NIGERIA’S MULTILATERAL TRADE WITH THE G8 ECONOMIES-A GRAVITY MODEL APPROACH

NIGERIA’S MULTILATERAL TRADE WITH THE G8 ECONOMIES-A GRAVITY MODEL APPROACH

ABSTRACT

It is an undeniable fact that trade has been facilitating growth and development of countries across the world. This underscores the recent upsurge in establishing multilateral trade relationship between Nigeria and other countries especially, the G8 member countries. While these realities are still contestable in terms of the potential benefits of the trade linkage that Nigeria stands to gain, the trajectory of the influx of export to Nigeria from the latter countries calls for a concern and a need to investigate the possible socio-economic, political and geographical variables that trigger this trend. It is in view of this, that this study empirically investigates the magnitude of the factors driving increasing Nigeria-G8 multilateral trade relations. To achieve this, we employ the augmented variant of gravity model (GM) that allows for the inclusion of country specific and country-pair characteristics in addition to the traditional GM variables (income and distance). We find that Economic Size, Population, the Geographical Landmass, Degree of Trade Openness, and Exchange Rate of the trading partners, drive multilateral trade flows between Nigeria and the G8 member countries. Therefore, promoting a broad-based diversification of the Nigerian economy is crucial for more beneficial Nigeria-G8 trade relations.