Global Value Chain and Economic Diversification in Nigeria

This research looks at the nexus between participation in the global value chain (GVC) and diversification in the Nigerian economy, as the Smile Curve framework analyzes Nigeria’s position in global production networks. Using time series data and sophisticated econometric methods like the Augmented Dickey-Fuller (ADF) test, Johansen cointegration analysis, and Vector Error Correction (VEC) Models, the study assesses the impact of backward and forward GVC linkages, human capital (HC), trade openness (TO), and foreign direct investment (FDI) on Nigeria’s economic diversification. The results indicate that participation in backward GVCs (BGVCs), along with TO and FDI, fosters economic diversification; however, participation in forward GVCs (FGVCs) and HC is the least relevant. Therefore, the results suggest that Nigeria remains trapped in the midstream, low-value, and backward regions of the Smile Curve. The exports consist mainly of raw primary products. The study proposes a repositioning strategy that emphasizes backward linkages to FDI, selective TO, and HC to increase constituency value upstream and downstream. This study contributes to the literature on strategic participation in GVCs that address the commodity trap for developing nations and provides policy transformation pointers for Nigeria.