GLOBALIZATION AND REAL SECTOR PERFORMANCE IN NIGERIA

Abstract

The need to provide a level playing field for national economies has necessitated the integration of the economies through cross flow of goods, services, technologies and capital. These goods and services are produced by key sectors of the economy which represents the real sector. Over the years, the competitiveness of the real sector in the international market has raised concerns on the link between globalization and real sector performance. Consequent upon this, this study examined the impact of globalization on real sector output in Nigeria for a 39 year time period spanning from 1981 to 2019. The time series datasets used in this study were adapted from the Central Bank of Nigeria’s Statistical bulletin. The Ordinary Least Squares and Error Correction Modeling were used as the main analytical tools. The Augmented Dickey Fuller unit root test showed that all the variables attained stationary after first difference. The Johansen cointegration test further showed that the series have long run equilibri um relationship at 5 percent level of significance. The result from the errorcorrection model confirms that about 38 percent of the short run shocks in real sector output is corrected annually. From the estimates, a positive and statistically significant relationship exists between real sector output and foreign direct investment. Trade openness also was significant in impacting real sector output positively while a negative and significant linkage was observed between exchange rate and real sector output in Nigeria. The study therefore concluded that openness to trade broadens real output growth. Based on the findings, the study recommends amongst others that in the quest to maximize the benefits from trade openness, the relevant authorities should ensure that the nation’s exports are competitive and meet international standards by leveraging on modern technol ogies and innovation. Also, favourable industrial policies and strong institutional framework should be set up by the government to attract the right foreign direct investments.