The result of the co-integration test, based on the ARDL bound testing approach, is presented in Table 3. The result revealed that computed F-Statistics for Wald test was 5.931370. The value exceeds both the upper bounds and lower bounds critical values for all level of significance. This indeed implies that trade liberalization, selected independent variables and real GDPPC are bound by a long run relationship in Nigeria which means that the variables included in the model shared long-run relationships among themselves.
4.3.1 Short-Run and Long-Run Effect of Trade Liberalization on Poverty in Nigeria
The short-run and long-run ARDL results for the effect of trade liberalization on poverty in Nigeria are presented in Tables 4 and 5 below.
Table 4
Parsimonious Long-run Coefficient
Variable | Coefficient | Std. Error | t-Statistic | Prob. |
TOP | -0.730176 | 0.390410 | -1.870279 | 0.0727* |
EXCH | 0.002039 | 0.000837 | 2.435867 | 0.0220** |
INT | 0.022504 | 0.011990 | 1.876816 | 0.0718* |
UNEMP | 0.032059 | 0.015779 | 2.031788 | 0.0525* |
INF | -0.005803 | 0.003022 | -1.920024 | 0.0659* |
C | 7.147270 | 0.258252 | 27.675537 | 0.0000 |
Source: Author’s Computation from E-view 9 |
Table 4 represents the long-run impact of the variables on poverty rate in Nigeria. The analysis shows that all the variables are statistically significant in determining poverty rate in Nigeria in the long-run. Trade openness, interest rate, unemployment rate and inflation rate are statistically significant at 10% level of significance while exchange rate is statistically significant at 5% level of significance. The coefficient of the variable shows that trade openness and inflation rate are negatively related to poverty rate Nigeria while exchange rate, interest rate and unemployment rate are positively related to poverty rate in Nigeria. The implication of the coefficient value is that a percentage increase in each of trade openness and inflation rate will reduce poverty rate in Nigeria in the long-run by 0.73% and 0.0058% respectively. Also, a percentage increase in each of exchange rate, interest rate and unemployment rate will increase poverty rate in Nigeria in the long-run by 0.0020%, 0.0225% and 0.032% respectively.
According to studies by Hameed and Nazir (2009), who found that economic globalization could eventually lessen poverty, trade openness has a detrimental long-term effect. However, a country's economic system's potential to gain from economic globalization also depended on its domestic macroeconomic policy, market structure, early economic state, institutional quality, and degree of political stability. The similar conclusion was reached by Ozcan and Kar (2016), Okungbowa and Eburajolo (2014), and Oyewale and Amusat (2013). According to the predicted outcome, trade will benefit the poor in the long run. Additionally, it necessitates additional work in order for the poor to benefit from global trade. It will become a reality once trade policy enables and safeguards the micro-economic agent to enable global trade competition.
Table 5
Parsimonious Short-run Coefficient
Variable | Coefficient | Std. Error | t-Statistic | Prob. |
D(TOP) | -0.126281 | 0.060686 | -2.080872 | 0.0474 |
D(EXCH) | -0.000411 | 0.000488 | -0.841167 | 0.4079 |
D(EXCH(-1)) | -0.001584 | 0.000514 | -3.078490 | 0.0049 |
D(INT) | 0.003892 | 0.001322 | 2.944269 | 0.0067 |
D(UNEMP) | -0.001380 | 0.003125 | -0.441581 | 0.6624 |
D(INF) | -0.001004 | 0.000392 | -2.560799 | 0.0166 |
ECT(-1) | -0.172945 | 0.055229 | -3.131447 | 0.0043 |
R-squared | 0.988943 | Mean dependent var | 7.445328 |
Adjusted R-squared | 0.985116 | S.D. dependent var | 0.244656 |
S.E. of regression | 0.029848 | Akaike info criterion | -3.955279 |
Sum squared resid | 0.023163 | Schwarz criterion | -3.515413 |
Log likelihood | 81.19503 | Hannan-Quinn criter. | -3.801754 |
F-statistic | 258.3944 | Durbin-Watson stat | 1.827695 |
Prob(F-statistic) | 0.000000 | | |
Source: Author’s Computation from E-view 9 |
Table 5 above represents the short-run impact of the variables on poverty rate in Nigeria. The analysis shows that in the short-run, trade openness, exchange rate at a year lag, interest rate, and inflation rate are statistically in determining poverty rate in Nigeria at 5%, 1%, 1% and 1% level of significance respectively while exchange rate and unemployment rate are statistically insignificant in determining poverty rate in Nigeria in the short-run. The coefficient values show that trade openness, exchange rate, exchange rate at 1-year lag, unemployment rate and inflation rate are negatively related to poverty rate in Nigeria in the short run while interest rate is positively related to poverty rate in Nigeria in the short-run. A percentage increase in each of trade openness, exchange rate, exchange rate at 1-year lag, unemployment rate and inflation rate in the short-run will reduce poverty rate in Nigeria by 0.126%, 0.0004%, 0.0016%, 0.0014% and 0.001% respectively. Also, a percentage increase in interest rate in Nigeria in the short-run will increase poverty rate in Nigeria by 0.0039%.
The error correction term (ECT), which will be used to assess how the variables will converge to equilibrium, must meet the benchmark that it be negative and significant at any level of significance. As a result, the coefficient of the error correction term (ECT) showed that the annual correction for the 17.29 percent variation in the poverty rate from the long-run equilibrium. Additionally, the modified R-square of 0.985116 showed that the whole variation in the poverty rate can be explained by all the explanatory factors by around 98.5 percent.