Productivity Growth in Nigerian Manufacturing and its Correlation to Trade Policy Regimes/Indexes (1962–1985)

Abstract

While the centrality of productivity enhancement to growth acceleration is one issue around which broad consensus exists in theory and empiricism, the role of trade policy in fostering productivity growth has received only modest attention. Recently, however, a considerable body of knowledge has accumulated on the importance of trade policy to the productivity process. To be sure, there are two divergent perspectives. One view posits that trade liberalization will stifle industrial productivity by opening up the economy to superior foreign products, compelling infant industries to close up. The other, and more pervasive, holds that outward-oriented trade policy will engender overall industrial efficiency in the economy by exposing local firms to competition and thereby improve the allocation of resources across sectors. This paper computes total factor productivity growth (TFPG) for the aggregate manufacturing sector of Nigeria and across the various subsectors and correlates these with specific indexes of trade policy. The results generally corroborate the mainstream view of a positive correspondence between trade liberalization and productivity growth.

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