Trade Openness, Government Regulations, and Economic Growth: The Nigeria Experience

Abstract

Trade openness as an indicator of growth in the Nigerian economy has caused grave concern among all stakeholders in the economy and the global business community at large. Nigeria's trade openness, governance, and economic growth were examined using quarterly time series data from 1996Q1 to 2021Q1. The study emphasised the role of governance in promoting long-term growth in Nigeria through trade openness. In this study, governance is proxied by three variants of good governance indicators: corruption control, rule of law, and government effectiveness, while the exchange rate was used as a control variable. The hypothesis was tested using the in autoregressive distributive lagged technique due to the mixed stationarity condition of the series. The estimated result revealed that trade openness is a negative predictor of economic growth and that government effectiveness promotes economic growth in the short run while control of corruption improves economic growth amidst a decreasing impulse generated by the rule of law in the long run. The study concludes that trade openness causes a reduction in economic growth in Nigeria while governance has a mixed effect on economic growth. Therefore, the study recommends that the government should enhance trade openness value and ranking through the export of capital-intensive commodities. Also, institutional efficiency should be enshrined Nigeria.