The study explores the relationship between trade liberalization and economic growth in Nigeria. Two equations were estimated in which index of industrial production proxied as yearly average capacity utilization as a function of degree of openness, terms of trade and real export. Similarly, in the second equation, real gross domestic product as a function of degree of openness, terms of trade, real export and trade liberalization dummy was estimated. A vector error correction model was employed for the study in which results show that openness of the foreign sector and trade liberalization dummy have positive significant impact on both industrial performance and economic growth in Nigeria within the period under review. The paper therefore recommended for the removal of all known impediments to trade such as excessive import levies and arbitrary tariffs.
Keywords: Cointegration, Index of Industrial Production, Real Gross Domestic Product, Trade Liberalization, Vector Error Correction Model
