Published on June 2022 | Development Economics

Contingencies in the relationship between trade and internal conflict in Nigeria: the role of the quality of the political institution

Purpose This paper empirically tests the relationship between conflict and trade in Nigeria from 1986 to 2017. Design/methodology/approach This study made use of secondary data. Time-series data were collected from CBN Statistical Bulletin, WDI of the World Bank, MEPV of the Centre for Systemic Peace database, Stockholm International Peace Research Institute, political risk ratings of the ICRG, Freedom in the World Country Ratings of Freedom House, and ACLED database. This study used descriptive and econometrics techniques to analyze the data. It adopted the IV-GMM techniques. Findings The study found that domestic trade has a negative and significant effect on internal conflict in Nigeria. International trade, on the other hand, does not affect internal conflict. In addition, the interaction of trade and institutions shows that more civil liberties (CL) and lower corruption (COR) complement the effect of domestic and international trade in reducing hostilities in Nigeria over the study period. Research limitations/implications The main limitation of this study is the inaccessibility of data. This study could not access the data on the volume of domestic trade in Nigeria. The study employed value-added tax on all domestic transactions in Nigeria as a proxy for domestic trade in the country. The study recommends that further studies should access the data on the volume of domestic trade as this could help further understand the relationship between domestic trade and internal conflict in Nigeria. Practical implications Since the improved domestic trade reduces internal conflict in Nigeria, the government should formulate policies that facilitate trade. Improving anti-graft efforts and CL will ease the process of formulating trade policies and increase the impact of domestic trade on internal conflict. Furthermore, these will reduce trade barriers and transaction costs. This can be achieved if the government strengthens its anti-COR agencies by making them more autonomous. CL can also be increased by enhancing voice and accountability in the country. Originality/value This study advances the literature by examining the role political–institutional quality plays in the relationship between trade and conflict.