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ABSTRACT
The impact of trade on economic growth has generated lots of empirical studies with different findings. Trade is generally believed to be positively related with economic growth. However, diverse opinions have continued to emerge on how trade can affect economic activities. The main objective of this study is to ascertain the impact of trade on economic growth. Endogenous growth model is employed for the study with emphasis on how export, import, exchange rate and foreign direct investment affect economic growth in Nigeria. The main objective of this research is to ascertain the nature of relationship between economic growth and trade. Therefore, this study has empirically examined the impact of trade on economic growth in Nigeria using annual time series data for the period 1985-2019. The variables considered are real GDP, a proxy for economic growth, export value, import value, exchange rate and foreign direct investment as independent variables. Augmented Dickey-fuller (ADF) test was used for the unit root test and the variables were found to be stationary at first difference except the import value that was stationary at level. Then Johansen (1988) technique was used to establish if the stationary variables are co-integrated. Further, ECM is employed to correct any form of disequilibrium in the short run. The result of stationarity and normality test reveals that the model is fairly well specified and could be used for policy analysis. The analysis was based on data extracted from Central Bank of Nigeria (CBN) statistical bulletin and World Development Indicators (WDI). The result of the analysis shows that all the variables except exchange rate were statistically significant at 5%. The results reveal that there is, overall, a positive relationship between economic growth and trade. The study therefore suggest that the government should adopt policies capable of stimulating trade as well as maintain a stable exchange rate which will ensure gainful trading activities to the country and its citizenry.
