Selected External Sector Variables And Economic Development In Nigeria
Tom-West Oduye Ngofa-a
Institute of International Trade and Development, University of Port Harcourt, Nigeria
KALU, Ijeoma E.
Institute of International Trade and Development, University of Port Harcourt, Nigeria
Keywords: Development, Exchange rate, Exports, External reserves, Trade openness
Abstract
The study examined selected external sector variables and economic development in Nigeria from 1980 to 2021.The objectives of the study were to: determine the impact of exchange rate, foreign exchange rate and trade openness on economic development in Nigeria. Annual data was collected from CBN statistical bulletins and World Development Index (WDI) and the techniques of Augmented Dickey Fuller (ADF) unit root test and Autoregressive Distributed Lag (ARDL) model was used. The ADF results showed that, only trade openness was integrated at order zero, I(0), while the remaining three variables were integrated at order one, I(1). The ARDL bound test results showed that, there is a long-run relationship amongst the variables. In the short-run, there is a positive relationship between foreign exchange reserves and economic development in Nigeria. Also, in the short-run, there is a positive and significant relationship between exchange rate and economic development in Nigeria. Similarly, trade openness has positive impact on economic development in Nigeria. Given the findings, it was concluded that, that, exchange rate, foreign exchange reserves, and trade openness contributed positively to economic development in Nigeria. Based on the findings, the following recommendations amongst others were made: - Foreign exchange reserves should be well utilized with a view to improve the economic development vis-à-vis good education and health care services and better standard of living. Government should also encourage local production that will help to improve trade openness through increase in exports, this invariably will help to make the value of the naira strong in relation to the USA dollar.