Impact of Trade Openness on the Output Growth in the Nigerian Economy

Abstract

This study examined the relationship between trade openness and output growth in Nigeria. The aim of this is to enable us suggest ways to raise productivity and wealth of the country. And thus, increase the standard of living in the country. Econometric techniques of the Non-Monotonic modelling was adopted. And the Ordinary Least Square (OLS) is used as the estimation technique. Unit root test and co-integration test were carried out as part of the estimation process. The data used was basically secondary (from 1970 to 2010). The variables used were real gross domestic product (RGDP) as the dependent variable, degree of openness, squared term of the degree of openness to capture the long run effect, real exchange rate, real interest rate and unemployment rate as the independent variables. The result shows that there is positive relationship between trade openness and output growth in Nigeria. The implication is that the Nigerian economy will grow more rapidly when she is opened to international competition. With this, it could be said that trade openness is very important and vital to the Nigerian economy. It is recommended that the government should focus on the other sectors in Nigeria such as the agricultural and manufacturing sectors other than petroleum. Secondary, the revenue generated from the export of crude oil can be used to develop the basic infrastructural facilities and essential social amenities needed in the country. The government should promote import liberalisation through the reduction of tariffs. The import of consumable and intermediate goods should be reduced and the local industries should be encouraged to produce such goods. The government needs to reduce import tariffs in other to prevent or discourage smuggling activities. Finally, government should re-orient its policies towards the external sector and make export more favourable.