EVALUATION OF PREBISCH-SINGER THESIS BETWEEN NIGERIA AND USA

Abstract

The Prebisch-Singer thesis (PST) states that the price of primary commodities decline relative to the price of manufactured goods on the long term, which causes the terms of trade of primary-product-based economies to deteriorate. The essence of PST is that the peripheral or less developed countries (LDC’s) had to export large amounts of their primary products in order to import manufactured goods from the industrially advanced countries. Nigeria over the years seems to have been caught on this web of unequal trade interaction with the industrially advanced countries and therefore, needs a functional regional trade blocs to leverage on for a better terms of trade.  This study therefore aims at ascertaining the degree of potential gains or loss of Nigeria’s trade relation with USA, using a fixed-effect panel data model sourced from the world Development Indicators. The study revealed that PST is real in Nigeria, as successive trading with economically advanced and industrialized nations have kept the country’s BOPs at a deficit. The study therefore argued that AFCFTA should be an option for Nigeria as it unlock manufacturing potential and facilitate industrialization, driving sustainable growth and jobs among other objectives. Findings from the study revealed the need for Nigeria to diversify into the manufacturing sector as a matter of urgency in order to avert declining terms of trade. Nigeria needs to take advantage of this AFCFTA agreement which is an intra-African trade, in order to provide a new era of development model for the African continent.