FOREIGN RESERVES ACCUMULATION AND MACROECONOMIC ENVIRONMENT: THE NIGERIAN EXPERIENCE (2004-2014)

This study examines the impact of Nigeria’s foreign reserves accumulation on macroeconomic environment. Seven macroeconomic variables were selected to represent macroeconomic environment (GDP, inflation, exchange rate and unemployment, investment, external debt and total trade). Data were sourced from the Central Bank of Nigeria’s Statistical Bulletin between 2004 and 2014. The ordinary least square (OLS) econometric model was employed in the analysis of the data. The study conducted the unit root test using both the Augmented DickerFuller and Philip Perron with and without trend and the result showed that all variables were stationary at first difference except inflation. The cointegration result obtained from the analysis showed the existence of a long run relationship between foreign reserves and the explanatory variables. The paper concludes that foreign reserve is a necessary tool in the macroeconomic stability of the country. It recommended that government should adopt proper and well articulated strategies of managing the nation’s reserve in order to achieve the desired objectives.

Keywords:

Foreign Reserves, Gross Domestic Product, External Debt Macroeconomic Environment.,

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