EXTERNAL SECTOR VARIABLES AND ECONOMIC GROWTH IN NIGERIA: A COINTEGRATION APPROAC.
OMEKWE, Sunday Omiekuma & KALU, Ijeoma E. and OTTO, Godly
The study examined external sector variables and economic growth in Nigeria from 1980-2016. The objectives of the study were to; examine the impact of exchange rate on economic growth in Nigeria, identify the impact of external debt on economic growth in Nigeria and determine the impact of export on economic growth in Nigeria. Secondary data on gross domestic product, exchange rate, external debt and exports were collected from CBN statistics bulletin. The collected data was subjected to Augmented Dickey Fuller (ADF) unit root test in order to test for the order of integration of the variables and co-integration test to test for the long run equilibrium relationship amongst the variables. The empirical results showed that the variables are individually integrated at order one and are indeed co-integrated. The result of the co-integrating regression model which measures the long run behaviour of the explanatory variables using the Fully Modified Least Squares (FMOLS) showed that the coefficient of determination is 98%. Meaning that the regressors have high explanatory power by extension the estimated model is a good fit. Also, the coefficient of both external debt and export were positively signed and statistically significant with GDP at 5% level. The coefficient of exchange rate also has a positive relationship with GDP but statistically not significant at 5% level. The Wald test for coefficient restrictions indicated that the independent variables are jointly significant in explaining variation in the dependent variable. Based on these findings, the study recommended that government should maintain a good market driven exchange rate policy in order to encourage local productionand increase export which will turn increase economic growth.