The Influence of Trade Openness on Poverty Reduction in Nigeria

The Influence of Trade Openness on Poverty Reduction in Nigeria

INTRODUCTION

BACKGROUND OF THE STUDY

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 influence of trade openness on poverty reduction in Nigeria.

STATEMENT OF THE PROBLEM

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 influence of trade openness on poverty reduction in Nigeria.

OBJECTIVES OF THE STUDY

The Main Objective of the study is to investigate the influence of trade openness on poverty reduction in Nigeria. The specific objectives include:

i.        To determine the level of poverty in Nigeria.

ii.        To determine the nature and relevance of open trade.

iii.        To determine the influence of trade openness on poverty reduction in Nigeria.

RESEARCH QUESTIONS

i.        What is the level of poverty in Nigeria?

ii.        What is the nature and relevance of open trade?

iii.        What is the influence of trade openness on poverty reduction in Nigeria?

STATEMENT OF THE HYPOTHESES

The statement of the hypothesis for the study is stated in Null as follows:

Ho₁: The level of poverty in Nigeria is low.

Ho₂: The influence of trade openness on poverty reduction in Nigeria is low.

SIGNIFICANCE OF THE STUDY

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

LIMITATION OF THE STUDY

The study was confronted with logistics and geographical factors.

DEFINITION OF TERMS

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.