Trade Openness and Economic Growth in the Developing Countries: Evidence from Nigeria

Abstract

This study purposed to examine the extent to which trade openness has impacted the growth of the Nigerian economy covering the period from 1981 to 2018. Real Gross Domestic Product (RGDP) was used as a proxy for economic growth. Other variables of interest incorporated into the model as independent variables including trade openness exchange rate and inflation. The data for the study were sourced from the Central Bank of Nigeria statistical database. The Augmented Dickey-Fuller test (ADF) was employed to ascertain the stationary of the variables, and the result revealed that the variables became stationary after the first difference. Findings from the Johansen Co-integration Test showed evidence of long-run relationship, while the Error Correction Model (ECM) revealed that trade openness has a positive and significant impact on economic growth, the ECM further revealed that inflation has a significant negative impact on economic growth while exchange rate has a positive but not significant impact on economic growth of Nigeria within the period under study. Based on the findings from the study, it was therefore recommended that the government should embark on a comprehensive trade liberalization policies and programs in order to ensure the acceleration and sustenance of the Nigerian economy.