FINANCIAL INTERMEDIATION, MACROECONOMIC DYNAMICS, AND TRADE PERFORMANCE

UNPACKING THE DETERMINANTS OF INTERNATIONAL TRADE IN AN EMERGING AFRICAN ECONOMY

Abstract

This study examines the effect of credit of commercial banks on international trade in Nigeria using annual time-series data from 1990 to 2023 from the Central Bank of Nigeria statistical bulletin. The estimation is done using the Fully Modified Ordinary Least Squares (FMOLS) estimation method to determine the contribution of bank credit, exchange rate, inflation, gross domestic product, and structural reforms to trade performance. The findings show that these effects of bank credit and GDP on international trade are positive and relatively strong, whereas the exchange rate has both positive but moderate impacts. On the other hand, inflation shows no substantial effect, showing how little short-term fluctuations in price levels matter in trade. The results emphasize the role of financial sector development, macroeconomic stability and structural reforms, most notably the banking sector consolidation in 2005, in facilitating long-term trade growth. The paper has provided relevant policy recommendations to improve trade finance, exchange rate stability as well as financial inclusion as instruments of bolstering Nigerian integration into the global economy.