Trade Growth and Economic Development in Developing Economies

Evidence from Nigeria

Abstract

This study examined the relationship between international trade relations and the economic development of Nigeria for the period spanning from 1974 to 2019. The causal relation between trade and development has generated controversies both empirically and theoretically. The increase in trade relations between Nigeria and the rest of the world have recorded a substantial rising profile within the period under review. Despite this growth, economic development appears to be non- responsive to such growth and as such calls for investigation. The objective of this study is to ascertain if it is trade growth that drives economic development or vice versa.  The specific objectives of this study are to ascertain the causality between- exports and economic development, imports and economic development, and balance of trade and economic development.  The source of data is secondary obtained from the Statistical Bulletin of the Central Bank of Nigeria of various issues. The econometric tools used are the unit root tests, the co integration tests and the Granger causality tests. The finding revealed that there is a bidirectional causality between import and gross domestic product, there is a unidirectional causality between balance of trade and economic growth running from balance of trade to economic growth and there is no causality existing between export and economic growth. This implies that there is trade- led growth in Nigeria, however this is import-led. The recommendations among others include that government should put in place initiatives and policy framework that will induce export oriented and import substitution. Again diversifying the economy from mono- product economy to multi product economy has become inevitable to cushion the shock of unforeseen price fall of the mono product in the global market, also there is need to explore ways of reviving the nation’s huge agricultural potential which has been neglected since the discovery of oil in addition to exploiting its rich untapped solid mineral deposits in order to promote diversification of the economy away from a mono- cultural product base. This no doubt will stimulate exportation resulting to economic development.