ABSTRACT
Foreign trade enlarges the market for a country’s output. Exports may lead to increase in national output and may become an engine of growth. Expansion of a country’s foreign trade may energize an otherwise stagnant economy and may lead it on to the path of economic growth and prosperity. The relationship between trade and growth is envisaged through an export led growth strategy. The study focuses on Impact of International Trade on Growth of the Nigerian economy. In carrying out this project, linear multiple regression analysis techniques was used in assessing various components of foreign trade. Data used in this study were extracted from CBN statistical bulletin, 2011 edition; secondary data for the period 1980 to 2012 was used for the study. The regression analysis was carried out using E-views statistical tool. From the analysis the results shows that export, exchange rate, foreign direct investment are positively related while import is negatively related to output (proxy by GDP) of Nigeria and the Adjusted R2 is 0.96 for the period of 1980-2012. This study has examined the performance of foreign trade in relations to economic growth in Nigeria. It is therefore concluded that, conscious efforts should be made by government to fine-tune the various macroeconomic variables in order to provide an enabling environment to stimulate foreign trade by engaging in more of export trade and in effect curtail on import trade which has a negative effect or strain the economy. Also government should encourage export diversification.
TABLE OF CONTENTS
Title Page
Abstract
CHAPTER ONE: INTRODUCTION
1.1 Background of the Study
1.2 Statement of the Problem
1.3 Objective of the Study
1.4 Research Questions
1.5 The Research Hypotheses
1.6 Scope of the Study
1.7 Significance of the Study
1.8 Operational Definition of Terms
References
CHAPTER TWO: REVIEW OF RELATED LITERATURE
2.1 CONCEPTUAL FRAMEWORK
2.1.1 Overview of the Nigerian Economy
2.1.2International Trade- Defined
2.1.3History of International Trade
2.1.4The Terms of Trade
2.1.4.1 Exchange Control
2.1.4.2Foreign Exchange Rate
2.1.4.3The Foreign Exchange Market
2.1.4.4 Balance Of Payments: Meaning and Components
2.1.4.5 Balance of Trade and Balance Of Payments
2.1.6Importance of International Trade
2.1.6.1 Problems of Foreign Trade
2.1.6.2 Benefits of Foreign Trade
2.1.6.3 Foreign Trade and Trade Restrictions
2.1.7Foreign Direct Investment and the Nigerian Economy
2.1.7.1Agriculture Resource and Nigeria Economic Growth
2.1.8Trade Policies and Foreign Trade in the Nigerian Context
2.1.8.1Nigeria’s Trade Policy
2.1.8.2 Pre-SAP Trade Policies
2.1.8.3 Trade Policies during SAP
2.1.8.4 Trade Policy under the Needs Era (1999 - 2006)
2.1.8.5 Trends in Nigeria’s Non-Oil Export Policies
2.1.8.6 Structural Adjustment Program (Sap) and Non-Oil Exports In Nigeria
2.1.9Africa in the World Economy
2.1.10World Trade Organization and Trade in Nigeria
2.2 THEORETICAL REVIEW
2.2.1Trade as Engine of Growth Theoretical Review
2.2.2Hecksher – Ohlin Trade Theory
2.2.3 Theories of Economic Growth
2.2.4Harrod-Domar Growth Model
2.2.5Traditional Neoclassical Growth Theory
2.2.6Endogenous Growth Theory
2.2.7Relationships between Trade and Economic Growth
2.2.8 Mercantilist Trade Theory
2.2.9Absolute Advantage Trade Theory
2.2.10Comparative Advantage Theory
2.3 EMPIRICAL REVIEW
2.3.1 Trade-Growth Debate
2.4 REVIEW SUMMARY
References
CHAPTER THREE: RESEARCH METHODOLOGY
3.0Introduction
3.1 Research Design
3.2Nature and Sources of Data
3.3 Model Specification
3.4 Measurement of Variables
3.4.1APriori Expectations of Variables Used
3.4.2Statistical Criteria
3.4.3 Econometric Criteria
3.5 Definition and Justification of Variables
3.5.1 Dependent Variables
3.5.2 Explanatory variables
References
CHAPTER FOUR: PRESENTATION AND ANALYSIS OF DATA
4.1.1 Introduction
4.1.2 Presentation of Data
4.2 Test of Hypotheses
4.2.1 Test of hypothesis one
4.2.2 Test of Hypothesis two
4.2.3 Test of Hypothesis Three
4.2.4 Test of Hypothesis Four
4.2.5 Ordinary least square result of hypothesis
4.2.6 Result Interpretation
4.3 Implication of Results
Reference
CHAPTER FIVE: SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATIONS
5.1 Summary of Findings
5.2 Conclusion
5.3 Recommendation
5.4 Contributions to Knowledge
5.5 Areas for Future Studies
Reference
Bibliography
Appendices
CHAPTER ONE
INTRODUCTION
1.1 Background of the Study
Starting from Adam Smith’s discussion on specialization and the extant of the market by international trade, to the debates about import substitution versus exported growth (growth based on exporting more goods and services), to recent work on increasing returns and endogenous growth models, there are increasing debates among economists about the international trade and economic growth ( Dushko and Darko2012).
Economists have long been interested in factors which cause different countries to grow at different rates and achieve different levels of wealth. One of such factors is trade. Nigeria is basically an open economy with international transactions constituting a significant proportion of her aggregate output (Mike and Okojie 2012). The Nigerian government like many other developing countries considers trade as the main engine of its development strategies, because of the implicit belief thattrade can create jobs, expand markets, raise incomes, facilitate competition and disseminate knowledge (Ogbaji and Ebebe 2013).Nevertheless, while trade between countries may generate growth globally, there are no guarantees that its aggregate benefits are distributed equitably among trading partners. There are winners and losers in any trading relationship. However trading partners all may gain differing degrees. Many factors determine the extent to which a country may benefit from a trading relationship. These include the terms of trade a country faces vis-Ã -vis its trading partners, the international exchange rate among the traded goods and the market characteristics of the country’s exportable goods (Eravwoke and Oyovwi 2012).This has been the experience of Nigeria since the 1960s even though the composition of trade has changed over the years. Foreign trade has been an area of interest to decision makers, policy makers as well as economists. It enables nations to sell their locally produced goods to other countries of the world (Adewuyi, 2000) as quoted by (JohnAiyelabola 2012).The word trade has been defined in the Oxford Advanced Learner dictionary as “the activity in which people are buying and selling or exchanging the goods and services between countries”. International trade is the exchange of capital, goods, and services across international borders. Zahoor,Imran,Anam,Saif-ullaha,Ashraf (2012) said it is a system where the goods and services are advertised, sell and switched between two or more than two countries through import and export.
The role of foreign trade in economic development is considerable. The classical and neo-classical economists attached so much importance to foreign trade in a nation’s development that they regarded it as an engine of growth. Over the past several decades, the economies of the world have become greatly connected through international trade and globalization. Foreign trade has been identified as the oldest and most important part of a country’s external economic relationships. It plays a vital and central role in the development of a modern global economy. Its impact on the growth and development of countries has increased considerably over the years and has significantly contributed to the advancement of the world economy. The impact of foreign trade on a country’s economy is not only limited to the quantitative gains, but also structural change in the economy and facilitating of international capital flow. Trade enhances the efficient production of goods and services through allocation of resources to countries that have comparative advantage in their production. Foreign trade has been identified as an instrument and driver of economic growth (Frankel and Romer, 1999).
According to Oluwasola and Olumide(2012), the basis for foreign trade rests on the fact that nations of the world do differ in their resource endowment, preferences, technology, scale of production and capacity for growth and development. Countries engage in trade with one another because of these major differences and foreign trade has opened up avenues for nations to exchange and consume goods and services which they do not produce. They further said that the differences in natural endowment present a case where countries can only consume what they have the capacity to produce, but trade enables them to consume what other countries produce. Therefore countries engage in trade in order to enjoy variety of goods and services and improve their people’s standard of living.
The current period in the world economy is regarded as period of globalization and trade liberalization. In this period, one of the crucial issues in development and international economics is to know whether foreign trade indeed promotes growth. With globalization, two major trends are noticeable: first is the emergence of multinational firms with strong presence in different, strategically located markets; and secondly, convergence of consumer tastes for the most competitive products, irrespective of where they are made. In this context of the world as a “global village”, regional integration constitutes an effective means of not only improving the level of participation of countries in the sub-region in world trade, but also their integration into the borderless and interlinked global economy.
Foreign trade allows a country or nation to expand her markets for both goods and services that otherwise may not have been available to her citizens. Foreign trade means per capita income has been based on the domestic production, consumption activities and in conjunction with foreign transaction of goods and services.
It has been established in several literatures that export trade is an engine of growth. It increases foreign exchange earnings, improves balance of payment position, creates employment and development of export oriented industries in the manufacturing sector and improves government revenue through taxes, levies and tariffs. These benefits will eventually transform into better living condition for the nationals of the exporting economy since foreign exchange derived would contribute to meeting their needs for some essential goods and services. However, before these benefits can be fully realized, the structure and direction of these exports must be carefully tailored such that the economy will not depend on only one sector for the supply of needed foreign exchange (John and Aiyelabola 2012).
Foreign trade has been regarded as an engine of growth (Adewuyi, 2002). Foreign trade as it has been regarded as an engine of growth must lead to steady improvement in human status by expanding the range of people’s standard and preference. Since no country has grown without trade, foreign trade plays a vital role in restructuring economic and social attributes of countries around the world, particularly the less developed countries (Usman 2011).
Though international trade can be made up of Foreign Direct Investment and Foreign Portfolio Investment, Foreign Direct Investment is often preferred as a means of boosting the economy. This is because FDI disseminates advanced technological and managerial practices through the host country and thereby exhibits greater positive externalities compared with Foreign Portfolio investment which may not involve positive transfers, just being a change in ownership. In addition, available data suggest that FDI flows tend to be more stable compared to Foreign Portfolio Investment (Lipsey, 1999). This is because of the liquidity of Foreign Portfolio Investment and the short time horizon associated with such investments. Also, FDI inflows can be less affected by change in national exchange rates as compared to Foreign Portfolio Investment. However, a balanced combination of the two, taking into consideration the unique characteristics of the recipient economy will bring about the required effects on the economy (Tokunbo and Lloyd 2010)....
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