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THE IMPACT OF TRADE LIBERALIZATION ON MANUFACTURING SECTOR IN NIGERIA

ABSTRACT

This research work studies trade liberalization how it was put place to rationalize the use of scarce resources to sustain Pareto optimality perspectives and promote efficiency in the development of manufacturing sector in Nigeria.

However, the main aim and objectives of the study is to analyze the importance of trade liberalization coupled with the challenges being faced in development of manufacturing sector in Nigeria, and this is achieved through the analysis of measure like exchange rate liberalization.

The problems identified with the study include the low capacity of Nigeria manufacturing sector in processing of raw materials.

The analytical techniques used are regression analysis which shows positive correlation between the Dependent variable (GDP) and independent variables (inflation rates and average capacity utilization, net import.

The findings finally show that there is high positive correlation between GDP and net export, average capacity utilization

CHAPTER ONE

BACKGROUND OF THE STUDY

1.1     INTRODUCTION

Aside from the fact that trade is inevitable in any economy and because countries are not equally endowed, trade is required as the engine of growth (Robinson, 1999).This is for the major reason why the importance of trade to a nation like Nigeria cannot be overemphasized .This is because, it has realized that most of the Nigeria's investment funds are directly influenced by the outcome of its source of investment funds depends on its export trade.

Therefore, if trade fails to perform these important roles, serious macroeconomic problem could result. The problems among others include; huge external debt, balance of payment deficit and chronic inflationary pressure (Giddens, 1996).

Niger economy is being referred to as a developing economy rather than developed when compared its level of development with that of other countries that they took off at same time.

However, trade liberalization implies free trade as its origin is classical in nature and it calls for perfect competition, under which a small price taking country will gain by eliminating or reducing tariffs and thus trade almost freely. Trade liberalization increase variably of goods and raises productivity by providing less expensive or higher quickly intermediate goods via free trade.

Trade liberalization as earlier mentioned implies free trade which can only occur in an open economy .An open economy encourages an open trading environment and it is also associated with a transfer of know-how, which can occur in a process that we can describes as Osmosis .Observation has proved that what (J.S.Mill, 1996) said a hundred years ago is still substantially true as regards the above arguments.

Fit is hardly possible to over rate the value in the present low state of human improvement of placing human beings in contact with person's dissimilar to themselves and with those which they are familiar with.

Trade liberalization basically entails the opening up of the domestic economy to the rest of the world through trade and careful planning by policy makers. The reasons behind the innovation of trade policy are wide and diverse ranging from anti-station, poor economic performance; information to World Bank pressure (DMBUSCH, 1992).The policy helps to faster a transition for economic growth and enhancement of domestic for a country .Among the policy's many advantage, it has risen and this is visible in most developing countries of the World.

However, the World Bank(1992) supported structural Adjustment Programme, introduced in Nigeria the third quarter of 1986,made the manufacturing sector pivotal to structural change and the growth of the Nigerian economy .Since the introduction of SAP ,Given the low level of industrialization and the SAP ,induced underutilization of industrial capacity in Nigeria economy, trade liberalization under the guise of globalization has translated into the restriction of Nigeria primary commodities is externally determined .This thus put Nigeria into a powerless situation where she lack direct control over the crisis in her economy because her hands are tied by the terms and dictates of globalization.

In light of the forgoing description of the manufacturing sector for the past two decades. Nigeria was qualifies as country experiencing de­industrialization. There is thus the inevitable need to determine whether a manufacturing sector operating in the types of Nigeria economy is equipped and can operate favorably as well as cope with the rigorous and dictates of globalization.

1.2     STATEMENT OF PROBLEM

One of the greatest problems facing the trade liberalization on manufacturing sector is the problem of capacity utilization in the manufacturing sector. The problem become more pronounced and aggravated by the structural Adjustment Programme (SAP) and more recently. The manufacturing sector is on the verge of collapse with thousands of workers being thrown out of job .Again, Nigeria had also become a dumping ground for all kinds of foreign products. There is thus the inevitable need to turn the search light on globalization and all that accompanied it and examine the impact on the Nigeria manufacturing sector. This is with a view to examine whether it is beneficial or not and to suggest how Nigeria's interest can be protected under the global agenda or arrangement if Nigeria must continue to participate in it.

The influence of trade policy on a country's economic wellbeing is one of the most widely debated topics in economics, yet the question on how trade liberalization restrictiveness should be received and its impact on the manufacturing sector has received little attention in the past. In most economies especially developing countries actual system of trade interaction are pervasive and highly complex. The poses a challenges for analysis and policy makers' alike.  In the face of a beroildenning array of tariffs and quantitative restriction, it can be extremely difficult to assess the time orientation of a country's policy change that encourages trade on some product line and discourages it in others.

It is difficult to evaluate proposals for trade liberalization that part of a stabilization package or to assess the progress made in moving towards a less restriction trade especially in the area of manufactured goods. It is therefore intention of this study to provide a coherent exposition of the major trade policy changes in Nigeria over the period of 1970 2004 and use a model that come close to the complexity of a real world structure to indicate the trade liberalization episodes in Nigeria and its impact on the manufacturing sectors during this periods.

The manufacturing sectors have an important implication for development strategies and policies as it helps to decides whether the policies should be discourages and adopt the new policy that is being advocate for.

1.3     RESEARCH QUESTIONS

This research work will seek to find answers to the following questions:

i.        What role does trade liberalization play on the manufacturing sector of Nigeria economy?

ii.  What are the problems facing trade liberalization?

iii. What are the impacts of government policy on trade liberalization?

iv.What are the views of trade liberalization on manufacturing sector?

1.4     OBJECTIVES OF THE STUDY

The general objective of this research work is to examine the impact of Trade Liberalization on manufacturing sector in Nigeria.

i. To examine the determinant of growth on trade in Nigeria.

ii.  To examine the extent to which trade liberalization has contributed to manufacturing sector performance.

iii.      To analyze the features of the major trade policy changes have occurred between 1991 to 2005 period in Nigeria.

ivTo examine the rate of growth in the manufacturing sector during the liberalization

1.5     SIGNIFICANCE OF THE STUDY

The study would contribute to existing literature on trade liberalization especially its justification. The study would evaluate the importance of trade liberalization by examining its impact on the growth process of the economy. The study IS significant in the following ways:

i.       It would help to take a stand on the controversial role of trade liberalization in the manufacturing sector of developing countries with special focus on Nigeria

ii.       The research would help to identify the factors hindering trade relations with other countries.

iii .     It would also help to evaluate the performance of different trade policies Nigeria government has adopted

iv.      The research would also be an invaluable tool for students and researchers that want to know more about the effect of trade liberalization on the manufacturing sector or Nigerian economy

1.6     SCOPE AND LIMITATION OF THE STUDY

This study will focus on external trade and not internal distributive trade. It will cover a period of fourteen years (14years) which is between the periods of 1991- 2005.

This period is chosen because it is significant in the Nigeria economy. It is oil boom of 1970s, the subsequent recession in the economy and the introduction of the Structural Adjustment Programme (SAP) where is part of the trade liberalization policy.

The study is constrained by time couple with reluctance on the part of government officials in charge of relevant information in making them available for analysis. The inadequacy of up-to date information will greatly impede the study.

1.7     ORGANIZATION OF THE STUDY

This study shall be divided into five sections.

In chapter one, which is the introductory part; the background of the study, the statement of the research problem and the objectives of the study shall be discussed.

Chapter two will deal with the literature review and theoretical framework. The methodology analysis, which includes the characteristics and basic elements of the research study, shall be examined in chapter three.

Data presentation, analysis and interpretation will be covered in chapter four while the concluding part of the research work will be chapter five where in a nutshell the summary, the conclusion and the recommendations would be discussed

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