Effect of Trade Liberalization on the Economic Development of Nigeria at the Micro Level and Aggregate Output

Abstract

This study investigated the effect of trade liberalization on the economic development of Nigeria at the micro level and aggregate output, from 1970 to 2020. Data were collected from Central Bank of Nigeria (CBN) statistical report bulletins, CBN online data base, National Bureau of Statistics, International Financial Statistics as well as World Development Indicators of World Bank for the period 1970-2020. The data were analyzed using the 2SLS regression technique with the help of Eview9 software. Unit root test was carried out using ADF to ensure the stationarity of data, Error Correction Model was used to stationalize the non-stationary data and finally co-integration test was carried out and a long-term relationship was ascertained to exist among the variables. The effect of trade liberalization on the economic development of Nigeria was determined by its effects on poverty, inequality of income distribution, per capita gross domestic product and employment. The study found that degree of openness has a negative and insignificant effect on poverty, a positive and significant effect on income inequality, negative and significant effect on per capita GDP and a positive and significant effect on employment. Trade openness has a negative but insignificant relationship with overall aggregate output at the long-run and a positive insignificant value at the short-run. The study recommends amongst others that the government and private sector engage in wealth generation programmes at the rural areas, to help close the income inequality gap.

Keywords: Trade Liberalization, Effect, Per capita gross domestic product, Poverty,  Income distribution, Employment, Aggregate output.

DOI: 10.7176/JESD/16-2-02

Publication date: March 30th 2025