Is Trade Openness Suitable for Growth of the Nigerian Manufacturing Sector? An Autoregressive Distributed Lag Approach
Journal Title: Academic Journal of Economic Studies - Year 2018, Vol 4, Issue 2
Abstract
The paper investigates the relationship between trade openness and manufacturing sector output in Nigeria from 1980–2016 using secondary data collected from the Central Bank of Nigeria (CBN) statistical bulletin (2016) and the National Bureau of Statistics (various issues). Trend analysis, descriptive statistics and unit root test were carried out for the study. For estimation analysis, we employed the Bounds (ARDL) test, Pairwise Granger Causality test, ECM test and stability test. The result conformed to economic theory and suggests that trade openness and foreign direct investments have positive and significant relationship with manufacturing sector output for the period under review. However, exchange rate did not conform to economic theory by appearing with a negative sign and it was not statistically significant for the period under review. The independent variables explained 86% of the total variation in manufacturing sector output in Nigeria. The Bounds test indicates that a long run relationship exist between trade openness, foreign direct investment, exchange rate and manufacturing sector output. Pairwise Causality test shows a bi-directional causation between trade openness and manufacturing sector output with the causation effect running from trade openness to manufacturing sector output and from manufacturing sector output to trade openness. Thus, the paper recommends that Nigeria’s manufactured products should be of top notch quality so that they can compete favourably with other manufactured goods produced by other countries in the international market. In addition, effort should be made in formulating policies that will improve both domestic and foreign trade as the economy strives to achieve growth through trade. Thus, there should be macroeconomic stability through the use of suitable trade, fiscal and monetary policies which if properly harmonized would be jointly reinforcing in achieving common macroeconomic objective of favourable balance of trade, price stability and economic growth. Finally, government should consider a set of reliable economic policies that will strengthen bilateral and multilateral trade agreements; this will go a long way in restoring the confidence of trade partners, thus increasing the rate of multilateral trade partners to Nigeria.
Authors and Affiliations
Anthony Ilegbinosa Imoisi
Keywords
Related Articles
- EP ID EP302745
- DOI -
- Views 58
- Downloads 0
Financial Malpractice and Risk of Financial Malpractice of NGOs in Ghana: Perspective of Donors
NGOs are the forefront of aid delivery and managing a large amount of aid funded projects. The impacts of these projects in developing countries like Ghana are very critical in alleviating poverty and improving the livin...
Comparison of Recent Developments in Productivity Estimation: Application on Ethiopian Manufacturing Sector
The objective of this paper is to estimate total factor productivity of manufacturing firms in Ethiopian under alternative estimation approaches. Six methods are compared in the estimated total factor productivity namely...
Modelling and Predicting the Fiscal Pressure Indicator in the European Union
The main goal of this research is to model and predict the fiscal pressure indicator and the real GDP rate in the European Union during 1996-2013 using the vectorial autoregressive approach. According to Granger test for...
Industrialization: Panacea for Economic Growth
This paper examines the relationship between industrialization and economic growth in Nigeria between 1981 and 2015, by employing cointegration approach known as Autoregressive Distributed Lag Model (ARDL). The empirical...
The Asymmetric Effect in the Volatility of the South African Rand
This study investigates the behaviour of the volatility in the South African Rand/USD exchange rate and its impact on the value of the Rand between 2001 and 2017. The key objectives were to assess the impact of its volat...