CHAPTER ONE
INTRODUCTION
- BACKGROUND OF THE STUDY
Trade liberalization is an important issue that concerned policy-makers in the past, concern them today and will concern them in the future – in all economies, poor or rich. It offers the potential to raise economic growth rates significantly. But at the same time, it also exposes firms and countries to intense competitive pressures. Declining terms of trade can result, and in some circumstances, may lead to an increase in economic activities which deliver lower standards of living. In addition, it could widen the income gaps both between and within countries. These developmental pitfalls can be avoided if the productive sector develops the ability to withstand the intense competitive pressures that are associated with economic openness (Kaplinsky, 1998).
Generally, foreign trade is considered as an essential factor for accelerating the path of economic development and growth. Most countries are involved in foreign trade to create employment, raise propensity to save, increase foreign exchange earnings, and raise the propensity of investment to move from less productive use to high productive use.
In a developing country like Nigeria, the role of international trade is very significant. The Nigerian economy is characterized by high degree of interdependence with the rest of the world, particularly in the field of trade exchange. As a result, the country is heavily reliant on the exports of crude oil, as the main source of foreign exchange earnings.
However, a major objective of economic development plans in Nigeria is to diversify the local economy and to find other sources of income rather than oil. To achieve such growth in non-oil sector, intermediate goods imports and raw materials may play a crucial role in the economic development process.
Economic development activity can be thought of as the sum of the efforts by all economic agents, operating within an economy and institutional set of arrangements that define the economic system, to convert the resources available to the economy – labor, capital and natural resources – into the output (goods and services) required by the society. The relationship between input and output represents the productivity ratio, that is, output per unit of input. In an opened economy, inputs can be sourced both locally and from other economies (that is, foreign inputs).
There are so many economic areas in which impact of import can be established. There are many international areas in which the importance of areas concerns economic . During the 19 and 20 centuries, import trade has played a leading role in bringing about global economic growth. In addition to its role as an “engine of growth” for the world economy, it has also played pivotal role bringing about rapid economic growth and development in several countries. The 19 century was perhaps the important century for (primary commodity) import-led growth.
Expansion of imports can lead to growth through stimulating technical change and investment, or by spilling demand over other sectors.
