A CRITICAL SURVEY OF INTERNATIONAL TRADE AND ITS IMPACT ON POVERTY REDUCTION IN NIGERIA

A CRITICAL SURVEY OF INTERNATIONAL TRADE AND ITS IMPACT ON POVERTY REDUCTION IN NIGERIA

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BACKGROUND OF THE STUDY

Poverty has been on the rise in the Nigerian economy for the past two decades, and the plague was particularly severe in the 1980s. As a result, it becomes critical to use all relevant economic factors to correlate economic growth with poverty reduction. The level of development in Sub-Saharan Africa is such that recent economic performance looks to be on the decline, and despite the progress made by a few African nations, the overall picture suggests that many of them will not fulfill the Millennium Declaration's aims and aspirations (Akinmulegun, 2012).

The ability to relate poverty reduction to trade policy practice is based on the assumption that the efficacy of trade via import and export facilitation is targeted at long-term economic growth and the development of productive capabilities, highlighting the relevance of pure international trade theory. Trade is sometimes referred to be the engine of growth, and its potential is expected to help restore African economies. As a result, establishing an indirect relationship between trade policy practice and poverty reduction will be required (Falki, 2009). That is, the process by which greater productivity is facilitated by openness to trade through the employment of trade policies, allowing nations to utilise more of their plentiful factor endowment to boost economic growth and therefore reduce poverty (Falki, 2009).

It is vital to emphasize that there is no clear link between trade policy in practice and poverty alleviation. The reason for this is because Nigeria, like other developing nations, relies entirely on primary products to allow international commerce through an import-substituting industrial sector. It is also only through the development of a variety of new institutional and infrastructural economic facilities, such as new agricultural technology developed and adapted to conform to the country's agro-climatic and soil conditions, the establishment and strengthening of schools, universities, hospitals, technical training centers, and research and development institutions, as well as the maintenance of a good network of roads and other transportation and telecommunications facilities, that the country will be able to achieve its goals (Adeolu, 2007). In a modernized economy, it is also necessary to enforce a free and transparent legal system that supports the rule of law. With the development of export, import, and economic factors, this would undoubtedly result in sustained economic growth aimed at reducing poverty through trade (Adeolu, 2007).

One of the positive roles international trade can play in improving the growth of the economy via export expansion is promoting the positive role of export in increasing the import capacity capable of improving the domestic capacity to the point where the huge external debt overhang is unable to neutralize such improvement. This is measured in terms of the yearly resources spent on repaying external debt. Otherwise, in light of the potential for enhanced future trade relationships, it will send a bad signal to donor agencies (Omorogbe & Ubeagbu, 2007).

Despite being tied to the world economy through commerce, the Nigerian economy as a national entity has failed to relate the majority of Nigerians' welfare, life, and livelihood to the circumstances available in the international economy. A notable example is the agricultural industry, which employs over 60% of the Nigerian workforce but does not reflect this proportionally in terms of agricultural exports to welfare. Aremu (2004), Aremu (2004), Aremu (2004), Aremu (2004), Aremu

However, it can be seen that export expansion has not been sufficient to generate economic development. This has been the petroleum sector's strategy, which has only resulted in "enclave-led growth" in a few sectors and geographical areas of the country. Transnational companies (TNCs) in the sector appear to benefit more from the money generated (Omorogbe & Ubeagbu, 2007). The development of an inclusive kind of economic growth capable of alleviating poverty through export expansion must be focused at expanding economy-wide income earning opportunities via competitive economic activities such as export and import (Akinmulegun, 2012). Both marketable and non-tradable commodities and services would be engaged. This would have to happen at a faster pace of economic activity than the rate of expansion of the productive labor force in the economy. As a result, this explanation emphasizes export expansion as a required condition that necessitates a holistic developmental connection of the entire economy experiencing expansion at the same time as a sufficient requirement. With these concerns in mind, the purpose of this study is to look at the trade policy practice-poverty link as it relates to the growth of the Nigerian economy. This is in consideration of the possibilities of reducing poverty through the use of trade policy, given that the Nigerian economy currently has a weak export performance that appears to be concentrated on one product, namely petroleum (Akinmulegun, 2012). Given the volatile price of crude oil, the aforementioned sector offers little or no assurance that exports would impact growth rates in such a way that the resulting economic expansion will result in poverty reduction. As a result, it raises doubts about trade policy's potential to institutionalize the enrichment of impoverished countries.

STATEMENT OF RESEARCH PROBLEM

This study aims to conduct in-depth research in order to identify solutions that conceptualize a relationship given the practice of international trade policy issues that encapsulate poverty and inequalities within the Nigerian economic framework, with the goal of achieving economic development and growth that is indicative of poverty alleviation (Adeolu, 2007).

This raises the question of how to find accommodations in literature that emphasizes the link between trade policy practice and poverty, which supports the aforesaid relationship. It entails examining the influence of international specialization on economic advancement on the one hand, while ensuring that it does not have a negative effect on household welfare on the other (Akinmulegun, 2012).

In addition, taking into account the situation of Nigeria's multilateral trading environment, as defined by the World Trade Organization (WTO), this research aims to provide answers as to how the aforementioned trade-poverty link might best relieve poverty in the country's setting.

JUSTIFICATION OF THE STUDY

Previous research on international trade has primarily focused on the individual effects of trade openness and liberalization on the following: macroeconomic indicators in various sectors of the global economy; national government roles; overall influence on world trade; and sectorial impact within national economies. However, from the standpoint of international trade policy, the rising prevalence of poverty has yet to get enough consideration. With the current focus in Nigeria on the Millennium Development Targets (MDGs), it appears that the first and eighth goals will both benefit from the previously indicated international trade viewpoint on poverty reduction. These objectives are as follows:

Extreme poverty and hunger must be eradicated.

Developing international development partnerships on a global scale (Nigeria MDG report, 2006).

This is because, by 2015, the Millennium Development Goals are predicted to have halved the poverty rate in 1990, on time (World Bank 2000) and perhaps ahead of schedule ( Ravallion, 2003) Taking the Nigerian context into account, this research looks at how trade liberalization and policy should be restructured to benefit poverty reduction in the country.

This research aims to investigate Nigerian trade policy and its development processes, as well as how trade policy has been integrated into national development policies aimed at poverty reduction.

As a result, the study's explanation is based on overcoming some of the nation's concerns with the implementation of WTO requirements.

OBJECTIVES OF THE STUDY

The major objective of this study is to examine of how trade policy and the policy formulation process has effectively been streamlined into overall national development strategy. This will possibly explain a relationship between the practice of international trade policy and poverty reduction. However the specific objectives of this study include:

1. To determine the effect of international trade practice on economic growth
2. To determine the effect of economic growth on poverty reduction.
3. To examine the effect of trade policy effect on poverty reduction.

THE RESEARCH QUESTIONS

Theoretical and analytical literature on the relationship between international trade, poverty reduction and welfare is aimed towards analyzing pertinent issues which are best expressed by the following questions:

1. Is there a direct relationship (or indirect) between the practice of international trade policy and economic growth?
2. Is there a relationship between economic growth and foreign direct investment towards poverty reduction?

RESEARCH HYPOTHESES

The research hypothesis that would be analyzed and tested during this study includes:

H0: There is no relationship between poverty reduction and practice of international trade policy in Nigeria.

H1: There is a relationship between poverty reduction and practice of international trade policy in Nigeria.

H0: There is no relationship between international trade policy practice and economic growth in Nigeria.

H1: There is a relationship between international trade policy practice and economic growth in Nigeria.

H0: There no relationship between economic growth on poverty reduction.

H1: There a relationship between economic growths on poverty reduction.

SIGNIFICANCE OF THE STUDY

Given the above objectives this study will be guided towards arriving at possible conclusions for averting the inherent limiting factors related to poverty incidence within the Nigerian economy. Research within this study is directed towards maximizing the advantages of an economy wide expansion of income earning opportunities. This would involve exports and import competing economic activities. Thus, it is expected that further research in this and other related areas would find the results of this study a useful source for welfare improvement, economic growth and policy recommendation guideline.

THE SCOPE OF THE STUDY

This study covers analysis of poverty incidence within the Nigerian context highlighting selected sectors of the economy. It would be carried out through a descriptive/qualitative and quantitative analysis on the impact of the practice of international trade policy so far on poverty reduction in Nigeria. The process would be by estimating the variables of poverty reduction in line with economic growth rate changes due to trade policy activities on investment, government expenditure, welfare improvement and real income improvement.

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