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07030248044CHAPTER ONE
INTRODUCTION
1.1 Background of Study
Trade has long been identified as a veritable way through which the quest of nations for improved well-being of their citizens could be achieved. Adam Smith recommended division of labour, specialization and the pursuit of foreign trade as a way of increasing the wealth of nations (Obadan, 2014; Ajayi, 2015). He went further to state that division of labour was limited by size of the domestic market (Bakare, 2014). Trade Liberalization is simply the process of removing restrictions on international trade. This may include the reduction of tariffs, abolition or enlargement of import quotas, abolition of multiple exchange rates, and removal of requirements for administrative permits for imports or allocations of foreign exchange, or at least simplification of the process of applying for them.
Trade liberalization started in 1947 after the 2nd World war with the inception of the General Agreement on Tariffs and Trade (GATT). The GATT was negotiated in 1947 by 23 countries of which 12 are industrialized countries and 11 developing countries. The main focal point of GATT was to lower trade barriers. GATT was later replaced by the WTO (World Trade Organization) in 1994. According to Echekoba et al. (2015) the main purpose of trade liberalization is to allow countries to export those goods and services that they can produce efficiently while they import the goods and services that they produce inefficiently. The developing countries continued to experience underdevelopment despite the economic growth of the early and late sixties.
The provision of new opportunities for paid employment, especially for those who are unemployed is then Job Creation. It can also be the process by which the number of jobs in an economy increases. Job creation often refers to government policies intended to reduce unemployment. Job creation programs may take a variety of forms. For example, a government may lower taxes and reduce regulation to make hiring less expensive.
Trade liberalization through regional, bilateral or multilateral trade agreements creates a competitive environment, permits the diffusion of knowledge and transfer oftechnology, enhances the competitiveness of export, increases access to the international market, expands the domestic market, creates marketing networks, provides managerial and technical skills, enhances the transformation of technology, results in industrialization, leads to job creation, improves productivity, enhances economic growth, provokes the expansion of the export sector and stimulates the reduction of sectors competing for import. Furthermore, there is a consensus among most economists that countries with open economies progress better than those with closed economies in the long-run (Bittencourt, 2004).
In the late 1980s and early 1990s, virtually all the developing economies in the global economy witnessed trade liberalization and integration, either individually or on the bright idea of multilateral organizations and/or international donor agencies like the World Trade Organization (WTO), World Bank (WB) and the International Monetary Fund (IMF) for the implementation of the Structural Adjustment Programmes (SAP). During this period, outward orientation and trade liberalizationwere part of the conditionality requirements for giving loans to developing economies. Rodrik (2006) argued that trade liberalization was among the major policy reforms prescribed in the Washington consensus. This had resulted in the proliferation of policies of trade openness and most economies entering into agreements for the integration of trade. Also Krueger (1997) maintained that the fast industrialization and development in the high-growth countries of Hong Kong, Taiwan, South Korea and Singapore tagged the Four East ''Asian Tigers", is often used as a reference point of beneficiaries of fruitful trade liberalization strategies since the early 1960s (Echekoba et al., 2015).
Before Nigeria adopted the trade liberalization policy in 1986, she experiencedpoor performance in terms of economic growth for most of the periods. The highest annual Gross Domestic Product (GDP) growth rate after independence was 25%, 24% and 14% for 1970, 1969 and 1971 respectively. Nigeria recorded a negative real GDP growth rate from 1966 to 1968, 1975, 1978, 1981 to 1984 and 1986. This was majorly as a result of the implementation of the Import Substitution Industrialization (ISI) strategy combined with disinvestment, the economic crisis of the mid-1970s and political instability. Hence, the poor economic performance recorded for the larger part of the pre-liberalizationera was caused by the implementation of inappropriate policies. Based on this background, the present study seeks to examine the impact of trade liberalization on job creation.
1.2 Statement of Problem
Despite the reforms implemented to boost economic performance via job creation, the growth performance of the postliberalization era provided a dramatic contrast to the ones experienced during the pre-liberalization era. Under Vision 20:2020 economic transformation blueprint, Nigeria was expected to be among the 20 largest economies in the world by the year 2020. Irrespective of these policy initiatives, the average growth rate of real GDP in Nigeria from 1990 to 2018 was only 4.6% (World Bank World Development Indicators, 2020).
The recorded GDP growth rate was inadequate compared to enormous government efforts towards trade openness. The average real GDP growth rate from 1990 to 2018 is lower than expected, though commendable, it was not unique as expected considering the implementation of trade liberalization policies on the growth rate of GDP. Based on this backdrop, the present study seeks to investigate the impact of trade liberalization on job creation in Nigeria.
1.3 Objectives of the Study
The Objectives of this study can be stated as follows;
1.4 Research Questions
The questions that arise from Trade Liberalization and Job Creation are;
1.5 Research Hypothesis
The following hypothesis will be tested in the course of study:
H1: Interest rates do not have a significant impact on economic growth in Nigeria.
H2: Exchange rates do not have a significant impact on economic growth in Nigeria.
1.6 Scope of the Study
The scope of this study focuses on the Gross Domestic Product (GDP) of Nigeria from the year 2001 to 2020 whereby the GDP will show the recent impact of the adoption of trade liberalization and job creation on Nigeria's economy. The figure of the GDP will be analysed to determine the impact of the trade liberalization and job creation in Nigeria.
1.7 Significance of the Study
The findings of this study will provide an insight on the impact of trade liberalization and job creation has on the Nigerian Economy. This will make policy makers to identify the section to improve on in the economy in the aspect of trade liberalization and job creation. It will serve as a reference material for further research work. It will also help in determining the how the adoption of trade liberalization and job creation has improved the Nigerian Economy.
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