STUDY ON INTERNATIONAL TRADE AND DOMESTIC PRODUCTION IN NIGERIA

INTERNATIONAL TRADE AND DOMESTIC PRODUCTION IN NIGERIA

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INTERNATIONAL TRADE AND DOMESTIC PRODUCTION IN NIGERIA

Abstract

This study explores the relationship between international trade and domestic production in Nigeria, focusing on the economic impact of trade policies and external trade relationships on local industries. By analyzing trade patterns, import-export balances, and production outputs across key sectors, the study aims to assess how trade influences domestic production capacity, employment, and economic growth. Utilizing data from Nigeria’s trade records and production statistics over the last two decades, this research employs both qualitative and quantitative methods to evaluate trends and correlations. Key findings are anticipated to offer insights into the benefits and challenges of Nigeria’s trade policies, with recommendations to optimize domestic production through strategic international trade engagement.

CHAPTER ONE

INTRODUCTION

Background of the Study

Nigeria’s economy has long been influenced by its engagement in international trade, primarily due to its vast natural resources, especially crude oil. Historically, international trade has provided Nigeria with access to foreign markets, advanced technology, capital, and other resources necessary for development. However, while trade has generated revenue and foreign exchange, especially through oil exports, it has also created challenges for the growth of local industries and domestic production.

Before Nigeria’s oil boom, agriculture was the backbone of the economy, supporting the livelihood of the majority of the population and contributing significantly to GDP. With the discovery of oil in the 1950s, there was a rapid shift toward oil exports, leading to a gradual decline in the agricultural and manufacturing sectors. Today, crude oil dominates Nigeria’s export portfolio, accounting for a significant portion of government revenue and foreign exchange earnings. This dependence on oil exports has made the economy vulnerable to global oil price fluctuations, which often lead to economic instability. The reliance on imported goods—ranging from raw materials to finished products—has further compounded this challenge, as it undermines the competitiveness and growth of local industries.

Despite these challenges, international trade remains essential for Nigeria’s economic growth. Trade agreements, import tariffs, and export incentives shape the business environment and influence production decisions across various sectors. However, there is a growing concern about whether Nigeria’s trade practices have favored foreign goods and services to the detriment of local production. For instance, cheap imports have often outcompeted local products, leading to reduced domestic manufacturing output, job losses, and decreased investments in local industries. Additionally, trade policies and regional agreements, such as the African Continental Free Trade Area (AfCFTA), present both opportunities and challenges for Nigeria’s industrial sector.

In recent years, the Nigerian government has sought to diversify its economy and reduce its reliance on oil exports by promoting policies that support local production and import substitution. Efforts such as the Economic Recovery and Growth Plan (ERGP) emphasize boosting agricultural and industrial production to create jobs and achieve economic stability. However, the effectiveness of these policies largely depends on how Nigeria balances its international trade practices with the development of its domestic industries.

This study aims to explore the complex relationship between international trade and domestic production in Nigeria. By examining the impact of trade policies, import-export dynamics, and global market conditions on key domestic sectors, this research seeks to provide insights into how Nigeria can leverage trade to enhance local production and achieve sustainable economic growth. The findings are intended to contribute to policy discussions on optimizing trade strategies to foster economic resilience and competitiveness in Nigeria’s domestic industries.

Statement of the problem

Nigeria’s economy is highly influenced by international trade, with crude oil exports forming the backbone of its foreign exchange earnings. This reliance on oil exports, however, has created vulnerabilities in the economy, exposing it to global market fluctuations and price volatility. At the same time, the country imports a wide array of goods, including essential raw materials, manufactured products, and consumer goods. This dependence on imports often results in an unfavorable balance of trade and contributes to the weakening of domestic industries, which struggle to compete with cheaper, sometimes higher-quality imported goods.

One of the critical challenges facing Nigeria is the limited capacity of its domestic production to meet the demands of its growing population. Despite various policies aimed at supporting local industries, Nigeria’s manufacturing sector remains underdeveloped, contributing only a small fraction to the GDP. This lag in production capacity raises questions about the effectiveness of Nigeria’s trade policies and their impact on local industries, employment, and economic stability. For instance, cheap imports have led to the closure of several local businesses, resulting in job losses and a shrinking industrial base.

Furthermore, Nigeria’s participation in international trade agreements, such as the African Continental Free Trade Area (AfCFTA), presents both opportunities and threats. While these agreements open access to larger markets, they also expose Nigeria’s domestic industries to increased competition from other countries in the region, which may further erode local production if not adequately managed.

1.3 Research Questions

1. What are effects of international trade on domestic production of fashion industry in Nigeria

2. What are effects of international trade on domestic production of agricultural products in Nigeria

3. What are effects of international trade on domestic production of vehicles in Nigeria

4. What are effects of international trade on domestic production of petroleum products in Nigeria.

1.4 Objectives of the Study

1. To examine effect of international trade on domestic production of fashion industry in Nigeria

2. Ascertain effect of international trade on domestic production of agricultural products in Nigeria

3. Examine effect of international trade on domestic production of vehicles in Nigeria

4. Examine effect of international trade on domestic production of petroleum products in Nigeria.

1.5 Significance of the Study

Academic Relevance: This study contributes to the understanding of the interplay between international trade and domestic production in developing economies like Nigeria.

Policy Implications: The findings will offer insights into formulating trade policies that align with industrial growth and economic diversification.

Economic Benefits: By identifying factors that hinder or support local production, the study will benefit policymakers, economists, and industry leaders in making informed decisions that strengthen Nigeria’s economy.

1.6 Scope and Limitations of the Study

Scope: Define the geographical and temporal scope of the study, focusing on Nigeria’s economy and trade activities in recent decades. Limit the focus to key industries, such as oil, agriculture, and manufacturing, while acknowledging their impact on other sectors.

Limitations: Note potential challenges such as data availability, the complexity of economic relationships, and changes in trade policies during the study period.

1.7 Definition of Key Terms

International Trade: Define it as the exchange of goods and services across borders and its relevance to Nigeria’s economy.

Domestic Production: Describe it as local manufacturing, agricultural, and industrial output within Nigeria.

Import Dependency: Explain the extent to which Nigeria relies on imported goods and the implications for local industries.

Trade Policy: Define trade policies, including tariffs, quotas, and incentives, and how they influence Nigeria’s trade and production.

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