CHAPTER ONE
1.0 INTRODUCTION
1.1 Motivation
Trade is widely accepted as a major
engine of economic growth. This has been the experience of Nigeria since the
1960s even though the composition of trade has changed over the years. International
trade has been an area of interest to decision makers, policy makers as well as
economists. It enables nations to sell their locally produced goods to other
countries of the world. International trade is the exchange of capital, goods
and services between countries. Foreign trade allows a country or nation to expand
her markets for both goods and services that otherwise may not have been
available to her citizens. Foreign trade means per capita income has been based
on the domestic production, consumption activities and in conjunction with
foreign transaction of goods and services. It has been established in the
literature that export trade is an engine of growth. It increases foreign
exchange earnings, improves balance of payment position, creates employment and
development of export oriented industries in the manufacturing sector and
improves government revenue through taxes, levies and tariffs. These benefits
will eventually transform into better living condition for the nationals of the
exporting economy since foreign exchange derived would contribute to meeting
their needs for some essential goods and services. However, before these
benefits can be fully realized, the structure and direction of these exports
must be carefully tailored such that the economy will not depend on only one
sector for the supply of needed foreign exchange. According to (Grossman and
Helpman 1997) a theoretical view and (keller 2002) an empirical view has argued
that openness is important for growth because it generates channels for technology
diffusions, which makes the less developed countries to import such goods from
the developed countries.
International trade has been regarded
as an engine of growth (Adewuyi, 2002). Foreign trade as it has been regarded
as an engine of growth must lead to steady improvement in human status by
expanding the range of people‟s standard and preference. Since no country has
grown without trade, foreign trade plays a vital role in restructuring economic
and social attributes of countries around the world, particularly the less
developed countries. Before 1972, most of Nigerian exports were agricultural
commodities like cocoa, palm produces, cotton and groundnut. Thereafter,
minerals, especially petroleum, became significant export commodities. By 1960,
imports were valued at N432million. They increased to N758.99million and
N8.132million in 1970 and 1978 respectively, rising to N124, 162.7million in 1
and N681, 728.3million in 1987. Food import became noticeable in Nigeria
foreign trade. The country had an unfavorable trade balance from 1960 to 1965,
partly because of the aggressive drive to import all kinds of machinery to
stimulate the industrialization strategy pursued immediately after
independence.
Thereafter, export of crude petroleum
guaranteed a favorable trade balance. The oil sector dominates export while the
non-oil sector dominates import. Growth performance of the Nigerian economy has
been determined by both domestic production and consumption activities as well
as foreign transactions in goods and services. . Before her political independence,
Nigeria has been an active player on the field of foreign trade, initially with
predominately agrain products, but presently dominated by petroleum products.
Since the discovery of oil in
commercial quantity in Oloibiri in the present day Delta State, Nigeria has
been an important player in world affairs, economically and otherwise,
particularly being the 6th largest producer of crude oil in the organization of
petroleum exporting countries (OPEC). Prior to the discovery of oil in 1960s,
the Nigerian government was able to execute investment projects through
domestic savings, earnings from agricultural product exports and foreign aids.
However, the capacity of the economy
to accumulate domestic savings to finance investment was limited. This study is
going to take a position, whether Nigeria‟s economic under-development can be
attributed to international trade or whether her relative economic prosperity,
in terms of growth and development can be attributed to her taking part in the
field of international trade. In other words, how effectively has trade
contributed to Nigeria‟s economic growth and development? This is the important
question which this study attempts to answer. Since the last twenty years,
economic policy in Nigeria can be characterized by trade liberalization and
regional integration which is defined by the radical reducing or removal of
trade barriers. The World Trade Organization (WTO) the IMF and especially the
World Bank
(WB) have obtained considerable powers
to sway policies in countries towards this path. As apart of the global
Structural Adjustment Programme, it is assumed and argued that trade
liberalization improves the welfare of consumers and trims down poverty. The
assertion was two-fold and simple. First, it is argued that liberalization
offers wider room for choice from an array of quality goods and cheaper imports
also find more lucrative markets in which their products can be sold. A second
argument is that, the production of goods in which a country has comparative
advantage expands, while the sectors without comparative disadvantage minimize.
This is believed to lead to an overall rise in real GDP since there would be
reallocation of the productive factors from less efficient sectors to more
efficient sectors. The importance of foreign trade in the development process
has been of interest to development economists and policy makers alike. Imports
and exports are key parts of foreign trade and the import of capital goods in
particular is vital to economic growth.
Promotion of economic growth is one of
the objectives of foreign trade but in recent times, this has not been the case
because the Nigerian economy still experience some element of economic
instability such as high level of unemployment, price stability and adverse
balance of payment to mention a few. One of the major obstacles why benefits of
foreign trade cannot be translated into economic growth is the macroeconomic
policy distortions resulting from the trade which turned the country into an
import dependent economy. The import of the country grew from N0.7 billion
in1970 to over N562 billion in 1996 and later increase to N1, 266 billion in
2001, (CBN Annual Report, 2004). More so, foreign trade has not accrued into
economic growth because some of the goods imported into the country were those
that cause damage to the local industries by rendering their product inferior
and being neglected, this thereby reduces the growth rate of output of such
industries and this later spread to the aggregate economy.
Due to the reasons stated above, it is
worthy of note to analyze the influence of foreign trade on economic growth in
Nigeria. To this ends, to what extent should Nigeria allow the importation of
goods and services to avoid damages to local industries? And what kind of
standard should be adopted for upgrading the exportation of goods and services.
The main objective of this study is to evaluate the performance of foreign
trade and its contribution to economic growth in Nigeria.
Most economists especially development
and international economists have argued in favor of international trade as it
relates to global and domestic economic growth and development. They believed
that international trade leads to specialization, increase in resource
productivity, large total output, creation of employment, generation of income
and relaxation of foreign exchange restraints (Nnadozie, 2003). The positive
relationship that exists between global trade and economic growth may be as a
result of the likely positive externalities due to the involvement of different
countries in the international trade. Many empirical studies have argued in
favor of the importance of global trade on economic growth using the degree of
trade openness, terms of trade, tariff and exchange rate as variables to
explain the claim that open economies grow faster than closed economies
(Edwards, 1998). On the contrary, some economists have argued that the practice
of protectionism is better means for domestic economic growth because in some
instances the domestic economy may have comparative advantage over the foreign
economy (Nnadozie, 2003). Nevertheless, the overwhelming evidence of positive
impact of international trade on economic growth cannot be overemphasized.
However, there are some questions to ask: what relationship exists between
Nigeria‟s involvement in international trade and her economic growth?
1.2 Statement of the Problem
The importance of international trade
in the development process has been of interest to development economists and
policy makers alike (Arodoye and Iyoha, 2014). 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 external balance. However, unless policy makers know what the major
components of imports are and how they are determined, such a policy decision
can be harmful to investment and output if domestic production relies on
imports.
In Nigeria, some people are in favor
of protectionist and highly regulated economy and have even criticized the
previous Nigerian government, for signing the treaty of the World Trade
Organization (WTO), claiming that, Nigeria was not adequately represented in
the negotiations and should push for a fairer deal. As regards to this
statement, some people, particularly economists pushed for the implementation
of the Structural Adjustment Programme (SAP) in 1986 which brought about
deregulation of formerly regulated areas of the economy, so that the country
could reap the benefits of economic openness.
The main thrust of this research is to
take an objective view regarding the controversy of the role of international
trade, in the progress of a country in terms of economic growth of Nigeria. It
has been eluded by the dissenting voices in the 21st century that trade could
be negative in terms of acting as a catalyst of economic growth and
development, being a retrogressive force, in the journey to economic independence.
But ironically, past experience has proven the potency of trade as a catalyst
of economic progress, with regards to growth and development.
1.3 Research Questions
This work will be guided through the
following questions;
(i) What is the impact of
international trade on the economic growth in Nigeria?
(ii) To what extent exchange rate
policy impacted on the economic growth in Nigeria?
TOPIC: INTERNATIONAL TRADE AND ECONOMIC GROWTH IN NIGERIA (1981 – 2013)
Format: MS Word
Chapters: 1 - 5
Delivery: Email
Delivery: Email
Number of Pages: 50
Price: 3000 NGN
In Stock

No comments:
Post a Comment
Add Comment