IMPACT OF TRADE LIBERALIZATION ON THE MANUFACTURING SECTOR OUTPUT IN NIGERIA

This study examined the impact of trade liberalization on the growth and performance of Nigeria’s manufacturing sector from 1990 to 2024. The research aimed to evaluate how trade openness, foreign direct investment (FDI), exchange rate, import tariffs, and inflation jointly influence manufacturing output within a liberalized trade regime. The Autoregressive Distributed Lag (ARDL) model was employed to capture both short-run and long-run relationships among the variables, with manufacturing output serving as the dependent variable. The results revealed that trade openness and FDI have positive and significant effects on manufacturing output, indicating that greater integration into global markets and increased foreign investment promote industrial growth through improved technology transfer and productivity enhancement. Conversely, exchange rate volatility, import tariffs, and inflation exerted negative and significant effects, suggesting that macroeconomic instability and high production costs continue to hinder the performance of domestic manufacturers. The negative and significant error correction term confirmed a strong long-run adjustment mechanism toward equilibrium. The study concludes that while trade liberalization has the potential to accelerate manufacturing growth, its benefits in Nigeria are limited by exchange rate depreciation, inflationary pressures, and weak policy coordination. It therefore recommends policy consistency, exchange rate stabilization, inflation control, rationalization of tariffs, and strengthened infrastructure to enhance competitiveness under a liberalized regime. Additionally, the promotion of local technology development, skill enhancement, and investment-friendly reforms is vital for sustaining industrial growth. This research contributes to existing literature by providing recent empirical evidence (1990–2024) on the interaction between trade liberalization and manufacturing performance using an integrated ARDL framework. It demonstrates that the success of liberalization policies depends critically on macroeconomic stability and supportive structural conditions within the domestic economy.