Inderscience Publishers

A vector autoregressive analysis of trade-environment linkage in Nigeria

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Trade liberalisation has been celebrated as an antidote to poverty as it has significantly increased global output and income. However, one issue appears to have escaped analysis: the environmental costs associated with free trade. This issue appears fundamental, more so because it has intergenerational economic implications. Three possible channels in which trade liberalisation could affect the environment have been identified and researched on. In our own analysis, we have conducted a research on the impact of trade intensity (openness) on pollution (using CO2 data) and resource depletion (using deforestation figure) in Nigeria using the vector autoregressive model (VAR). Our result indicates that the scale effect of trade intensity is positively related to pollution, the composition effect of trade is real in the short and medium term while the technique impact is beneficial. The conclusion on resource utilisation indicates that scale and technique impacts are detrimental while it is beneficial via the composition effect. Overall, trade intensity is detrimental to pollution and resource utilisation.

Keywords: trade liberalisation, environmental degradation, economic growth, trade intensity, strategic trade, poverty reduction, pollution, composition, scale and technique, Nigeria, environmental damage, resource depletion, free trade

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