Trade Policy Incentives and Economic Growth in Nigeria
Authors: Emmanuel Dele Balogun
This paper analyzes, using descriptive statistics and econometrics data which span the period 1981 to 2014 to gauge the effects of trade policy incentives on economic growth in Nigeria. It argues that the provided incentives penalize economic growth during pre-trade liberalization eras, but stimulated a rapid increase in total factor productivity during the post-liberalization period of 2000 to 2014. The trend analysis shows that Nigeria maintained high tariff walls in economic regulation eras which became low in post liberalization era. The protections were in favor of infant industries, which were mainly appendages of multinationals but against imports of competing food and finished consumer products. The trade openness index confirms the undue exposure of Nigeria’s economy to the vagaries of international market shocks; while banking sector recapitalization and new listing of telecommunications companies deepened the financial markets in post-liberalization era. The structure of economic incentives was biased in favor of construction, trade and services, but against the real sector despite protectionist policies. Total Factor Productivity (TFP) estimates show that the Nigerian economy suffered stagnation in pre-liberalization eras, but experienced rapid growth rates in post-liberalization eras. The regression results relating trade policy incentives to TFP growth rate yielded a significant but negative intercept suggesting that a non-interventionist policy could be detrimental to economic progress, while protective tariff which limits imports of competing products could spur productivity gains in domestic import substitutes beyond factor growth with market liberalization. The main constraint to the effectiveness of trade policy incentives is the failure of benefiting industries to leverage on the domestic factor endowments of the nation. This paper concludes that there is the need to review the current economic transformation strategies urgently with a view to provide policymakers with a better understanding of the most viable options that could make for rapid success.
Digital Object Identifier (DOI): doi.org/10.5281/zenodo.1124899Procedia APA BibTeX Chicago EndNote Harvard JSON MLA RIS XML ISO 690 PDF Downloads 1265
 Pagés, C. (ed.). 2010. The age of productivity: Transforming economies from the bottom up (Washington, DC, Inter-American Development Bank and Palgrave Macmillan).
 Devlin, R.; Moguillansky, G. 2011. Breeding Latin American tigers: Operational principles for rehabilitating industrial policies (Santiago and Washington, DC, ECLAC and World Bank
 Jansen, M.; Peters, R.; Salazar-Xirinachs, J.M. 2011. Trade and employment: From myths to facts (Geneva, ILO).
 Gomory, R.E.; Baumol, W.J. 2000. Global trade and conflicting national interest (Cambridge, MA, MIT Press)
 Salazar-Xirinachs, J. M.; Nübler, I.; Kozul-Wright, R. 2014. “Industrial policy, productive transformation and jobs: Theory, history and practice” in José Manuel Salazar-Xirinachs, Irmgard Nübler and Richard Kozul-Wright (editors), Transforming economies: Making industrial policy work for growth, jobs and development pp.1-39. © International Labour Office. – Geneva: ILO, 2014.
 Hausmann, R.; Hwang, J.; Rodrik, D. 2007. “What you export matters”, in Journal of Economic Growth, Vol. 12, No. 1, pp. 1–25.
 Lederman, D.; Maloney, W.F. 2012. Does what you export matter? In search of empirical guidance for industrial policies (Washington, DC, World Bank).
 Aghion, P.; Durlauf, S. 2007. From growth theory to policy design (Washington, DC, World Bank, PREM Network).
 Kenny, C.; Williams, D. 2001. “What do we know about economic growth? Or, why don’t we know very much?”, in World Development, Vol. 29, No. 1, pp. 1–22.
 Krueger, A.O. 1990. “Asian trade and growth lessons”, in American Economic Review, Vol. 80, No. 2, pp. 108–112.
 Schleifer, A. 1998. “State versus private ownership”, in Journal of Economic Perspectives, Vol. 12, No. 4, pp. 133–150.
 Lin, J.Y.; Treichel, V. 2011. “Applying the Growth Identification and Facilitation Framework: The case of Nigeria”, World Bank Policy Research Working Paper 5776, Washington DC, 47 pp.
 Cimoli, M.; Dosi, G.; Stiglitz, J.E. (eds). 2009. Industrial policy and development: The political economy of capabilities accumulation (Oxford, Oxford University Press).
 Greenwald, B.; Stiglitz, J.E. 2014. Creating a learning society: A new approach to growth, development and social progress (New York, Columbia University Press).
 Nelson, R.R.; Winter, S.G. 1982. An evolutionary theory of economic change (Cambridge, MA, Harvard University Press).
 Dosi, G.; Winter, S.; Nelson, R.R. 2000. The nature and dynamics of organizational capabilities (New York, Oxford University Press).
 Chang, H.-J. 2010. “Hamlet without the prince of Denmark: How development has disappeared from today’s development discourse”, in S.R. Khan and J. Christiansen (eds): Towards new developmentalism: Markets as means rather than master (Abingdon, Routledge).
 Schumpeter, J. A. 1934. Theory of economic development. Harvard Univerisity Press, Oxford.
 Schumpeter, J. A. 1939. Business cycles (Vol. 1, pp. 161-74). New York: McGraw-Hill.
 Hicks, J. R. 1939. Capital and time. Clarendon, Oxford
 Hicks, J. R. 1973. Value and Capital. Clarendon, Oxford
 Hicks, D., 2005. The four literatures of social science. In the Hankbook quantitative science and technology research (pp. 473-496). Springer Netherlands.
 McMullan W. E. and Kenworthy, T.P., 2015. “Modernizing Schumpeter: Toward a New General Theory of Entrepreneurship”. In Creativity and Entrepreneural Performance, pp. 57-72. Springer International Publishing.
 Bayoumi, T., D. T. Coe, and E. Helpman (1999) "R&D Spillovers and Global Growth." Journal of International Economics, 47(2), pages 399-428.
 Barro, R. and X. Sala-i-Martin, (1992) “Convergence,” Journal of Political Economy, 100: 223-51.
 Beason, R. and Weinstein D (1996) “Growth, Increasing Returns, and Targeting in Japan (1955-1990)” Review of Economics and Statistics.
 Dollar, D. and E. N. Wolff (1994). Capital Intensity and TFP Convergence by Industry in Manufacturing, 1963-1985. Convergence of Productivity. W. J. Baumol, R. R. Nelson and E. N. Wolff. New York, Oxford University Press.
 Edwards, S. 1992 “Trade Orientation, Distortions, and Growth in Developing Countries,” Journal of Development Economics, 39: 31-57
 Krishna, P. and D. Mitra. (1998) “Trade Liberalization, Market Discipline and Productivity Growth: New Evidence from India.” Journal of Development Economics, 56(2) pp. 447-62.
 Clerides, S., S. Lach, et al. (1998). "Is Learning by Exporting Important? Micro-Dynamic Evidence From Colombia, Mexico and Morocco." Quarterly Journal of Economics;113(3), August 1998, pages 903-47.
 Bernard, A. B. and J. B. Jensen (1999a). “Exceptional Exporter Performance: Cause, Effect or Both?” Journal of International Economics, 47(1) pp. 1-26.
 Bernard, A. B. and J. B. Jensen. (1999b) “Exporting and Productivity” Yale University, mimeo, March.
 Rodrik, D. (1995). Getting Interventions Right: How South Korea and Taiwan Grew Rich? Economic Policy April: 55-107.
 Rodrik, D. (1999) (The New Global Economy and Developing Countries: Making Openness Work Washington DC: Overseas Development Council
 Lawrence, R. Z.; Weinstein, D. E. 1999. “Trade and Growth: Import-Led or Export-Led? Evidence from Japan and Korea”, NBER Working Paper No. 7264. © 1999 by Robert Z. Lawrence and David E. Weinstein
 Greenwald, B.; Stiglitz, J.E. 2013. “Industrial policies, the creation of a learning society, and economic development”, in J.E. Stiglitz and J.Y. Lin (eds): The industrial policy revolution: The role of government beyond ideology (Basingstoke and New York, Palgrave Macmillan).
 Kim, J. 2001. Total Factor Productivity Growth in East Asia: Implications for Future Growth, Department of Economics, Dongguk University, Seoul, Korea.
 Comin, D. 2006. “Total Factor Productivity” in Durlauf, S.N. and L. E. Blume (editors), The New Palgrave Dictionary of Economics, Palgrave Macmillan or diego.cominnyu.edu
 Lucas, R.E. 1988. “On the mechanics of economic development”, in Journal of Monetary Economics, Vol. 22, No. 1, pp. 3–42.
 Mankiw, N. G. 2010. Macroeconomics, 7th Edition, Worth Publishers, New York, p. 250.
 The World Bank. 2015. World Development Indicators: databank.worldbank.org accessed on 4/3/2016
 Central Bank of Nigeria. 2015. CBN Statistical Bulletin: Database www.cenbank.org.ng accessed on 4/3/2016