Trade Finance and Economic Growth in Nigeria: A Fully Modified OLS Approach

Abstract

The study examined trade financing and economic growth in Nigeria from 1981 to 2024. The World Development Indicators and the Statistical Bulletin of the Central Bank of Nigeria were the primary sources of secondary data applied in the research. Real GDP serves as the dependent variable, with Nigeria's export credit, import credit, and letter of credit serving as the explanatory factors in the study. Full Modified Ordinary Least Squares (FMOLS) is an econometric technique that was applied to examine the data. The results showed that real GDP is positively affected by a rise in export trade credit. The same holds true for import trade credit; it boosts real GDP. Real GDP is negatively impacted by the issue of the letter of credit. The research found that trade financing helped Nigeria's economy grow over the studied period. The study consequently recommends that, import trade should be more on capital-intensive goods where Nigeria has a disadvantage in either production or expertise, credit to the private sector should be channeled into the production of capital goods and services which will attract more foreign exchange into the country.