contributors to economic
growth in Nigeria. The study recommended that Nigeria government should promote
importation of raw materials and exportation of finished goods so as to promote
favourable balance of payment hence economic growth.
CHAPTER ONE
INTRODUCTION
International trade can be seen as trade/ exchange
of goods and services that exists between two or more countries of the world.
(Mannur 1995) defines international trade as an exchange of goods and services
between the residents of a given country and of the rest of the world. It is
therefore, a process which links the countries of the world through commodity
trade, service flows and factor movement/factors of production which are
labour, capital etc. According to (Adedeji, 2006) it is shown that countries
engage in international activities with the aim of making profit.
International trade occurs due to differences in
natural resources endowments, technology, demand, existence of economics of
scale in production, financial capital and existence of government policies
etc. In all these, there are people that are more endowed but are unable to
manage and direct them to their useful state, thereby lowering the growth and
development of the economy, which reduce the standard of living of its
citizens.
International trade arises due to the need for
exchange which involved from the barter system to the money system.
International trade became popular in Nigeria due to colonial rule that brought
their wares and made Nigerians their middle men (Nick 2008). The classical and
neo-classical economists have attached so much importance to international
trade in an economy’s growth that they even regard it as engine of economic
growth (Jhingan, 2006). So, growth of any country’s output and per capita
income does not base only on domestic production and consumption activities but
also on international transaction of goods and services. Foreign trade plays a
vital role in reforming economic and social attributes of countries (improving
standard of living and preferences) around
the world, particularly the less developed countries. One of the major
important of international trade is that it enables other country to obtain the
goods and services which they cannot produce in the home country or commodities
which is too costly if produced at home.
Upon Nigeria endowments with about 37 solid minerals
type and population estimates of over 170 million people, Nigeria has failed in
relation to her peer like emerging Asia countries- Thailand, Malaysia, China,
India, and Indonesia. Before the discovery of oil in 1960s, the Nigeria
government was able to carry out investment project through domestic savings,
earning from agricultural produce exports and foreign aids, but the discovery
of oil has brought general stagnation in agriculture exports and oil now become
the major source of foreign exchange earning in Nigeria. For instance in 1970s
petroleum constituted of about 78% of federal government revenue and more than
95% of export earnings and about 15% of the GDP. (World Bank, 2002). The
arrival of oil leads to the loss of Nigeria’s position as an important producer
and exporter of palm oil produce, groundnut, cocoa, and rubber (CBN annual
report 2006). Between the year 1960 and 1980, agriculture and agro-allied
exports constituted an average of 60% of total export in Nigeria, which is now
accounted for, by petroleum oil export, (CBN annual report and account,
2004).furthermore, by 1997, export stood at N7881.7
million. Between 1960 and 1977, value of export grew by 19%. It should be noted
that before 1972, most of the export were agricultural commodities like cocoa,
palm produces, cotton and groundnut.
Thereafter, minerals, especially crude, petroleum, became significant export commodities. Imports also increased in values during the period. By 1960, imports were valued at N 432 million. They increased to N758.99million and N813.2 million in 1970 and 1978 respectively, rising to N124,162.7 million in 1992 and N681,728.3 million in 1997. Non-oil GDP recorded a growth rate of 8.9% compared with 8.5% in 2010. The improved performance in the sector was driven largely by the agricultural sector which grew by 5.7% underpinned by robust growth in all its components. However, from 1974, food import became obvious in Nigeria’s international trade. The country had unfavourable trade balance from 1960 to 1965, partly because of the aggressive drive to import all kinds of machinery to stimulate the industrialization strategy pursued immediately after independence. Therefore, export of crude, petroleum guaranteed a favourable trade balance. The oil sector dominates export while the non-oil sector dominates import. Between 1960-1970, oil export grew by 31.6% and 44.6% respectively. Also, from this period, non-oil export showed marginal growth of 1.2% and 6.6%. This made Nigeria to be 4th world exporter of oil and 7th largest producer of oil in the organization of petroleum exporting countries (OPEC). In the early 1980s, there was an oil price shock in the world market which caused an oil glut for Nigeria and since other productive sectors were abandoned, Nigerian government could not meet up with the needs of its populace, thus resulting to external borrowing. Nigeria can also be said to be suffering from the resource curse syndrome’(also known as the paradox of plenty)’ (Soludo 2005). This means that countries and regions with abundance of natural resources like minerals and fuels tends to have less economic growth and worse development outcomes than countries with fewer natural resource.
From the background of the study, it could be seen that growth performance of the Nigeria economy has been less satisfactory during the past three decades and there had never been a steady growth in the nation’s economy, inspite of all her endowments. Apart from oil, Nigeria exports are mainly primary products and depends more on a limited number of commodities (such exports are characterized by lower prices than manufactured goods with highly volatile markets). Thus, Nigeria is often on the wrong end of unbalanced trade environment that favours developed countries. Nigeria with the abundant human and natural resources is paradoxically being regarded as one of the poorest and indebted countries in the world. Hence, the need to answer some important questions in this research studies.
IMPACT OF INTERNATIONAL TRADE ON THE ECONOMY GROWTH OF NIGERIA
