Nigeria–South Africa Trade Relations and Sectoral Performance of the Nigerian Economy: A Diagnostic Analysis

Abstract

This study addresses the persistent structural asymmetries and missing sectoral linkages that characterize Nigeria–South Africa trade corridors, leaving the Nigerian economy highly vulnerable. The paper uses a two-level research structure, with a systematic literature review combined with an ex-post facto quantitative econometric model from 1990 to 2024. The empirical analysis tests three fundamental dependent variables: real GDP growth, manufacturing output and agricultural output, and compares them to key export and import factors, while holding exchange rates, population growth, and institutional quality constant. Structural imbalances are highlighted using diagnostic testing within E-Views 10. South African foreign direct investments are very deep into Nigeria's services and construction industry, but Nigeria's exports outside are poorly diversified and still heavily dependent on primary products, with Nigeria's exports to South Africa accounting for 97% of oil. In addition, the results of Augmented Dickey-Fuller and Phillips-Perron unit root tests confirm the mathematical foundation of applying an Autoregressive Distributed Lag (ARDL) Bounds testing approach in a situation where the variables are of mixed order of integration; some are I(0) (level) and others are I(1) (first difference). The study findings finally suggest that Nigeria needs to deliberate on the need to implement targeted industrial policy changes and build stronger linkages with the local industries to address these one-sided trade flows and attain the best macroeconomic benefits within the African Continental Free Trade Area (AfCFTA)