Nexus Between International Trade, Economic Growth And Environmental Sustainability In Nigeria

Abstract

This study examined the nexus between international trade, economic growth and environmental sustainability in Nigeria. Vector Autoregressive (VAR) Model was adopted for this research to reveal insights into the dynamic interactions between Gross domestic product growth rate (GDPGR), Trade intensity ratio (TIR) and Environmental performance index (EPI) in Nigeria. The key objectives pursued in this study are; to analyze the relationship between international trade and economic growth in Nigeria, to examine the impact of international trade on environmental sustainability in Nigeria and to examine the dynamic variance decomposition between international trade, economic growth and environmental sustainability in Nigeria. The result showed that there is co – integration amongst the key variables (GDPGR, TIR and EPI) and therefore an existence of a long – run relationship between them in the model. It was also revealed that international trade does not exert a significant influence on economic growth in Nigeria within the short-run dynamic structure. The VAR results further revealed that the GDPGR variable itself does not respond significantly to its past values, indicating a weak autoregressive structure. Similarly, the results from the EPI equation revealed that international trade does not significantly influence environmental sustainability in the short run and exchange rate appears to play more dominant role than trade, suggesting that currency fluctuations may have immediate effects on environmental quality, likely through their influence on the cost of imported green technologies and raw materials and that environmental degradation was more likely in countries lacking strong
regulatory institutions: a condition which arguably characterises Nigeria’s environmental governance. Another critical insight from the VAR results is the relatively high R-squared values across most equations, especially for TIR (0.94), EPI (0.96), and EXCHR (0.97), indicating that the model explained a significant portion of the variations in these variables. These results justify the need for green trade policies, sustainable industrial development, and environmentally-conscious trade agreements in Nigeria, strengthening of institutional framework and deliberate investment in infrastructure, to enable the revelation of any true nexus between international trade, economic growth and environmental sustainability.