Economic Determinants of Nigeria's Trade with China: A Cointegration Approach

The China-Nigeria trade volume has been increasing over the years with no signs of slowing down any time soon. This work examined the long-and-short run economic catalysts that stimulate this trade relation with focus on Nigeriai¯s economic factors as well as the Third Countryi¯s Factors. Japani¯s REER was adopted as a Third Countryi¯s Factor and Johansen and Juselius cointegration technique was used to determine the result. The outcome revealed that GDP, trade openness and FDI inflow possess significant positive influence on China-Nigeria trade relations while bilateral exchange rate and Third Countryi¯s Factor are negative determinants, suggesting that improvement in domestic prices and increased real exchange rates of Japan could undermine China-Nigeria bilateral trade, howbeit, in the long-run. So, both countries should gear towards improving domestic prices, efficiency and competitiveness relative to the Third Countryi¯s Effect to curtail its excessive influence on bilateral trade and particularly, Nigeria should focus on redefining its business environment politically and otherwise to attract further FDI and ameliorate its trading sector.