ANALYZING THE IMPACT OF INTERNATIONAL TRADE ON ECONOMIC STABILITY IN NIGERIA USING THE ARDL METHOD

Abstract

This study examined the impact of international trade on economic stability in Nigeria using time-series data and econometric models, including autoregressive distributed lag (ARDL) models, with a dataset spanning from 1981 to 2022. The analysis reveals that higher inflation rates and exchange rate fluctuations have a statistically significant negative effect on economic stability. Specifically, increased inflation correlates with decreased economic stability, highlighting the need for effective inflation management. Exchange rate volatility also has an adverse effect on stability, emphasizing the need for exchange rate stabilization measures. In contrast, the import-to-consumption ratio significantly impacts economic stability, while the import-to-production ratio does not exhibit a significant effect. The study suggests that promoting domestic production through policy incentives and technological investments can reduce import dependence and mitigate trade imbalances. The policy implications emphasize the importance of robust monetary and fiscal policies to control inflation, stabilize the exchange rate, and support domestic production. Addressing these factors is essential for maintaining economic stability and promoting sustainable growth in Nigeria