Tariff Policy and Economic Growth in Nigeria

Abstract

This study examined the impact of trade protectionism (tariffs) and economic growth /productivity in Nigeria between 1990-2021 using relevant time series data obtained from CBN Statistical Bulletin. Econometric techniques such as unit root, cointegration, and the ARDL model technique of analysis were adopted in order to determine the impact of the tariff and other variables such as exchange rate, export, import, foreign direct investment, and trade openness on economic growth/productivity in Nigeria.

The findings show that the coefficient of ECT is negative and indicates that 68.82% of the disequilibrium in the model is offset by the short-run annually to restore the long-run equilibrium. In the short run, at a 5% level of significance, the effect of TAR and IMP on RGDP is positive but statistically insignificant; TRO and LEXC have a negative and statistically insignificant effect on RGDP. However, the effect of EXP is negative but significant on RGDP. In the LR, the ARDL indicates that TAR_, TRO, LEXC, EXP, and FDI positively affect RGDP. _TAR and EXP are significant at the 5% level. IMP negatively affects RGDP. The R-squared shows that in the long run, 83.10% of the variation of the independent variables affects the dependent. The F-statistic (3.99) and a p-value (ρ) of 0.007827 show the existence of a strong linear dependency between the dependent and independent variables.

The conclusion is that tariffs and other trade variables stimulate economic growth. Since tariffs and exports are seen as sources of income to the government and FDI as a source of employment generation, they should be encouraged, and imports should be discouraged to a reasonable extent to help sustain economic growth and productivity. Trade policy should also be made to improve tariff imposition in Nigeria.