The Asymmetric Effects of Trade Openness on Industrial Productivity and Competitiveness: Evidence from Nigeria (1986–2023)

Abstract

Purpose: This study examines the impact of trade openness on Nigeria's industrial productivity and competitiveness between 1986 and 2023. Methodology: Annual time-series data on industrial productivity, competitiveness, trade openness, foreign direct investment, inflation and institutional quality were sourced from the National Bureau of Statistics, the World Bank's World Development Indicators, the Central Bank of Nigeria and the Worldwide Governance Indicators. Two separate Autoregressive Distributed Lag (ARDL) models were estimated to capture the distinct effects of trade openness on industrial productivity and on competitiveness, with bounds testing for cointegration and error correction modelling for short-run dynamics. Findings: The bounds test confirms long-run cointegration in both models. Trade openness exerts a positive but statistically insignificant long-run effect on industrial productivity, while institutional quality is the only significant long-run productivity determinant. Conversely, trade openness has a significant negative long-run effect on competitiveness, alongside a significant negative effect from foreign direct investment. Originality: The study contributes by separately modelling productivity and competitiveness as outcomes of trade openness, departing from studies that conflate the two, and by applying the ARDL bounds testing approach to a near four-decade dataset spanning Nigeria's major trade policy reforms.