The Impact of International Trade on Private Sector Development in Nigeria

INTRODUCTION

BACKGROUND OF THE STUDY

Abebefe (1995), stated that trade constitute of the exchanges of goods through market transactions. 1nternational trade involves trade transactions beyond national boundaries involving two or more countries. Accordingly, Samuelson and Nordhaus (2002) see international trade as the export and import of goods, services, and capital between nations. International trade promotes specialization and increases productivity (Ingram and Dunn 1993, Samuelson and Nordhaus 2002) as quoted by (Ezirim, Aloy, Okeke, Titus, Akpobolokerni and Patrick 20l1). Trade openness is defined as the positioning of the economy outwardly or inwardly. Outward positioning significantly takes advantage of the opportunities to trade with other countries. While the inward positioning refers to economies which are unable to take advantage of the opportunities to trade with other countries. Economic theories indicate that open economies will lead the country into increased economic growth while closed economies would experience no economic growth. The essence of open trade was to protect and stimulate domestic production through the importation of capital goods at low prices, prevent balance of payment problem, boost the value of the Naira, so as to grow the economy and reduce poverty (Oyejide, 2001). The study seeks to appraise the impact of international trade on private sector development in Nigeria.

STATEMENT OF THE PROBLEM

The perceived benefit of International trade is faced with challenges which is affecting the rapid development of the private sector in Nigeria. The fundamental aim of open trade was to drive development in the nation but the perceived impact on poverty reduction seems illusive. A liberalized trade regime is expected to change relative factor prices in favor of the more abundant factor. Therefore, greater trade openness increases labor prices and raise the standard of living of the people thereby reducing poverty. However, should the re-allocation of factors be hampered, the expected benefits from freer trade may not materialize.

The rate of poverty index seems to be on the increase since 1992. Poverty is viewed as operating below 2/3 of the mean monthly household expenditure (Ajakaiye and Adeyeye, 2001). The percentage of people living below this level constitute the poverty headcount index. The problem confronting the study is to appraise the impact of international trade on the private sector development in Nigeria.

OBJECTIVES OF THE STUDY

The Main Objective of the study is to investigate the impact of international trade on the private sector development in Nigeria; The specific objectives include:

i.        To determine relevance is international trade on private sector development in Nigeria.

ii.        To understand the impacts of international trade on private sector development in Nigeria.

iii.        To examine the challenges of private sector development in Nigeria.

RESEARCH QUESTIONS

i.        How relevant is international trade on private sector development in Nigeria?

ii.        What are the impacts of international trade on private sector development in Nigeria?

iii.        What are the challenges of private sector development in Nigeria?

STATEMENT OF THE HYPOTHESIS

Ho₁: There is no significant impact of international trade on private sector development in Nigeria.

SIGNIFICANCE OF THE STUDY

The need for a better living standard, economic development and growth constitute the aims of pursuing the policy of international trade. The study seeks to proffer relevant information for policy stakeholders to stimulate the economy with policies which are capable of promoting international trade and increase the living standard of the people.

LIMITATION OF THE STUIDY

The study was confronted with logistics and geographical factors.

DEFINITION OF TERMS

INTERNATIONAL TRADE DEFINED

International trade is the export and import of goods, Services, and capital between nations or across national boundaries.

TERMS OF TRADE DEFINED

This is the rate at which the goods of one country exchange for the goods of another country.

POVERTY DEFINED

Poverty is viewed as operating below 2/3 of the mean monthly household expenditure.

TRADE OPENNESS DEFINED

Trade openness is defined as the positioning of the economy outwardly or inwardly. Outward positioning significantly takes advantage of the opportunities to trade with other countries. While the inward positioning refers to economies which are unable to take advantage of the opportunities to trade with other countries.

INTEREST RATE DEFINED

Interest rates are the rental payments for the use of credit by borrowers and return for parting with liquidity by lenders (CBN, 1997).

FINANCIAL PERFORMANCE DEFINED

This is the measure of the firm’s financial returns or goals through the use of evaluation method or financial indicators.

RETURN ON INVESTMENT DEFINED

The return on investment defines the firm’s efficiency in the utilization of the invested capital. This ratio is determined as net profit after tax divided by total paid in capital.

CUSTOMER SATISFACTION DEFINED

Meeting or exceeding customer expectations