CHAPTER ONE
1.1. BACKGROUND TO THE STUDY
International trade deals with the economic and financial interdependence among nations. International trade is a part of our daily life, which plays a vital role in shaping economic and social performance and prospects of countries around the world, especially those of developing countries. No country has grown without trade. However, the contribution of international trade to the development of commerce and industry in Nigeria depends a great deal on the context in which it works and the objectives it serves.
International trade is the exchange of capital goods and services across borders or territories. Through international trade countries supply the world economy with the commodities that they produce relatively cheaply and demand from the world economy the goods that are made relatively cheaper elsewhere. The positive effects of international trade on the development of commerce and industry in Nigeria were first pointed out by Smith (1776). This idea prevailed until World War II, although with relative hibernation during the Marginalist Revolution”. Economic theories have argued that countries engage in international trade to reap the gains that arise from specialized production with each country concentrating on producing those goods and services that involve the least opportunity cost.
Industrial growth is the increase in the amount of the goods and services produced by economy overtime, it can also be said to refer to growth of potential output, that is, production. It is measured as the percent rate of increase in real GDP. Various literatures on international trade recognize trade as a catalyst for economic growth. To act as an engine of economic growth, trade must lead to steady improvements in human conditions by expanding the range of people’s choice, a notion that the concept of human development tries to capture. For developing countries, contribution of trade to the development of commerce and industry in Nigeria is immense owing largely to the obvious fact that most of the essential element for growth of such as capital goods, raw materials and technical know-how, are almost actively imported because of inadequate domestic supply. Foreign exchange has to be earned through exports to be able to pay for imports. To enhance exports, improved technology must be acquired, and this in turn further pushes up demand for imports. Prolonged pressures on the balance of payments constitute constraints to the development of commerce and industry and thus, appropriate policy measures have to be put in place to streamline international trade to conform to desired goal of economic growth.
This study is basically undertaken to take an objective view of the impact of international trade on the economy of Nigeria. Before her political independence in October 1st 1960, Nigeria has been an active player on the field of international trade, initially with predominately primary agricultural commodities that comprised groundnuts, cocoa beans, palm oil, cotton and rubber (Englama, et al. 2010), but presently dominated by petroleum products (Onwe, 2013). Since the discovery of oil in commercial quantity in 1956 (Englama, et al. 2010) in Oloibiri in the present day Delta State (Afaha and Aiyelabola, 2012), Nigeria has been an important player in world affairs, economically and otherwise, particularly being the 12th largest producer of crude oil in the Organisation of Petroleum Exporting Countries (OPEC) (OPEC Annual Statistics, 2014). Unfortunately, these blessings by nature to Nigerians did not reflect in the overall welfare of the citizen made worse (Soderbom and Teal, 2001), by the collapse of world oil market as a result of glut in 1981 (Muritala, et al. 2012). For example, crude oil prices, which rose rapidly from $20.94 dollars per barrel in 1979 to $36.95 dollars in 1980 and $40.00 dollars in 1981, fell to $29.00 in 1983 and low level of $14.85 in 1986. Exchange receipt which rose from $15.7 billion dollars in 1981, fell to $5.2 billion dollars. In 1983 the economy came close to a virtual collapse, real per capita income being about 30 per cent lower than at the onset of the oil price boom, ten years earlier (Soderbom and Teal, 2001).
The above does not mean that there have been absolutely no gain from Nigeria’s participation in the arena of international trade, the point is that the gains have been normal, not in real terms. However, Usman, (2011) posits that international trade has not help in promoting economic growth of Nigeria because her economy still experience some element of economic instability and this trade has also turned the country into an import dependent economy. Arodoye and Iyoha (2014) argue that in Nigeria, proceeds from exports were not effectively channeled to economic growth as a result of corruption, rent seeking and a pervasive lack of accountability, particularly under the military dictatorships between 1966 and 1999, which led to serious macroeconomic management mistakes, including a Dutch diseasegenerating syndrome in which policy makers erroneously treated favorable but transitory oil shocks as permanent. A nation where over 40% of the population live below poverty line, cannot be said to have prospered in real economic terms.
