IMPACT OF INTERNATIONAL TRADE ON ENVIRONMENTAL DEGRADATION

ABSTRACT

Nigeria is not an exception to the widespread understanding that environmental degradation is a serious problem. This study employed the autoregressive distributed lag (ARDL) methodology to analyze annual time series data. The key variables of interest are trade openness, terms of trade, imports and exports for the period 1981 to 2021, in order to investigate the effects of international trade on environmental degradation in Nigeria. The results of the ADF unit root test show that the variables are both I(1) and I(0), thereby making it suitable for ARDL model. A long-run relationship between the variables was indicated by the bound test. It was found that the previous period for imports and the current-year values of terms of trade, imports, and exports have a negative impact on environmental degradation in Nigeria in the short run, whereas trade openness and the previous value for export have a positive impact on the current-year environmental degradation. However, the finding shows that terms of trade has a negative impact on environmental degradation in the long-run, this means that favorable terms of trade will lead to a reduction in environmental degradation in the long run. Hence favorable terms of trade which is likely to increase country’s external reserve will make more funds available for the issues of environmental degradation to be tackled. Based on the empirical results the study recommends, among other things, that: beyond raw materials exports, government must commit itself to promoting value addition to increase quality of export to make the country’s trade more profitable. Also in case of oil spillage especially in the Niger Delta region, immediate cleanup of the environment should be carried out while processes of remediation should commence without delay.