External Reserves and Economic Growth in Nigeria

The study examined the effect of external reserves on economic growth in Nigeria. The study disaggregated external reserve variables into external reserve stock, capital account balance, current account balance and cost of holding reserves. Economic growth was captured as the Gross Domestic Product growth rate. The data were generated from the CBN Statistical Bulletin and World Bank Group World Development Indicators, for a period of 35 years spanning 1987 to 2021. The regression model for the study was analysed using the Autoregressive Distributive Lag, which was found as most suitable using the Augmented Dicker Fuller Unit root tests. The results showed that there is no significant long run relationship between external reserves and economic growth in Nigeria and that the model explained about 71 of the short run factors that impact economic growth within the deregulated Nigeria economy. It was also discovered that economic growth has an endogenous effect on the model of external reserve strategies for economic growth. The regression results for the specific objectives and hypotheses testing revealed that 1 external reserve stock has a significant oscillatory short run effects on economic growth in Nigeria which was positive at lag 2 period and then negative in subsequent lag 3 year 2 capital account balance has a positive but no significant short run effect on economic growth in Nigeria 3 Current account balance has significant and short run positive effect on economic growth in the initial period but no effect in subsequent years and 4 Cost of reserve has significant and positive short run effect on economic growth in Nigeria. The study concluded that external reserves have not been an effective driver of Nigerian economic growth within the deregulated economy era. Based on the findings of the study it was recommended among others that government should increase her external reserve stock to enhance the growth of Nigerian economy, by increasing the export through diversification and exploration of new markets for Nigerian export products. Maryrose Chinyere Oforah | Prof. C. E. Umeora "External Reserves and Economic Growth in Nigeria" Published in International Journal of Trend in Scientific Research and Development (ijtsrd), ISSN: 2456-6470, Volume-7 | Issue-2 , April 2023, URL: https://www.ijtsrd.com.com/papers/ijtsrd55135.pdf Paper URL: https://www.ijtsrd.com.com/management/public-sector-management/55135/external-reserves-and-economic-growth-in-nigeria/maryrose-chinyere-oforah