Nigerian Foreign External Reserves and Economic Growth: An Application of Fully Modified Ordinary Least Square (FMOLS)
The study examined the impact of foreign external reserve on economic growth in Nigeria from 1986-2022. This study used secondary data that were collected from CBN Statistical Bulletin (2022) and Word Bank Development Indicator, (2024). The methods of data analysis employed include Augmented Dickey Fuller (ADF) unit root test, Johansen Co-integration test and Fully Modified Ordinary Least Squares (FMOLS). The ADF result showed that real-GDP, external reserves, effective exchange rate, trade openness and inflation rate were stationary at first level difference I (1) at 5% level of significance in absolute term. The Johansen Co-integration confirmed a long relationship between the variables. Also, the FMOLS estimate confirmed that external reserves and trade openness were significant and directly related real-GDP; while effective exchange rate and inflation rate were significant also and negatively related to it. Suggesting that higher rate of external reserve assets increases aggregate output that directly promotes economic growth. The study concluded that higher external reserve promotes economic growth. Therefore, recommended that Nigeria government should maintain a stable foreign reserve in order to strengthen the country’s local currency by maintaining a certain level of thresholds. Keywords: External reserves, economic growth, exchange rate, trade openness, Fully Modified Ordinary Least Squares (FMOLS)
Keywords: External reserves, economic growth, exchange rate, trade openness, Fully
Citation: , & Damilola, O.A. (2024). Nigerian Foreign External Reserves and Economic Growth: An Application of Fully Modified Ordinary Least Square (FMOLS). International Journal of Innovative Research in Accounting and Sustainability, 9(3), 48-58.