Abstract:
This study examines the nature of relationship between economic globalization and Nigeria's real
economic growth (RGDP) as well as the direction of causality between the two key macroeconomic
aggregates, employing the Johansen Co-integration, unit root, Granger Causality tests, and error
correction model for a period spanning 1981 to 2018. The empirical result demonstrates that in the
long run, a significant positive relationship exists between economic growth (RGDP) and some selected
economic globalization indicators namely, Nominal Foreign exchange rate (NFXR) and foreign direct
investment (FDI)), implying that FDI contributes positively to the growth of the economy while that
of NFXR implies significant depreciation of Naira which adversely affects the cost of production in the
long run , Nigeria being import-dependent for the inputs of the manufacturing sector of the economy.
However, the relationship between trade openness (TOR) and economic growth, although negative, is
weak and thus implies insignificant impact while inflation constitutes an impediment to benefits derivable
from economic globalization as reflected in its significant inverse relationship with economic growth.
The coefficient of the ECM term, (-0.162) is significant and correctly signed (negative) at a 5 percent
level. The speed suggests that economic growth in Nigeria adjusts slowly to the short-run
disequilibrium changes in the explanatory variables since only 16 percent of short run disequilibrium
in the economic growth process is corrected within one lag. Therefore, achieving sustainable price
stability, strong institutional and economic reforms and stable polity to promote trade, domestic and
foreign investments should be highly emphasized. |
Keywords:
Real Gross Domestic Product, Foreign Direct Investment, Annual Inflation Rate,
Nominal Foreign Exchange Rate, Trade Openness |
