ECONOMIC GROWTH AND GLOBALIZATION IN NIGERIA: A CAUSALITY ANALYSIS

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1 Economic Asian-African Growth Journal and of Globalization Economics and in Nigeria: Econometrics, A Causality Vol. 13, Analysis No. 2, 2013: ECONOMIC GROWTH AND GLOBALIZATION IN NIGERIA: A CAUSALITY ANALYSIS Sede Igbaudumhe Peter * and Izilein Elizabeth I. * ABSTRACT The Neoclassical proposition of improving the economic growth especially of growing economies has widely been refuted by most studies due to the latter s inability to utilize the opportunities of increased international trade. The study deviated from the common norm of studying the impact of globalization on economic growth to examining at the causality relationship between economic growth and globalization in Nigeria. Result of the study showed that the null hypothesis of globalization not granger causing economic growth should be accepted at 5% level. This in a way still confirms the negligent effect of globalization in the Nigerian economy and therefore calls for all necessary policy efforts at positioning the economy in a form that can make her maximize the advantages of globalization. Key words: Economic growth, Nigerian export and import,granger causality 1. INTRODUCTION The economic growth of any economy is a crucial issue because it, ultimately,forms the crux of economic development which is the desire of every economy (Todaro, 2010). Thedividend of growth is what digests into the numerous strands of development indices that is enjoyed by the affected economy. It has therefore become the focus of every economy to harness every available resource towards enhancing sustainable growth. The external sector of the economy is one major aspect through which growth can be enhanced. This is so because the economic interaction with other economies of the world, through trading, enhances the productivity of the economy. However, the ability of any economy to benefit from economic globalization depend on the presence of Certain conditions such as, the elasticity of the supply and demand for the products of the globalizing economy and the goodwill position with other economies (Marshall-Learner,) the effectiveness of globalization rate of an economy would also depends on the level of technology which will enhance the competitiveness of the goods and services in the foreign market. As the economic growth of an economy begins to appreciate, no doubt the craving to globalize becomes moreintensive. Thus the question is which one actually causes the other in Nigeria? Does growth causes globalization or is it globalization that causes growth in Nigeria? This forms the investigation assignment of this study. Previous studies, in this area, tend to concentrate on impact measurement. For * Department of Economics and Statistics, Faculty of Social-sciences, University of Benin, Benin-city, Edo State, Nigeria, p.petersede@yahoo.com

2 146 Sede Igbaudumhe Peter and Izilein Elizabeth I. example, Tudeno and smith, (2005), Alaba, (2006) Onyeonoru, (2003) Oguijiba et al. (2004) and Ndiyo et al. (2003) have all concluded that globalization has not had significant impact on developing economies especially Nigeria since she cannot meet up with the necessary conditions to maximize the gains from globalization. None, however, ask for the causation link between the two.on the contrary, this study examines the causal link between openness (globalization) and economic growth in Nigeria by means of Granger Causality test Export Trend Nigeria In an attempt to assess the level of openness of the Nigerian economy, the study takes a brief look at the components of the Nigeria export and imports as well as their trends for some selected years. Table 1 Oil and Non-oil Export Composition Year Percentage oil export of total export Percentage non-oil export of total export Total Percentage Table 1 above shows, the trend of Nigeria s export by composition and as percentage of total export for selected years. From the table it can be deduced that oil export was a meager 2.6% in 1960 of total Nigeria export. By 1962, it had risen to 10.2%. As at 1965 the growth had doubled to 25.4%. it rose still to 57.5% in 1970 and by 1975 it had reached a peak of 92.6%. This rather exponential growth in the percentage share of oil in Nigeria total export hit an apex Table 2 Import Composition Percentage Share of Total Import for Selected Years Year Food and Crude material Chemicals Manufactured Machinery and live animal inedible goods transport Source: CBN Statistical Bulletin Several Years.

3 Economic Growth and Globalization in Nigeria: A Causality Analysis 147 of 98.7% in 2000 and dropped slightly to 96.4% in Since then it has not fallen below 90%. On the contrary the non-oil exports which is a conglomerate of agriculture, manufacture, and machinery, to name but three of them, has declined almost into oblivion. This tells the discouraging story of Nigeria s poor participation in foreign trade. It shows how the Nigerian economy is mono-cultural Import Trend in Nigeria A similar look at the percentage share of import values for some selected years from Table 2 shows an interesting picture as well. From the table it can be seen that importation of manufactured product, machinery and transport takes a larger proportion than importation of crude materials that could be used as important inputs for the manufacturing sector.on the whole, for the estimated period, machinery and transport has a mean value of 30.9%, manufacturing has a mean value of 29.3%. Food and live animals import has a mean value of 10.4% while importation of crude material have 3.2%. The highest value of import is recorded by machinery and transport with a value of 41.9 in The lowest value for crude materials was 0.1% in 1960 and its highest value was 5.9% in That of food and live animal stood at 6.5% in 2010 and 17.0% in 1985 while manufacturing ranges between 21.8% in 1980 to 37.6 in Machinery and transport on its part ranges between 21.9% in 2005 and 41.9% in Food and live animal trended downwards from 11.7% in 1960 to 8.0% in 1975 rose to 15.8% in 1980 and climaxed at 17.0% in It plummeted to 7.6% in 1990, then wobbled between 11.7% and 11.5% in 1995 and 2000 and finally plummeted to 6.5% in Import of manufactured products declines from 37.6% in 1960 down to 21.8% in 1980 and started to ascend and climaxed at 32.5% in Machinery and transport wobbled from 23.9% in 1960 through 37.7% in 1970 to its apex of 41.9% in 1975 then wobbled through 40.1%, 34.2% and 40.5% in 1980, 1985 and 1990 respectively before descending in a progressive fashion to 22.2% in The progressive fall in machinery and transport share from 1990 to 2010 tends to give credence to the impact of recent government commercial policy on reducing the unguided consumption of foreign cars. However much still need to be done as this is a serous pointer to the extent to which domestic electric power generation, especially, is being neglected. This distribution presents a worrisome picture. It shows how largely import dependent Nigeria is for her survival in crucial sectors that should enhance her advantageous exploitation of globalization. Nigeria large import dependence on manufactured goods and machinery products is a serious threat to her ability to maximize the benefits of globalization. In the art of production no economy is completely adequate in the production of all the required resources. Thus the importation of certain crude material as raw materials for the manufacturing industries is inevitable. Much as excessive importation is not desirable the low series of percentage input values shown in the crude material, column is reflective low pace of activity in the manufacturing sector. For instance, it start from an all time low of 0.1% and wobble up to 5.0 in 1985, plummeted to 3.1% in 1990 and started off to 5.9% in 2005 and dropped slightly to 5.8% in The 2005 and 2010 drop in crude material is corroborated by the absent in input of manufactured product in that same period.

4 148 Sede Igbaudumhe Peter and Izilein Elizabeth I. To further buttress this point table 3 shows manufacturing records in Nigeria as against those of some selected countries of the world. Table 3 Nigeria s Manufacturing Records and Those of Some Selected Countries of the World Country (s) China Thailand Brazil Malaysia South Nigeria Items Africa Manufacturing % share in GDP (2005) Manufacturing value added per capita (2005) , Manufacturing export per capita (2005) , Manufacturing value added share in GDP (2005) Manufacturing % share of total export GDP per capita 5, ,600 2,200 Source: National Planning Commission A look at table 3 shows Nigeria having the poorest of all the records in the manufacturing sector as against her counterparts in the world. For example, Nigeria s percentage share of manufacturing in GDP for 2005 was 5% as against 33.5%, 34.8%, 20.4% and 18.6% for China, Thailand, Malaysia, and South Africa respectively. Manufacturing value added per capita for Nigeria was 19.3 in 2005 as against 495.8, 882.2, 748.7, and for China, Thailand, Malaysia, and South Africa respectively. Also the value for manufacturing per capita in 2005, for China, Thailand, Malaysia, and South Africa stood, respectively, at 556, 1498, 463, 4753 and 703. That of Nigeria was 4. The percentage share of manufacturing value added in GDP for China, Thailand, Malaysia, and South Africa, respectively, was 34.1, 36,1, 20.4, 32.2 and 16.3 while that of Nigeria was 4.1. What is more, while Nigeria s share of manufacturing in total export in 2005 was 2.5% Those of China, Thailand, Malaysia, and South Africa stood, respectively at 95.1%, 87.4%, 72.8%, 85,5% and 70.2%. All these point at the economy s dormancy in participating in the ongoing globalization and hence a threat to national productivity, This is again clear from the table as her Per capita GDP in 2008 in million U. S Dollar was 2200, those of China, Thailand, Malaysia, and South Africa were 5300,8000, 9700, 7022 and 10,600 respectively. The interesting question at this point is would Nigeria s openness cause her economic growth or is it her economic growth that would cause her maximization of potentials in the global market Nigeria s Balance of Payment and Economic Growth Table 4 above shows the balance of payment (BOP) and the GDP growth rate (GDPGR) for selected years in Nigeria from the table it is seen that for the years 1962, , 1995, 2000 and 2010 the economy registered unfavourable balance of payment. This implies that the net receipt from transaction with other nations of the world is deficient. This indicates poor globalizing index as well as poor performance of the external sector. The second column shows the GDP growth rate of Nigeria for the same selected years. The figures are rather low, which are reflection of the economy s poor performance in the external sector. This is true because the GDP report of the economy is the sum of her productivity in both the internal and external sectors.

5 Economic Growth and Globalization in Nigeria: A Causality Analysis 149 Table 4 Nigeria BOP and GDP Growth Rate for Selected Years Year BOP GDPGR in % The figures show 1995 with highest growth rate of 9% within the period in view and 1980 with a negative growth of 9.7%. On the whole, the growth rates for the period were consistently limited to one digit. As earlier mentioned, the growth rate of any economy is necessarily affected by the productivity of both the external and internal sectors. Since the external sector performance is weak, and then the rest is devolved on what happens in the internal sector whose viability is not clear. 2. LITERATURE REVIEW Literature is replete with studies on the impact of globalization on economic development from different perspectives. In what follows effort is made at presenting a few of them and also to possibly detect how much has been done to examine the causality link between both. Spence, (2011) in his study using explanatory method, concludes that globalization has enhanced the GDP growth rate of the economies of both the advanced and developing economies. The study noted that even though there is disparity in growth between the advanced and the growing economies, but that the growing economies have been able to adjust to the competitiveness of the world market and hence improved on the quality of export supply. Ukpere, (2011), also adopted the explanatory methodology, to investigate the functional relationship between globalisation, unemployment, income inequality and poverty in Africa This is because, the study considered the fact that unemployment accelerates the level of income inequality and poverty within a given economy. The study found that in spite of the laudable credits given to globalisation, the current globalisation seems to have aggravated the problem of unemployment, the corollary of which is endemic income inequality and mass poverty in Africa. In fact, the trickle down economy pattern has consistently failed Africa. The study noted that while the advanced economies had the necessary economic and technological conditions to benefit from globalization, most African economies did not. The study therefore, concluded that, viewed from any angle, the African continent seems to have been marginalised and left behind by globalisation. Capitalist globalisation undeniably, created wealth but also intensified inequality and poverty, particularly in Africa. High growth rate of Gross domestic product (GDP) may be a good statistics to parade at international conferences and seminars. However, for the hungry jobless youths in the streets, these are meaningless numbers since they do not translate into job creation or cure their hunger. The study therefore, recommended that African nations look beyond the official statistics of the so called high GDP growth rate and get down to the hard business of creating real jobs that take out the hungry, angry and jobless youths from the

6 150 Sede Igbaudumhe Peter and Izilein Elizabeth I. streets into workplaces. African countries need to develop comprehensive strategies to create jobs locally. In the paper, the author posited that there is a strong linkage between globalisation, unemployment, income inequality and poverty in Africa. Some mechanisms were proffered to overcome these bottlenecks. Kleinert, (2012) in his study, noted that increasing integration of economic activities enforces large scale reallocations of labor between the participating economies. This reallocation pressure requires necessarily an increase in the separation rate of jobs. While new jobs are created, reallocation can not be achieved instantaneously if labor markets are characterized by frictions. The study introduced hiring costs in a Melitz type model of international trade with nonpermanent employment to show that an increase in export activities of trading countries leads to a temporary increase in the rate of unemployment in the affected economy. The increase in unemployment is due to labor reallocations and therefore driven more by the change in export activities than by its level. A permanent increase in export activities leads to a permanently higher rate of unemployment. Thus, globalization can have adverse effects on labor markets. Mohamed and Motinga, (2012), investigated the economic impact of globalisation on the Namibian labour market. It dealt with how trade liberalisation, which is just one dimension of globalisation, impacts on the labour market, and therefore outlines possible indicators of the links between liberalisation and employment. The paper argued that the economic returns from greater openness are indisputable, but are perceived as having been unevenly distributed both between and within countries. For some groups, the rising flow of trade and capital has heightened the sense of vulnerability. Workers in industrialised countries fear being displaced by cheaper labour in developing countries. Developing countries think that the continuing globalisation, particularly of capital markets, will lead to greater volatility in their national economies, which will damage their growth performance. This is a fear that has been raised by the labour movement in Namibia and South Africa. Thus, globalisation is often associated with greater unemployment and social collapse. Without doubt, globalisation impinges on development from several directions. Of greatest significance for national policy are: growth of trade, capital flows and financial capability, migration, information technology, the Internet, and the diffusion of technology. The paper therefore argued that all parts of the world are affected by globalisation through these channels, but it is important to remember that the full force of change is felt by a relatively small number of upper and middle-income countries whereas most poor countries are left out. Most economies are only partially integrated into the global system. Naturally, while this insulates closed economies to a degree from the risk of turbulence associated with volatile short-term capital flows it also prevents these countries from tapping the resources, energy and ideas inherent in globalisation. Africa in particular is relatively closed and thus lagging behind in terms of economic development. The study used standard trade theory to theoretically and empirically (albeit with limited success) to explore the effects of trade liberalisation on employment in Namibia. The paper noted that the Namibian economy specialises in capital-intensive sectors and that formal sectorwage inequality is rising, which begs the questions. Is trade the culprit? Finally, the paper advances some policy considerations; whilst at the same time acknowledging that analysing the impact of trade (globalisation) remains a difficult but important process.

7 Economic Growth and Globalization in Nigeria: A Causality Analysis 151 Osabuohien, (2007), examined the influence of globalization and governance on economic growth in West Africa, drawing empirical facts from Cote d Ivoire and Nigeria. Data sourced from IFS and Polity IV for the period were analyzed using parsimonious error correction model after Carrying out stationarity and cointegration tests. The study found that the measure of globalization was found to influence positively the economic growth of Cote d Ivoire and Nigeria, the nature of governance and socio-political situations had negative effect. The study recommends that efforts are to be made by these countries to adapt technologies that suit local peculiarities via appropriate policies, in order to significantly partake of the opportunities that are in the globalizing world. The need for the nature of governance and socio-political ambiance to be investment friendly was also advocated. From the above it can be seen that very few of the studies adopted econometric methodology in their studies and in particular none of them localized their studies on Nigeria. It is this gap this study intends to cover by looking at the impact of globalization on unemployment rate in Nigeria. Yusuf, (2003) reviewed the existing literature on the implication of globalisation on the economic development of Nigeria. The study thus critically examined the concepts of globalization and development as well as some components of Nigeria development and the impact of globalisation on the world economy. Based on determining implication of globalization on economic development, the paper therefore recommended the adoption of development inclined policies for Nigerian economy to keep pace with globalization. It is concluded that if necessary measures are not put in place Nigeria may be excluded in this process, and globalization of poverty rather than prosperity will occur. Axel D., (2003) Used panel data for 123 countries in to analyzed empirically whether the overall index of globalization as well as sub-indexes constructed to measure the single dimensions affect economic growth. The paper presented an index of globalization covering its three main dimensions: economic integration, social integration, and political integration. The results showed that globalization promotes growth but not to an extent necessary to reduce poverty on a large scale. The dimensions most robustly related with growth refer to actual economic flows and restrictions in developed countries. Although less robustly, information flows also promote growth whereas political integration hadno effect. Emmanuel, (2007) Confirming the increased pace of globalization in the last two decades in the world over, concluded that the major driving forces of this process are technology, policy and competition. The paper also concluded that globalization subordinates the domestic economy to global market conditions and practices. Thus developed nations are the beneficiaries of globalization as their share of world trade and finance has been expanded at the expense of developing countries. Thus, the process exacerbates inequality between the world s regions and poverty in the developing world. According to them, Nigeria has not benefited from globalization due to monocultural export, inability to attract increased foreign investments and huge indebtedness..the paper, however, concluded that globalization can be domesticated in the country through diversification of exports, debt reduction and expanded development cooperation with other countries. The paper also concluded that, Nigerian state also needs to

8 152 Sede Igbaudumhe Peter and Izilein Elizabeth I. be strengthened as a bulwark against the dictates of foreign capital. So as to join the league of nations enjoying the benefits of globalization. Mohammad, (undated) in his study, examined the impact of globalization on the economic growth of Pakistan s economy for the period The study used trade openness and financial integration measures to account for the impact of globalization on economic growth. Cointegration results indicated a robust long-run relationship between economic growth, trade openness and financial integration. The paper concluded that the Pakistan s economy will certainly benefit from globalization provided the country pursues sound policies. It also noted that the impact of globalization varies from country to country depending on the level of social, economic and political developments. To the paper, LDCs have gained as well as suffered from globalization. The paper also concluded rhat Globalization is the need of the hour and that no country can afford to live in isolation. It therefore, suggested that LDCs can counter the adverse impact of globalization if they unite and adopt policies that serve their genuine cause. Aremo et al., (2010), In an attempt to assess the extent to which globalization has influenced the structure of development in Nigeria, studied the impact of globalization on labor force utilization, proxied as employment. The paper performed the, Augmented Dickey Fuller (ADF) and cointegration tests to investigate the unit root problem and the long run relationship among variable respectively. The paper also utilised the Error Correction Methodology to capture both the short run and long run dynamic adjustments in employment model. Their findings were that globalization practice could generatenegative impact on employment in both shortand long run periods suggesting that if globalization continues as being practiced, it could further worsen the extant decrepit state of unemployment in Nigeria other things being equal. It is therefore recommended that government should confront the imminent unavoidable negativeeffects of globalization with a well designed policy mix. Loto (2011) investigated the impacts of globalization on Nigeria s Economic growth. The paper adopted the Mundel-Fleming model of open macroeconomic..based on the notion of one price, it concluded that trade, cans influence growth via catch-up, and other causal links. The paper estimated openness model using Nigerian data. It adopted the OLS regression analysis in conjunction with other tests of stability. The regression results showed that the inflation and exchange rates were negative. Openness indicator was also negative. According to the paper, the violation of the a priori expectation of these variables would not have been far from the occurrence of poor indices of certain crucial parts of the values employed in the estimation. For example, the openness indicator which was calculated as total volume of trade divided by the GDP had a low numerator; a situation that can make the regression outcome to violate the a priori expectation. Moreover, it has been established that the level of trade in Nigeria is low: As a confirmation, the sign of the coefficient of the openness variable violated the a priori expectation. The paper thus suggested that Nigeria needs to improve on her trade with the rest of the world for the country to benefit from globalization. The paper also noted that sound macroeconomic policies are needed to reinforce the globalization exercise for a better result. Thus it suggested that fiscal discipline, coupled with good functioning financial framework as necessary tools for better results and that Nigeria should also look beyond oil. Moreover, it

9 Economic Growth and Globalization in Nigeria: A Causality Analysis 153 concluded that Nigeria needs to get out of the mono-product type of business and research into other types of products that could be effectively and competitively sold in the international market. From the literature presented above, the focus of investigation has been the impact of globalization on economic growth but none, to the best of our knowledge investigated the causality relationship between the two. This is what paper is set to do. Table 5 Data Description Variable Description Source GDPGR Gross Domestic Product Growth Rate. World Bank in World Development Indicators 2011 A proxy for economic growth OPN Openness a proxy for Globalisation. It is Data on Export, Import and GDP were derived derived as a quotient of the sum of export from CBN Statistical bulletin several issues and import and GDP OPN is author s computation EXRT Foreign Exchange Rate of the Nigerian CBN Statistical bulletin Naira per dollar. FEXPD Total Federal Government Expenditure. CBN Statistical bulletin several issues. A variable to capture government fiscal policy. FIDIP Financial Deepening. This is obtained as the M 2 and GDP data were obtained from CBN quotient of GDP and M 2 statistical bulletin and FIDIP is author s computation 2.1. Descriptive Statistics The variables employed in the study are required to display certain desirable features before theycan be engaged in further statistical analysis, such features include consistency, and normality of distribution. These features are observable from the descriptive statistics displayed in Table 3.2 below. Table 6 Descriptive Statistics Variable(s) Mean Median Maximum Minimum Standard Kurtosis Skewness Jaqu-Bera statistic Deviation GDPGR OPN FEXPD FIDIP EXRT The mean value of GDP growth rate (GDPGR) for the period is 4.38 while the median is The little difference between the two indices, as measures of central tendency, portrays consistency of the central values of the data. Those of openness (OPN), federal government expenditure (FEXPD) financial deepening (FIDIP) and naira-dollar exchange rate for mean

10 154 Sede Igbaudumhe Peter and Izilein Elizabeth I. and median respectively were; and -0.59, and 11.00, 1.35 and 1.36 and 2.23 and This reflects a great deal of consistency in the data employed in the analysis. As a measure of their dispersion about their mean, the maximum and minimum values for each of the variables as well as their standard deviations are reported in the table. From the table, it is easily seen that the maximum value of GDP growth rate for the period was while its minimum value is Those of OPN were and respectively. Federal government expenditure (FEXPD) had maximum and minimum values of and 6.81 respectively. The values for financial deepening (FIDIP) were 1.99 and 0.92 respectively while the values for exchange rate EXRT were 2.23 and 2.29 respectively. Their standard deviation shows that these dispersions were minimized at 6.28 for GDPGR, 0.30 OPN 2.62 for FEXPD, 0.30 for FIDIP and 2.46 for EXR. This also goes to confirm The Jaqu-Bera results for GDPGR, OPN, FEXPD, FIDIP and EXR which are 10.29, 4.77, 1.61, 1.47 and 1.65 respectively confirms absence of serious outliers. Skewness and kurtosis are used to test for normality in distribution of the data. If it is positive it means skewness to the right of the mean while negative value means skewness to the left hand side of the mean. Due to sample size limitation, skewness may not exactly be zero but the closer its value is to zero the better. Kurtosis shows the closeness of the data near the center. Thus a zero Kurtosis shows that the data are bell shaped. The result above shows that the skewness values of GDPGR, OPN FEXPD, FIDIP and EXR are 0.17, , 0.18, 0.28 and 0.41 respectively. The kurtosis statistics were also minimized at 5.43, 3.32, 2.10, 2.26 and 2.46 for GDPGR, OPN, FEXPD, FIDIP and EXR respectively. These results confirm the normal distribution of the dependent and independent variables. In addition, the cholesky multivariate normality test statistics showed the three criteria. The normality test statistics passed at 1% thereby forming the basis for rejecting the null hypothesis that claimed that the data are not normally distributed. Table 7 Normality Test Result Skewness ** Kurtosis ** Jarque-Bera ** Null Hypothesis Rejected at 1% Unit Root Results The characteristic feature of trend in time series data often makes them susceptible to spurious correlation. In order to avoid this, the data are always detrended on confirmation of the presence of unit root. The test for the presence of unit root were carried out with the Augmented Dickey Fuller and Philip-Perron tests. There were two versions of test under each category. These are; results at levels and results at first difference. This therefore ascertained the stationarity status of the data. Table 5 below presents the two stationarity results. From the results above, GDPGR was stationary at levels under Philip-Perron. There after the rest variables passed the unit root test at first difference. Thus for the two versions of the

11 Economic Growth and Globalization in Nigeria: A Causality Analysis 155 Table 8 Unit Root Results ResultsVariable Augumented Dickey Fuller Philip-Perron Without Trend With Trend Without Trend With Trend Level 1 diff Level 1 diff Level 1 diff Level 1 diff GDPGR ** ** -5.96** ** -6.05** ** LOPN ** ** ** ** LEXRT ** ** ** -6.60** ** LFEXPD ** ** ** ** LFIDIP ** ** ** ** Source: Author s Computation from Eviews 7.0 results, most of the variables were not stationary at levels but after first differences they became stationary. This says that they were integrated of order one I(1) Cointegration Test To ascertain the long run relationship among the variables the study employed the Johansen maximum likelihood approach. The number of cointegrating relations from all the models on the basis of trace statistics and the maximal Eigen value statistics at 5% level of significanceare reported in table 6 below: Table 9 Johansen Cointegration Statistics Rank Trace Statistics Maximal Eigen Values r = * 38.30* r = r = r = r = Source: Author s Computation from Eviews 7.0 The results of the trace statistics and maximal Eigen value from the table above indicate that there is at least one cointegrating equation among the variables. This therefore gives the basis to reject the null hypothesis that there is no long run relationship among the variables for Nigeria.Having ascertained the existence of cointegration the variables, the study then precedes to carryout the Granger causality test between GDPGR and Openness. The emphasis Granger causality test emphasized GDPGR and Openness because they form the main issue of the study. Results are as presented in table 7. Emphasis and explanation is focused on globalization and economic growth since they form the main issue of the study. From the table it is clearly seen that causality OPN GDPGR is among the weakest because none of the results at any of the three lags was significant. This implies that openness has no serious growth implication for Nigeria. On the contrary the causality

12 156 Sede Igbaudumhe Peter and Izilein Elizabeth I. Direction of Causality Table 10 Granger Causality Test Results Lags OPN GDPGR GDPGR OPN * 2.79* FEXPD GDPGR GDPGR FEXPD EXRT GDPGR * GDPGR EXRT FIDIP GDPGR GDPGR FIDIP *significant at 5% level GDPGR OPN shows the strongest causality in the table. This implies that it is rather the economic growth rate thatgranger causes openness in Nigeria Variance Decomposition The variance decomposition for GDP growth rate in Nigeria is shown in table 8 below. This is because economic growth is the main issue of concern in the study. The essence of the variance decomposition is to ascertain the proportion of forecast error variance in one variable explained by its innovation and other variables. It is a device for measuring the amount of shock received by the variable from itself and other variable. The result from table 11 shows that GDPGR variance decomposition receives the largest shock of 77.5%, followed by 8% from openness, 6.18% of federal government expenditure 4.15% of financial deepening and 3.69% of exchange rate in 10years. This shows that growth rate in Nigeria is minimally affected byglobalization. See table 11. Table 11 Variance Decomposition for GDPGrowth Rate GDPGR OPN EXRT FEPD FIDIP

13 Economic Growth and Globalization in Nigeria: A Causality Analysis POLICY IMPLICATION The result above has some interesting policy implications for Nigeria. From the descriptive statistics it is clear that the mean growth rate of GDP in Nigeria is This shows consistency in growth even though low. Mean value of for openness shows very poor globalization index. This has a lot of implication for the economic benefits from international trade to Nigeria. This further confirms the balance of payment problem in Nigeria. A mean value of financial deepening of 1.35 implies a very poor banking culture in Nigeria. It also goes to show how little monetary policy could possibly affect GDP. Federal government expenditure with a mean value of actually shows the strength of emphasis of government on fiscal policy option. It is the highest of all the descriptive indices. The Granger causality test showed that OPN GDPGR was not significant at any of the three lags. It implies that Openness does not propel economic growth in Nigeria. Rather the causality of GDPGR OPN which was most significant at 2 of the 3 lags shows a reverse causation. This implies that economic growth will only be the impetus for Nigeria to benefit from globalization. This gives a signal to emphasize on improved productivity so as to open up the economy for the patronage of instruments of globalization.the variance decomposition results show that Openness (OPN) only contributes a meager 8% to GDP Growth rate in the period of 10years. Much as this value can be said to be low it still implies thatglobalization still holds some good prospects for improving on the Nigerian economic growth. Policy Recommendations Base on the foregoing, the following are the policy recommendations: Necessary policy instrument should be put in place to harness the human resources so as to maximize the benefits of openness. For one thing, globalization can be exploited to enhance GDPgrowth rate in Nigeria, especially if the economy improves on human capital. The fact is that much as openness does not currently contributes to the GDP growth rate of Nigerian economy, the evidence from the results still shows it is still having the potential to contributes to it, if she harnesses her natural resources well. There is a need to diversify the economy from a major primary product exports to manufactured exports. The economy also has to fight seriously against the monocultures export syndrome Conclusion The study examined a causality relationship between economic growth captured by GDP Growth rate and globalization captured by Openness. The Granger causality results showed that Openness does not Granger causes GDP growth rate thus the study fails to reject the null hypothesis at 5%. It was also reported that crude oil export featured monotonously in the Nigerian export table which therefore made the economy monoculture. Manufactured exports are infinitencimally minimized in the export records. This calls for serious policy attention to diversify the economy.

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