An investigation into the impact of international trade in the growth of Nigeria's economy

Abstract

International trade has become an inevitable activity in today’s world. A country such as Nigeria generates a substantial portion of its revenue through the exportation of oil and agricultural produce. Likewise, through importation the country is able to satisfy the domestic needs for mechanised and technological products which it lacks the capacity and technical know-how to produce. It is based on this premise that this study conducts an investigation into the impact that international trade (through import and export channels) has on Nigeria's economy. Through the Johansen Cointegration test on data from 1971 to 2012, this study finds a long run relationship existing between international trade and economic growth in Nigeria. The Ordinary Least Square results suggest that export is positively associated with economic growth while imports connotes otherwise. The Granger causality test finds a unidirectional causation running from GDP to Import. However, the test failed to find a mutual correlation between Export and economic growth. This study therefore suggests that export promotion strategies should be put in place in order to encourage local farmers and producers to increase production which in turn will stimulate exports and enhance economic prosperity in Nigeria.