Trade Liberalization and Industrial Growth in Nigeria

Abstract

This study investigated the relation between trade liberalization and industrial growth in Nigeria.  Adopted in the study is the human capital model of endogenous growth with modifications for trade liberalization within the Nigerian context. In the empirical investigation of the aggregate function of industrial output growth in Nigeria, co-integration and error correction estimation approaches were utilized. A unique co-integral relation between industrial production and the explanatory variables in the study  is found. In order to determine the short-run dynamics around the equilibrium relationship, we estimated an error correction model [ECM]. The empirical findings in this study have it that there is a positive and significant correlation between trade liberalization and industrial growth in Nigeria, structural deregulation had positive impact industrial growth in Nigeria, Nigerian industries are labour intensive, industrial production responded negatively and insignificantly to capital formation in Nigeria, industrial growth is cumulative and self-sustaining in Nigeria. The result however does not provide evidence of significance of structural deregulation over the period of short-run analysis. The policy implications are simple. The results of the study suggest the need for government to embark on comprehensive implementation of trade liberalization policies in order to accelerate and sustain industrial growth in Nigeria. However, the implementation of trade liberalization polices should be done with a delay caution.

Keywords: trade liberalization, industrial growth, endogenous growth, cointegration, error correction