This study investigates the relationship between trade liberalization (measured through the degree of openness), and economic growth in Nigeria. Motivated by Nigeria’s sustained efforts to attract FDI and liberalize trade since the mid-1980s, the paper explores whether these strategies have significantly impacted the nation’s Gross Domestic Product (GDP). Drawing on time-series data from 1981 to 2022, the study employs Augmented Dickey-Fuller (ADF) tests, Johansen Cointegration analysis, and Fully Modified Ordinary Least Squares (FMOLS) regression to examine long-run relationships among the variables. The findings reveal a statistically significant positive relationship between FDI and economic growth, affirming its critical role in capital formation, technology transfer, and job creation. Conversely, the degree of openness exhibits an inverse and statistically insignificant relationship with GDP, suggesting that unregulated trade liberalization may undermine domestic industrial growth and increase vulnerability to external shocks. The study recommends a recalibration of Nigeria’s trade policies to promote value-added exports, implement smart tariffs to protect infant industries, and improve trade-related infrastructure. These measures, if well-executed, could enhance the developmental benefits of FDI and ensure more inclusive, sustainable economic growth.

Keywords: Foreign Direct Investment, Gross Domestic Product, Monetary Policy Rate