Effects of trade liberalization and institutional quality on economic growth in Nigeria

This study examined the effects of trade liberalization and institutional quality on economic growth in Nigeria from 1985 to 2023, using the vector error correction model (VECM) technique: Granger causality, impulse response function (IRF) and Forecast error variance decomposition (FEVD) approaches in line with the study objectives. The study was anchored on the endogenous growth theory, as trade liberalization and institutional quality goes with human innovation and creativity. The data used in this study were sourced from the Central Bank of Nigeria statistical bulletin, National Bureau of Statistics and World Bank Development Indicators. The variables used include real GDP, the dependent variable and a measure for economic growth; average import tariff (AIT), the dependent variable and a proxy for trade liberalization. Other variables used include institutional quality, foreign direct investment, remittances, gross fixed capital formation, exchange rate, financial development and labor force. The findings revealed that: average import tariff (AIT) has a significant negative impact on real GDP in Nigeria in the long-run; quality of institutions has significant impact on real GDP in Nigeria; average import tariff (AIT) granger causes real GDP in Nigeria; shocks to average import tariff (AIT) influences the trends of real GDP in Nigeria. This study therefore, recommended the removal of bottlenecks by the Nigerian Custom Service in clearing of goods imported into Nigeria, appropriate duty specification, strengthening of institutions and regulatory reforms, and stabilization of tariff regime in order to realize the benefits of trade liberalization and good quality of institutions on economic growth in Nigeria. Keywords: Trade, Liberalization, Institutions, Quality, Economy, Nigeria.