TRADE OPENNESS AND MANUFACTURING SECTOR PERFORMANCE IN NIGERIA
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Abstract
The broad objective of this study is to examine impact of trade openness on manufacturing sector performance in Nigeria. This study investigates the intricate relationships among manufacturing value added (MAN), trade openness (TOP), exchange rate (LNEXR), interest rate (LNIR), imports (IMP), and exports (LNXPT) over a 41-year period from 1981 to 2021, employing various econometric techniques. Descriptive statistic was conducted to know the raw nature of all variables, the unit root test using the
Augmented Dicky-fuller test to check for stationarity of the variables. The co-integration analysis using the bounds test was used to check if there is a long run relationship between the variable and the ARDL-ECM approach was used to analyze the data for both the short run and long run analysis. The Augmented Dickey-Fuller test confirms that all variables are non-stationary at levels but stationary after first differencing, indicating they are integrated of order one, I(1). The ARDL Bound Test establishes a long-run
equilibrium relationship among the variables, with a computed F-statistic of 10.76345 exceeding the upper bound critical value, confirming co-integration. The Error Correction Model (ECM) indicates that approximately 17% of the previous period's disequilibrium is corrected in the current period. The Auto Regressive Distributed Lag (ARDL) model reveals that trade openness, interest rates, and exports significantly negatively impact manufacturing value added in the short run, while the exchange rate shows no immediate significant effect. However, past increases in the exchange rate positively influence manufacturing value added in the long run. The findings underscore the complex dynamics of trade and economic policy on domestic manufacturing, highlighting the need for strategic interventions to bolster the manufacturing sector amidst increasing trade openness and fluctuating economic conditions.
Augmented Dicky-fuller test to check for stationarity of the variables. The co-integration analysis using the bounds test was used to check if there is a long run relationship between the variable and the ARDL-ECM approach was used to analyze the data for both the short run and long run analysis. The Augmented Dickey-Fuller test confirms that all variables are non-stationary at levels but stationary after first differencing, indicating they are integrated of order one, I(1). The ARDL Bound Test establishes a long-run
equilibrium relationship among the variables, with a computed F-statistic of 10.76345 exceeding the upper bound critical value, confirming co-integration. The Error Correction Model (ECM) indicates that approximately 17% of the previous period's disequilibrium is corrected in the current period. The Auto Regressive Distributed Lag (ARDL) model reveals that trade openness, interest rates, and exports significantly negatively impact manufacturing value added in the short run, while the exchange rate shows no immediate significant effect. However, past increases in the exchange rate positively influence manufacturing value added in the long run. The findings underscore the complex dynamics of trade and economic policy on domestic manufacturing, highlighting the need for strategic interventions to bolster the manufacturing sector amidst increasing trade openness and fluctuating economic conditions.
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