Macroeconomic Implications of the Degree of Openness in Developing Countries: The Experience in Nigeria

Abstract

Nigeria is significantly blessed with abundant of human and natural resources that can meaningfully position the country in the international product market and consequently achieve considerable economic growth through trade. Similarly, degree of openness of an economy has the potentials to encourage sustainable growth and development through its impact in integrating global countries, and nurturing of innovative and broader markets for numerous countries within the global environment. Several scholarly contributions in the literature shows a divergent view on the relationship between country’s openness and growth. While some studies revealed a positive nexus, others shows a negative relationship. Therefore, further studies on this research domain remains incessant. It is in view of this background, that this study conceptually evaluates the effects of the degree of openness of the Nigerian economy and its macroeconomic implications on the desired level of growth. The study found that, despite the increased liberalisation and openness of the Nigerian economy to external trade, the contribution of country’s openness revealed an insignificant results, evidenced by lower growth rates and other macroeconomic disequilibrium. Meaning that, the enormous advantage of liberalisation and the benefit of economies of scale are yet to be maximised in the Nigerian economy. The result apparently is not amazing given the high rate of social and religious conflicts including the Niger Delta crisis, terrorist activities by the Boko Haram militants, high rate of kidnapping, and other communal clashes within the domestic economy. This undoubtedly has frightened many foreign investors resulting to lower economic growth rates; increased unemployment and poverty ratios, persistent increase in price among the locally-produced commodities, as well as the unstable exchange rate. Obviously, there is gain in external trade and hence, Nigeria should thoroughly designed appropriate policies to allow for the attainment of desired level of sustainable growth. This implies the need to implement a robust macroeconomic strategy to combat the undesirable social crisis and terrorist attack that has grossly undermined the productivity status of the economy.