International Trade, Institutional Quality and Poverty Level: A Case Study of Nigeria Economy

Abstract

The study examined the differential and the interactive effects of disaggregated components of international trade and institutional quality on poverty level in Nigeria. The study employed ARDL Bound Test on the time series data spanning from 1981-2022. The findings of the study revealed mixed results both for the short run and long run. The short run result shows that (EXR) exchange rate has a positive and significant effect on poverty level with p-value of 0.0184; while the long run result shows no significant effect on poverty level in Nigeria. Also, the short run result of institutional quality (INQ) reveals a negative and significant effect on poverty level in Nigeria with the p-value of 0.0142; while the long run result shows a positive and significant effect on poverty level in Nigeria with the p-value of 0.0640. The short run results of (OM) oil import shows a negative and significant effect on poverty level with p-value of 0.0536; while the long run result shows a positive and significant effects on poverty level at p-value of 0.0808. The results of (NM) non-oil import had no significant effects on the level of poverty both in the short run and long run. The short run result of (NX) non-oil export shows a positive and significant effect on poverty level in Nigeria with p-value of 0.0230, while the long run result (NX) non-oil export shows a negative and significant effect on poverty level in Nigeria with the p-value of 0.0526. The short run and the long run results of (OX) oil export shows a negative and significant effect on poverty level at p-value of 0.000 and 0.0010 respectively. Furthermore, the results for interactive effects shows that EXR_INQ has a positive and significant effect on poverty at p-value of 0.0196 in the short run, while the long run result displays a negative and significant effect on poverty level in Nigeria at the p-value of 0.0609. The short run result of NM_INQ shows an insignificant effect on poverty level in Nigeria, while the long run result of NM_INQ shows a positive and significant effect on poverty level in Nigeria at the p-value of 0.0461. The short run result of NX_INQ shows a positive and significant effect on poverty in Nigeria with p-value of 0.0861; while the long run result of NX_INQ shows a negative and significant effect on poverty level with p-value of 0.0507. The short run and long run results of OM_INQ show no significant effect on poverty level in Nigeria. While, the result of OX_INQ shows a negative and significant effect on poverty level in Nigeria at p-value of 0.0562 and 0.0768 both in the short run and long run respectively. In conclusion, the outcome of the study shows that international trade has a significant effect on poverty level both in short run and long run. However, the country (Nigeria) is yet to benefit fully from the expected benefits associated with international trade. Therefore, the study recommends that in order for the country (Nigeria) to benefits fully from international trade, the country needs to strengthen her weak institutional quality to come in as a strong force where necessary to put things right and set the pace for sustainable development that allay poverty.