Impact of International Trade on Balance of Payment Position in Nigeria

Abstract

This paper examined the impact of international trade on the balance of payments position in Nigeria over the period 1986 to 2025. The study was motivated by the persistent volatility in Nigeria’s external sector, characterized by recurrent current account deficits, changing trade patterns, and shifts in trade policy over time. The paper adopted an ex-post facto research design, while the Quantile Autoregressive Distributed Lag Model was used to estimate both the long-run and short-run median dynamics. Preliminary analysis showed that the variables were integrated at mixed orders, making the chosen estimation technique appropriate. The findings revealed that export intensity exerted a positive and significant impact on the balance of payments position, indicating that stronger export performance improved the country’s external position. Import penetration had a negative and significant impact, implying that rising dependence on imports weakened the balance of payments position. Tariff rate produced a positive and significant impact, showing that trade policy remained relevant at driving favourable balance of payments position. It therefore recommended that the Federal Ministry of Industry, Trade and Investment, the Nigerian Export Promotion Council, the Central Bank of Nigeria, and the Bank of Industry should intensify export diversification and provide targeted support for export-oriented production. It also recommended that the Federal Ministry of Finance, the Nigeria Customs Service, and the Nigerian National Petroleum Company Limited should reduce harmful import dependence through selective import management, while tariff reforms should be strategically aligned with domestic production objectives.