Economic diversification: imperative for trade and industrial policies in Nigeria

  • Chekwube Vitus MADICHIE Nnamdi Azikiwe University, Awka
  • Festus OSAGU University of Ibadan
  • Eze Anoke EZE Nnamdi Azikiwe University, Awka
Keywords: economic diversification, trade policies, industrial policies, ARDL, Nigeria


The sharp and continuous decline in crude oil prices since the mid-2014, along with the lackluster efforts at diversifying the sources of revenue and foreign exchange in the economy, incontrovertibly led to the recession that greeted Nigeria in the second quarter of 2016 as manifested by fiscal crisis. Hence this study examines the imperative of economic diversification in trade and industrial policies in Nigeria. In order to characterize the pattern of trade and industrial transformation in the diversification process, we adopted the augmented version of Kaldor’s first law which establishes a link between manufacturing output and economic growth. Based on annualized secondary time series, spanning from 1970 to 2015, obtained from the CBN statistical bulletin of various years, the study employed the contemporary econometric techniques of cointegration and error correction mechanism, within the framework of the Autoregressive Distributed Lag (ARDL) model as proposed by Pesaran et al (2001) in achieving its objective. The results show that manufacturing output, crude petroleum and natural gas production, as well as mining production have significant positive longrun impact on economic growth in Nigeria. This implies that economic diversification-based industrial policies will definitely bring about the desired economic outcomes in Nigeria. We therefore conclude that trade and industrial policies should be geared towards diversification of the economy.

Author Biographies

Chekwube Vitus MADICHIE, Nnamdi Azikiwe University, Awka

Department of Economics, M.Sc.

Festus OSAGU, University of Ibadan

Department of Economics, M.Sc.

Eze Anoke EZE, Nnamdi Azikiwe University, Awka

Department of Economics, Ph.D.


Analogbei, F. C. O. (2000). “Trade reforms and productivity in Nigeria: Proceedings of the Ninth Annual Conference of the Zonal Research Units of CBN.

Ansu, Y. (2013). Industrial policy and economic transformation in Africa: Strategies for development and a research agenda. In: Stiglitz, J., Yifu, J.L., Patel, E. (Eds.), The Industrial Policy Revolution II: Africa in the 21st Century. Palgrave Macmillan, Hampshire, UK, pp. 492–528

Brown, R. L., Durbin, J. & Evans, J. M. (1975). Techniques for testing the constancy of regression relationships over time. Journal of the Royal Statistical Society, Series B (Methodological), 149-192.

Chen. L. (1998). The concept and measurement of regional industrial diversification. Southern economic journal, 41:492-505.

Clark, D., Renato, L. & Charles S., (2016). Stages of diversification in Africa. Economics Letters 144, 68–70.

Corral, P. & Natalia, R. (2017) What’s So Spatial about Diversification in Nigeria? Article in press. World Development Vol. 10, pp. 231-253.

Ekpo, A. H. & Umoh, O. J. (2014) An Overview of The Nigerian Economic Growth and Development,, July 30, 2014.

Emerole G., and Edeoga G (2013). Empirical analysis of the problems and prospects of export marketing of non oil agricultural product in Nigeria. European Journal of Business and Management . Vol.5, No.23

Hirschman, C. (1981). The concept and measurement of regional industrial diversification. Southern Economic Journal, 41:492-505.

Kaldor, N. (1967). Strategic factors in economic development. New York State School of Industrial and Labour Relations, Cornell University, Ithaca, NY, USA.

Michler, J and Josephson, A. (2016). To Specialize or Diversify: Agricultural Diversity and Poverty Dynamics in Ethiopia, World Development

Moghaddasia, R., Sadeghia, E, Hosseinib, S, & Amir, M. (2017). Export diversification and agricultural growth: Evidence from developed countries. Journal of Economics, 1 (2017) 1-13.

NISER, (2013). Potential for Diversification of the Nigerian economy. NISER Publication

Nouf, A., Bhattacharyya, S. & Intartaglia, M. (2017) Economic diversification in resource rich countries: History, state of knowledge and research agenda. Resources Policy 52 (2017) 154–164

Nwogwugwu, U. C., Maduka, A. C. & Madichie, C. V. (2015). Price and income elasticities of import demand in Nigeria: evidence from the bound testing procedure. International Journal of Development and Economic Sustainability, 3(4), 91-103.

Onodugo, V. A., Ikpe M. and Anowor O. F., (2013) Non-oil Export and Economic Growth in Nigeria: a Time Series Econometric Model, International Journal of Business Management & Research (IJBMR), Vol.3, Issue 2, 115-124.

Pesaran, M. H. Shin, Y. & Smith, R. J. (2001). Bounds testing approaches to the analysis of level relationships. Journal of Applied Econometrics, 16(3), 289-326.

Taylor, I. (2014). Africa rising? BRICS - Diversifying dependency. Oxford: James Currey.

Uzonwanne, M. C. (2015). Economic diversification in Nigeria in the face of dwindling oil revenue. Journal of Economics and Sustainable Development, 6 (4), 61 – 67.

World Bank (2015a). Africa: end of the commodity super cycle weighs in on growth. Africa’s Pulse.

World Bank (2015b). World Development Indicators.
How to Cite
MADICHIE, C., OSAGU, F., & EZE, E. (2019). Economic diversification: imperative for trade and industrial policies in Nigeria. Timisoara Journal of Economics and Business, 11(1), 67-86. Retrieved from