1.1 BACKGROUND TO THE STUDY
The issue of employment is very germane to any economy; this is
why one of the mainmacroeconomic objectives of any country is to attain
full employment. The issue of employmentis paramount to Africa and
Nigeria in particular, where high-level poverty is obvious with
risingunemployment rates. However, in order to combat the problem of
poverty, Oni (2006) arguedthat reducing the level of unemployment will
increase the income level in the economy andthereby reduce the level of
poverty. To increase the level of employment, some scholars haveargued
that the flow of goods and services (trade flows) could propel
employment generation,especially in developing countries.
According to Pieper(2006), growth inemployment has a feedback on
economic growth, such that an increase in labour incomes wouldexpand
domestic demand, which in turn would lead to sustainable GDP growth and
reducingrisks of excessive reliance on uncertain foreign markets. Given
this fact, trade can absorbNigeria’s surplus labour and this can go
long way in alleviating poverty for the majority of thepoor Nigerians.
Economists have long been interested in factors
which cause different countries to grow at different rates and achieve
different levels of wealth. One of such factors is foreign trade.
Nigeria is basically an open economy with international transactions
constituting a significant proportion of her aggregate output. To a
large extent, Nigeria’s economic development depends on the prospects of
her import and export trade with other nations. Foreign trade provides
both foreign exchange earnings and market stimulus for accelerated
economic growth (Obadan, 2004). Nigeria’s relatively large domestic
market can support growth but alone cannot deliver sustained growth at
the rates needed to make a visible impact on unemployment and poverty
reduction. Hence Nigeria has continued to rely on foreign market as
well (World Bank, 2002).
Many economists generally agree that openness to international
trade accelerate development. The more rapid growth may be a transition
effect rather than a shift to a different steady states growth rates,
clearly, the tradition takes a couple of decades or more so, that is,
it is reasonable to speak of foreign trade openness accelerating growth
rather than merely leading to a sudden onetime adjustment in net
income (Dollar and Kraay, 2001).
Nigeria is characterized with a ‘dualistic’ labour market in which
the minority of workershave regular formal sector jobs, while majority
works in the informal sector, with a large pool ofsurplus labour. This
is seen from its rapidly increasing labour force.The impact of trade
liberalisation on employment growth in Nigerian economy; considering
the vision of the country, the welfare of its people and its economic
position in the world today, tend to be a special area of interest for
the academic world and for policy makers.
1.2 STATEMENT OF THE RESEARCH PROBLEM
In spite of the country’s large pool of surplus labour, rapidly
growing labourforce and increasing employment, the share of employed
workers in total labour force has beendeclining since 1980, coupled
with this, in the last two decade, the trend has been below 70%,which
is an indication of high unemployment as more than 30% of its active
This trend is not surprising as Nigeria ishighly dependent on
imports for most of its raw materials inputs (CBN, 2007) and
theemployment effect of these imports might be positive if a significant
portion of imports serves asinputs for labour intensive industries.
However, this trend has given rise to debates in developingcountries
where concerns have been expressed over the loss of jobs due to import
competition(Ghose 2003) and deindustrialisation as result of increased
However, government has tried to reverse this
trend through the implementation ofpolicies to diversify the country’s
export base away from oil so as to promote a stronger
exportperformance. Such export policy includes export promotion
strategies in which incentives weregiven for the promotion of non-oil
exports particularly agriculture and labour intensivemanufactures. As
noted by Carneiro and Arbache (2003) and Rama (2003), export
promotionimproves employment level in countries embracing the
strategies. Therefore, there had been anongoing argument between
government and public, while the former opined that her exportpromotion
policies have increased the level of employment, majority of the people
believe thatunemployment is on the rise; it is against this backdrop
that we consider it interesting todetermine whether the flow of imports
and exports have brought any significant effects on employment growth
1.3 OBJECTIVES OF THE STUDY
The main objective of this research is to empirically examine the
impact of trade liberalisation on employment growth in Nigeria between
the year 1981 to 2013.
Specifically, the study also seeks:
- To examine the trend in trade liberalisation vis a vis employment growth in Nigeria.
- To examine the extent at which trade liberalisation can generate employment.
- Proffering appropriate framework based on the policy recommendations made.
1.4 RESEARCH QUESTION
This study aims at answering the following research questions:
i Does a long or short run relationship or both exist between trade flows andemployment?
ii. To what extent is Nigeria’s total employment growth rate attributed to domesticfactors and external factors?
iii. What are the factors that hinder trade liberalisation?
1.5 RESEARCH HYPOTHESIS
The following hypothesis will be tested in the course of this study:
H0: Trade liberalisation has no significant impact on employment growth in Nigeria.
H1 Trade liberalisation has significant impact on employment growth in Nigeria.
1.6 SIGNIFICANCE OF THE STUDY
The findings of this study will provide an insight as to whether
trade liberalisation has any significant impact on Nigeria’s employment
growth. Hence, policy makers will be able to formulate an articulate
and comprehensive policy with respect to trade liberalisation
management in Nigeria. This research will also provide an objective
view to the relevance of trade liberalisation on employment growth in
Nigeria. The findings of this research will also serve as a useful
reference material for further research on the impact of trade
liberalisation on employment growth in Nigerian economy.
1.7 RESEARCH METHODOLOGY
The analysis that will be made in this study shall be based on
macroeconomic data in Nigeria economy. Due to the linearity nature of
the model formulation, Ordinary Least Square (OLS) estimation method
would be employed in obtaining the numerical estimates of the
coefficients in the model using Eviews.
Two multiple regression models shall be used in the estimation.
The model shall seek to investigate the effect of trade liberalisation
on employment growth in Nigeria. This is a follow up on the objectives
of study stated earlier.
economy is a large component with lot of diverse and sometimes complex
parts; this research work will only look at a particular part of the
economy (Trade). This work cannot cover all the facets that make up the
Trade sector, but will look at trade liberalisation has been used by
the government for the stabilization, and attaining economic
The empirical analysis and estimation covers the period between
1981 and 2013. This restriction is unavoidable because of the
non-availability of some data.
The data for this study would be obtained mainly from secondary
sources; particularly from Central Bank of Nigeria (CBN) publications
such as the CBN Statistical Bulletin, CBN Annual Reports and Statements
of Accounts, and National Bureau of Statistics publications.
1.9 LIMITATIONS OF THE STUDY
Finance is one of the elements that assist a good research.
Financial constraint created difficulties in the process of this
research work; however, it did not hinder the research.
The main limitation of this study is time constraint. The time
allotted for the completion of this research is not adequate based on
recent and contemporary happening with respect to the impact of trade
liberalisation on employment growth inNigerian economy.
- ORGANISATION OF THE STUDY
This study shall be divided into five chapters.
The first chapter provides the background of the subject matter
justifying the need for the study. Chapter two presents related
literature concerning trade liberalisation on employment growth in
Nigeria. The research methodology, which includes the theoretical
framework, sources of data, model formulation, estimation techniques
etc, are stated in chapter three while data presentation, analysis and
interpretation of regression result were made in chapter four.
Concluding comments in chapter five reflects on the summary,
conclusion, recommendations and suggestion for further studies based on
the findings of the study.
1.11 DEFINITION OF TERMS
The following words are operationally defined as they would be used in this research study.
Trade liberalisation: The removal or
reduction of restrictions or barriers on the free exchange of goods
between nations. This includes the removal or reduction of both tariff
(duties and surcharges) and non-tariff obstacles (like licensing rules,
quotas and other requirements).
Foreign Trade: This is a trade between
two or more countries. It is also referred to as international trade or
external trade. It is a trade outside the national boundaries of
countries. Foreign trade could be bilateral trade, which is trade
between two countries or multilateral trade, which is trade between
more than two countries.
Employment: This is astate of having a legitimate paid work. This is the opposite of unemployment.
Economic Growth: This refers to the
increased over time of an economy’s capacity to produce those goods and
services needed to improve the well-being of the citizens in
increasing number and diversity. It is the study of the process by which
productive capacity of the economy is increased over time to bring
about rising level in national income.
Economic Development: This is a
multi-dimensional process involving the provision of basic needs,
acceleration of economic growth, reduction of inequality and
unemployment, eradication of poverty as well as changes in attitude,
constitution and structure in the economy.
Carneiro, F.G. and Arbache, J.S. (2003) ‘The Impacts of Trade on
the Brazilian Labour Market: A CGEModel Approach’, World Development 31(9): 1581-95.
Central Bank of Nigeria (2007); Annual Report and Statement of
Accounts, December, Abuja.
Dollar D. and A. Kraay (2001), Growth is Good for the poor,
Washington D.C. World Bank policy research working papers No. 2587.
John Black (2002). Oxford Dictionary of Economics. Oxford University Press Inc. New York.
Obadan, M. (2004).“Prospect for diversification in Nigeria export
Trade” inAnnual conference of the Nigeria Economic society
(NES).Heinemannpress, Ibadan. Pg. 35 – 55, unpublished Empass, press
Oni, B. (2006) ‘Employment Generation: Theoretical and Empirical
Issues’, paper presented at the 2006 Annual Conference of the Nigerian
Economic Society. Calabar, (August).
Pieper, U. (1998) ‘Openness and Structural Dynamics of
Productivity and Employment in Developing Countries: A Case of
De-industrialization?’ ILO Employment and Training Papers 14, Geneva:
International Labour Organisation.
Rama, M. (2003) ‘Globalization and Workers in Developing Countries”, World Bank Policy Research
Working Paper No. 2958. Washington, DC: World Bank.World Bank (2002). World Development Indicators, Washington D.C., The World Bank.