Impact of Trade Liberalization on the Nigerian Manufacturing Sector

Abstract

The study examines the inter-relationship between trade liberalization and manufacturing performance in Nigeria. Time series data sourced from Central Bank of Nigeria (CBN), National Bureau of Statistics (NBS) and Manufactures' Association of Nigeria (MAN) for the period 1980 to 2010 were utilised. Short-run error correction model (ECM) and long-run (OLS) regression techniques was employed to derive the estimates. The findings from the study indicate that the adoption of trade liberalization strategies in Nigeria have negatively affected the country's manufacturing sector, This shows that trade openness has brought about negative total factor productivity in Nigeria as manufacturers often respond to uncompetitive ease in trade restrictions by outright closures, reduction in production, and sometimes, relocation to neighboring countries. However, empirical evidence suggests trade liberalization increases Nigeria's manufacturing output when total value of manufacturing output was used as measure of performance, although was not significant at the conventional test levels. Additionally, the incidence of the Dutch Disease syndrome was found to adversely affect Nigeria's manufacturing sector performance measures employed in this study, and result aptly support the resource-curse hypothesis.