Benue State University, Makurdi

Rethinking Nigeria’s International Trade in the Post Economic Crisis Period: Application of the Gravity Model

Terungwa Paul Joseph Jato

Abstract

Given the volatile and unpredictable nature of global economic interactions as exemplify by the recent global economic crisis and the fact that no one nation is an island of its own, most economies are therefore at risk to global economic movements. There is, therefore, always the need for individual economies, especially those of the developing nations, to continually evaluate and reposition their global interactions, interrelations and interdependence. Applying Ordinary Least Squares (OLS) technique to the gravity model of trade, the work investigated the relationship between Nigeria’s international trade and trade determinants to analyse trade flows between Nigeria and her trading partners (OECD Countries and SSA Countries) with the view to see whether Nigeria should operate a free trade with the advanced economies or with the developing ones. The results of the work conformed to the expected sign of GDP variable of the trade partners in the gravity equation; howev er, the sign of the own GDP and distance variables did not conform. Also, trade flows between Nigeria and trade partners responds more to the GDP of the OECD countries than it responds to the GDP of the SSA countries. The conclusion thus is that, Nigeria c an benefit from free trade with the advanced economies as much as free trade with the developing economies. However, it is recommendations, among others, that Nigeria should seek for more trade with the developing economies to which she has more comparativ e advantage over.

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