The Impact Of International Trade On The Development Of Commerce And Industry In Nigeria
The project set out to examine the impact of international trade on the development of commerce and industry in Nigeria, the variables used for this study are GDP, Volume of Import, Volume of Export, Net Export and Trade Openness. The methodology used is Ordinary Least Squares (OLS) and E-new software package. The main objective of this study is to examine the relationship between international trade and economic growth, and to examine the impact of international trade on the development of commerce and industry in Nigeria. The T-test is used to determine the significance of the individual parameter estimates. The F-test is used to determine the significance of the entire regression plan. The regression result shows that NEXP (Net Export) and VIMP (Volume of Import has a positive relationship with GDP) while Trade openness and VIMP (Volume of Import has a negative relationship with GDP). The researcher made the following recommendations among others: The federal government of Nigeria should put in more efforts in encouraging local manufacturers to produce more.
1.1 Background of the Study
International trade deals with the economic and financial interdependence among nations, international trade is a part of our daily life, international trade plays a vital role in shaping economic and social performance and prospects of countries around the world, especially those of developing countries. No country has grown without trade. However, the contribution of international trade to the development of commerce and industry in Nigeria depends a great deal on the context in which it works and the objectives it serves.
International trade is the exchange of capital goods and services across borders or territories. Through international trade countries supply the world economy with the commodities that they produce relatively cheaply and demand from the world economy the goods that are made relatively cheaper elsewhere. The positive effects of international trade on the development of commerce and industry in Nigeria were first pointed out by Smith (1776). This idea prevailed until World War II, although with relative hibernation during the “Marginalist Revolution”. Economic theories have argued that countries engage in international trade to reap the gains that arise from specialized production with each country concentrating on producing those goods and services that involve the least opportunity cost.
Industrial growth is the increase in the amount of the goods and services produced by an economy overtime, it can also be said to refer to growth of potential output, that is, production. It is measured as the percent rate of increase in real GDP. Various literatures on international trade recognize trade as a catalyst for economic growth. To act as an engine of economic growth, trade must lead to steady improvements in human conditions by expanding the range of people’s choice, a notion that the concept of human development tries to capture. For developing countries, contribution of trade to the development of commerce and industry in Nigeria is immense owing largely to the obvious fact that most of the essential element for growth of such as capital goods, raw materials and technical know-how, are almost actively imported because of inadequate domestic supply. Foreign exchange has to be earned through exports to be able to pay for imports. To enhance exports, improved technology must be acquired, and this in turn further pushes up demand for imports.
Prolonged pressures on the balance of payments constitute constraints to the development of commerce and industry and thus, appropriate policy measures have to be put in place to streamline international trade to conform to desired goal of economic growth.
1.2 Statement of Problem
The importance of international trade in the development process has been of interest to development economists and policy makers alike. Imports and exports are a key part of international trade and the import of capital goods in particular is vital to economic growth. This is so because imported capital goods directly affect investment, which in turn constitutes the motor of economic expansion. Economic reform is expected to affect imports as part of the strategy to restore balance.
In Nigeria, some people are in favor of protectionist and highly regulated economy and have even criticized the previous Nigeria government for signing the treaty of World Trade Organization, claiming that, Nigeria was not adequately represented in the negotiations and that we should push for a fairer deal.
The research questions which will guide this work are as follows. Does international trade lead to economic growth? What are the factors that hinder international trade in Nigeria?
1.3 Objectives of the Study
International trade has been an “Engine of growth” for the global economy and Nigeria in particular. Large dissenting voices in the 20thCentury claim that international trade only perpetuates the under-development of poor countries due to the fact that there is a disproportionate share of gains from international trade that accrues to industrialized countries.
We shall focus on the following objectives.
- To examine the relationship between international trade and economic growth.
- To examine the impact of international trade on the development of commerce and industry in Nigeria.
- To examine the factors that hinder international trade in Nigeria.
- Ho: That there is no relationship between international trade and the development of commerce and industry in Nigeria.
- H1: That there is relationship between international trade and the development of commerce and industry in Nigeria.
1.5 Significance of the Study
This study will be an invaluable tool for students, researchers, research institutions and the general public that partake in international trade who wants to know more about the impact of international trade on the development of commerce and industry in Nigeria.
Summary, Conclusion and Recommendations
5.1 Summary Of Findings
From the above it is seen that:
- There is a significant impact of Export trade on the Nigerian economic growth
- There is no significant impact of Import trade on the Nigerian economic growth
This study has examined the impact of international trade on Nigeria economic growth, Export, import values, were used as the explanatory variables or regressors while GDP growth rate was used as the dependent variable in an ordinary least squares regression process, the study concludes that trade favorably impacts on growth in the Nigerian economy.
Based on the findings of this research work, it is necessary 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. First of all, there should he optimal control of trade through the borders of the economy. The underground economic activities of bunkering, smuggling, child and drug trafficking, and other related illegal activities should he properly checked. This will help the economy to fully account for every trade/transaction through the border and determine its impact on the output growth of the economy. In order to achieve this, governments trade policy must be liberal. Export promotion strategy should be review and import substitution strategy should also be review so that import and export will change its dimension. Also Nigeria government should strengthen the competiveness of exports by combing the imports of high technology and domestic independent research.
The government should encourage export diversification. Non-oil sector exports should be encouraged and concentration on oil sector export should be minimized. Expenditure on projects and infrastructures that would facilitate trade and economic growth should be encouraged, and the monetary authority should give priority to exchange rate stability.
Nigerian should reframe from excessive consumption of foreign goods and services so that their imports might be cutoff.
Manufacturing industries should improve on their production so that their output would be competitive in the global market. Excise duties should be lowered so as to encourage local industries to export their goods and services. Lifting of trade barriers on local output should not be followed by the introduction of new ones. Only the importation of capital goods that are essential should be encourages, since not all importation are necessary for economic growth.
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