Reevaluating the Impact of Trade Openness on Economic Growth in Nigeria: Evidence from the Autoregressive Distributed Lag Approach

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Authors: Iya Ibrahim Digil and Aniekan O. Akpansung

Abstract

Trade openness has been a core aspect of Nigeria’s economic policy since the early 1980s. However, the relationship between trade openness and economic growth in Nigeria remains debated. This study, therefore, reexamined the impact of trade openness on Nigeria’s economic growth, both in the short and long term, using annual data from 1981 to 2023. The Augmented Dickey-Fuller (ADF) unit root test indicated that the variables were integrated of order zero and order one, but not of order two or higher, thereby necessitating the application of the autoregressive distributed lag (ARDL) bounds cointegration approach. The bounds test results showed that the variables follow a stable long-term trend despite short-term fluctuations. The findings reveal that trade openness negatively affects economic growth in the long run, while it has positive effects in the first and second lagged periods. Other economic factors, such as foreign direct investment and government spending, support growth, whereas physical capital and the exchange rate act as long-term obstacles. This contradicts the positive role of investment suggested by Solow's model. However, in the short term, government spending was negative and significant, often reflecting structural issues such as low productivity, poor diversification, weak institutions, or ineffective liberalisation policies. Therefore, Nigeria needs to better sequence its trade policies, improve human capital, and pursue openness with a focus on diversification to foster sustainable, long-term growth.

Keywords: Trade openness, Economic growth, ADF, ARDL, Nigeria

2026 - NIJAF - 18 - 104 Iya Ibrahim ET AL..pdf

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