Multilateralism Vs. Regionalism: An Analysis of Nigeria’s Bilateral Trade Flows Using the Gravity Model

Abstract

International trade is critical to economic development. The 20th century ushered in an era of global trade that was dominated by multilateral and regional systems. Both concepts influence bilateral trade flows, but their outcomes for each nation differ. A valid approach to ascertain the efficiency of the concepts for any country is to subject them to empirical investigation. This study used the gravity model to empirically examine annual time series data of twenty-nine countries from 2000 to 2014 to determine the impact of multilateral and regional trades on Nigeria’s bilateral trade flows. The study revealed that some factors including gross domestic product(GDP), distance, GDP per capita, global competitiveness, market concentration and the type of trade concept influence the bilateral trade flows. Empirical evidence suggests that the multilateral system generates a greater bilateral trade flow for Nigeria than the regional system. The study concludes that multilateralism is more efficient for Nigeria than regionalism. Therefore, this paper recommends that Nigeria should trade more with the multilateral partners while maintaining its position within the regional economic bloc to sustain the regional demand for its manufactured exports.

Keywords: Multilateralism, Regionalism, Gravity Model, Bilateral trade flows, Nigeria.