The Impact of Foreign Trade on the Nigerian Economy
Chapter One
OBJECTIVE OF THE STUDY
The objective of this will be summarized as follows:
- i) To investigate the effect of foreign trade on Nigeria’s economy.
- ii) The objective intends to compare the rate at which Nigeria import and exports goods and services.
- To find out the impact of certain bilateral and multilateral trade relationships which Nigeria has made with other countries over the years.
- To find out how foreign trade has helped Nigeria’s economy
- To find out whether Nigeria has invested in industrial projects.
- To find out how industrialization should be embraced by Nigeria in other to develop and to be able to compete in the international market.
CHAPTER TWO
REVIEW OF RELATED LITERATURE
INTRODUCTION
A developing economy as that of Nigeria is basically characterized by a high degree of subsistence production, with a very low application of modern technology. These have resulted into a very high volume of importation against manufacturing and tertiary industries are relatively low and the agro- based industries are common but, in low capacity.
Foreign trade can been defined as trade across the frontiers that is with the rest of the world, it has been argued that, it plays a prominent role in promoting economic growth and productivity in particular, and debate have been ongoing since several decades ago. Historical validation has revealed that internationally active countries tend to be more productive than countries which only produce for the domestic market. As a result of liberalization and globalization a country’s economy has become much more closely associated with external factors such as openness. Against this background, conducting a study on the effects of international trade on economic growth is imperative in this globalize era. It helps policymakers to marshal appropriate policies by determining the source of productivity growth with respect to international trade. Since the introduction of economic reforms and the adoption of outward oriented strategies in Nigeria, Nigeria economy have experienced dramatic growth. Additionally, Nigeria. Participation in international trade has contributed tremendously in productivity of domestic industries and advancement of technology. Therefore, research on how international trade contributed Nigeria’s economy growth can serve has a distinguishing case study revealing a latecomer catches up with forerunners by increasing his participation on the global stage.
Macaulay, (2012) asserted that Nigeria’s foreign investment can be traced back to the colonial era, when the colonial masters had the intention of exploiting our resources for the development of their economy. There was little investment by these colonial masters. With the research and discovery of oil foreign investment in Nigeria, but since then, Nigeria’s foreign investment has not been stable. The Nigerian governments have recognized the importance of FDI in enhancing economic growth and development and various strategies involving incentive policies and regulatory measure have been put in place to promote the inflow of FDI to the country. According to Lall, (2002), privatization was also adopted, among other measures, to encourage foreign investments in Nigeria. This involved transfer of state-owned enterprises (manufacturing, agricultural production, public utility services such as telecommunication, transportation, electricity and water supply), companies that are completely or partly owned by or managed by private individuals or companies. Shiro (2009) noted that since the enthronement of democracy in 1999, the government of Nigeria has taken a number of measures necessary to woo foreign investors into Nigeria. These measures, he noted, include the repeal of laws that are inimical to foreign investment growth, promulgation of investment laws, various oversea trips for image laundry by the President among others. Thus, this study assesses the impact of FDI on economic growth in Nigeria within the period 1999-2013.
CHAPTER THREE
RESEARCH METHODOLOGY
Research design
The researcher used descriptive research survey design in building up this project work the choice of this research design was considered appropriate because of its advantages of identifying attributes of a large population from a group of individuals. The design was suitable for the study as the study sought the impact of foreign trade on the Nigeria economy.
Sources of data collection
Data were collected from two main sources namely:
(i)Primary source and
(ii)Secondary source
Primary source:
These are materials of statistical investigation which were collected by the research for a particular purpose. They can be obtained through a survey, observation questionnaire or as experiment; the researcher has adopted the questionnaire method for this study.
Secondary source:
These are data from textbook Journal handset etc. they arise as byproducts of the same other purposes. Example administration, various other unpublished works and write ups were also used.
Population of the study
Population of a study is a group of persons or aggregate items, things the researcher is interested in getting information on the study the impact of foreign trade on the Nigeria economy. 200 staffs of different banks of Nigeria was selected randomly by the researcher as the population of the study
CHAPTER FOUR
PRESENTATION ANALYSIS INTERPRETATION OF DATA
Introduction
Efforts will be made at this stage to present, analyze and interpret the data collected during the field survey. This presentation will be based on the responses from the completed questionnaires. The result of this exercise will be summarized in tabular forms for easy references and analysis. It will also show answers to questions relating to the research questions for this research study. The researcher employed simple percentage in the analysis.
CHAPTER FIVE
SUMMARY CONCLUSION AND RECOMMENDATION
INTRODUCTION
It is pertinent to note that this research was aimed at examining the effect of foreign trade in Nigeria, thus the topic “the impact of foreign trade on the Nigeria economy”.
In the preceding chapter, the relevant data collected for this study were presented, critically analyzed and appropriate interpretation given. In this chapter, certain recommendations made which in the opinion of the researcher will be of benefits in addressing the challenges associated with foreign trade and economic improvement in Nigeria.
SUMMARY
This study examines the contribution of foreign trade and economic growth in Nigeria. The study investigated the causal and dynamic nature of the relationship between international trade and economic growth by using annual time series data from 1981 to 2008.The result shows that positive relationships exit between export, import and economic growth. However, the export coefficient is insignificant therefore, Nigeria need to increase or diversify her export goods to enjoy more of the benefits of trade. Other developing countries based on the results should also embrace global trade in the area of export goods to enhance domestic economic growth. Contrary to our a priori expectation of import coefficient, the value of import is positive meaning it has positive relationship with economic growth. This is also confirmed in our Granger causality result. The unit root test indicates that the variables are allstationary at levels, i.e. they are I(0) series.
Data analysis revealed that relationship exists between international trade and economic growth, and that while some components of international trade exerted positive and significant effect on growth, interest rate exerted positive but insignificant effect. Furthermore, the result shows that all the regressors except interest rate were statistically significant at 5% level of significance.
CONCLUSION
This study examines the impact of foreign trade on the Nigerian economy. It was discovered that foreign trade and exchange rate have positive impact on growth of the economy, openness is observed to have a negative impact on the growth of the economy, and this is in contrast to the finding of Ayanwale (2007) which shows that openness has a positive and significant relationship with economic growth. However, it agrees with Odozi (1995), Anyanwu (1998), and Usman (2011) who have also observed the negative impact of openness on the Nigerian economy. Odozi (1995) and Anyanwu (1998) blamed the negative effect of openness in Nigeria on capital flight and unfavourable trade policy, while Usman (2011) observed that there is more of import than export. Despite their earlier observations, this simply shows that Nigeria’s trade policies, and implementation is still not growth friendly. Looking at the dummy variable, political stability, it shows that the type of political dispensation in place have no effect on growth, this is in conformity with the result of Asiedu (2001) and Ayanwale (2007). This can be seen in the growth of GDP over the years through the military and the democratic political periods. This can be attributed to the importance of petroleum product in international market, which is the bulk of Nigeria’s export and source of foreign exchange earnings. In conclusion, despite the shortcomings observed in openness, the paper still shows that Nigeria is still gaining from trade but this gain yet to be maximized. Thus, the study indicates that there is gain in trade and that government can rigorously pursue growth and economic development through foreign trade.
RECOMMENDATIONS
As a result of the findings in this paper, the following recommendations were put forward;
- As a result of the negative impact of Nigeria’s openness, trade policies in Nigeria need to be reviewed, reappraised and reinvigorated to encourage the gain of trade in order to foster growth, through diversification of the economy to areas such as agriculture, industrialisation, privatisation of the power sector, and building of oil refineries to reduce importation of petroleum produce, among others.
- The port and border system should be critically looked into in the areas of adequate personnel, the personnel should be trained and equipped in order to carry out their duty, such as curbing smuggling.
- Conscious effort should be made to encourage mass production of exportable goods, which will leads to injection into the economy, by the industry and individual entrepreneurs.
- The government should make frantic effort to improving infrastructural facilities in order for the manufacturing firms be able to add value to the natural endowment abound in the country.
- Nigerians should be massively educated as to the importance of consuming locally produced good and the effect of consuming foreign goods, as withdrawal, on the economic growth of Nigeria.
- Importation of some goods that can be produced locally at low cost should be banned and massive production of such goods, locally, with the required quality and standard, should be encouraged.
- Goods that are deemed not to meet the quality standard of Nigeria that are smuggled into the country should be communicated to the masses at the earliest time to discourage the consumption of such goods in order to forestall the withdrawal effect on growth, caused as a result of consuming such goods.
REFERENCES
- Anyanwu, J.C. (1998). An Econometric Investigation of Determinants of Foreign Direct Investment in Nigeria. Investment in the Growth Process: Proceedings of the Nigerian Economic Society Conference 1998: pp. 219–240. Ibadan, Nigeria.
- Asiedu, E. (2001). On the Determinants of Foreign Direct Investment to Developing Countries: Is Africa Different? World Development, 30(1), pp. 107–19.
- Ayanwale, B.A. (2007). FDI and Economic Growth: Evidence from Nigeria. African Economic Research Consortium (AERC) Research Paper 165, Nairobi. ISBN 9966-778- 09-8.
- Adedeji, S. (2006). Writing and Research Proposal in G.O. edu.uI.ng/so AdedejiAkanni, O.P. (2007). Oil Wealth and Economic Growth in Oil Exporting Countries, AERC ResearcgOaoer 170.
- Amsden, B. (1989). Economc Growth, Export and External Causality: “The Case of African Countries”. Applied Economists, 38, 21-27.
- Awoluse. (2008). Economic Growth in the Presence of FDI. Retrieved from www.uk.essay.com
