| Title: | Assessing the effects of External Sector Aggregates on Economic growth in Nigeria |
| Author(s): | E. Nyeche & O.E. Wokekoro |
| Abstract: | This study examined the effect of the external sector on economic growth in Nigeria. The external sector was measured using Net Exports, Exchange Rate and External Debt while the Gross Domestic Product (GDP) growth formed the basis for measuring economic growth. The data for these variables which spanned from 1981 to 2022 were obtained from the Central Bank of Nigeria (CBN) Statistical Bulletin and World Bank World Development Indicators (WDI). Descriptive statistics, unit root test, bounds co-integration test method and autoregressive distributed lag (ARDL) estimation method formed the basis for data analysis. The unit root test results showed that the variables are mixed-integrated and the bounds co-integration test results showed evidence of long-run relationship among the variables in the model. The estimated ARDL showed that net export has a negative and significant effect on GDP growth in the long run. This could be attributed to the increasing level of imports compared to exports, which undermines the growth of the Nigerian economy. The results further showed that the exchange rate has a negative effect on GDP growth in both the short and long run. Although this finding is not significant at the 5% level, it highlights the adverse implications of the naira depreciation on the Nigerian economy. In addition, evidence of a negative and significant effect of external debt on GDP growth was established in both the long and short run. This highlights that the growth of external borrowings has not translated to the growth of the Nigerian economy. The error correction coefficient (-0.3757) was negative and significant at the 5% level, indicating that about 37.57% of distortions from long-run equilibrium will be adjusted each year. Given the findings, this study recommends that policymakers should ensure the expansion of the export base to deepen the net exports and create more opportunities for economic growth in Nigeria. |
| Keywords: | Net export, Exchange rate, External debt, Economic growth |
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