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The performance of the manufacturing sector in an oil-rich country like Nigeria has been a subject
of debate among scholars. Some believe that it has not been impressive due to the preference and
reliance on imported goods while others share different opinions. This study therefore investigates
the relationship between trade openness and industrial output growth in Nigeria using time series
data, endogenous growth framework as well as export-led growth model. The paper also examines
the direction of causality between trade openness and manufacturing output using Toda-
Yamamoto Causality Approach. The adopted framework contends that domestic policies on trade
liberalization cannot be avoided but harnessed for optimal benefit of the economy. The empirical
results shows that trade openness contribute positively to industrial output growth. In the short-
run, the dynamic impact of trade openness on industrial output growth is insignificant while its
long-run impact is significant. The paper also reveals a bidirectional causality between the two
core variables. As the paper suggests, this could be a pointer to the government that there is need
to diversify the economy and stop depending on a mono product. Again, the government should
be careful while implementing trade openness policies to avoid making the country a dumping
ground for unwanted developed countries’ goods and service. This is particularly important when
signing bilateral trade agreements and other treaties.
