Impact of International Trade on Economic Growth: Evidence from Nigeria

Abstract

The paper investigates the impact of international trade on economic growth in Nigeria from 2000Q1- 2020Q4. The choice of the period was informed by the economic recessions which the country experienced within the period. The paper employed an autoregressive distributed lag model (ARDL) and error correction model (ECM) to estimate the short run and long run relationships among the series. The findings of the paper reveal that exports demand has significant and positive short run and long run relationship with economic growth, while imports demand and exchange rate volatility have short run and long run negative relationships with economic growth in Nigeria during the study period. The paper recommend that Nigerian government should intensify efforts towards expanding the country’s export based in order to improve its external competitiveness for the enhancement of the aggregate external demand and foreign exchange earnings that will mitigate the adverse effect of exchange rate volatility. By expanding the exports based, the country will likely reduce its import demand particularly in consumer goods thereby saving millions of dollars to boost the nation’s reserve which will attract more foreign investors that will boost the country’s economic activities to achieve higher and inclusive economic growth in the country.