IIARD International Institute of Academic Research and Development

WORLD JOURNAL OF FINANCE AND INVESTMENT RESEARCH (WJFIR )

E-ISSN 2550-7125
P-ISSN 2682-5902
VOL. 9 NO. 3 2025
DOI: 10.56201/wjfir.v9.no3.2025.pg28.46

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External Economic Uncertainty Indicators and Nigeria’s Foreign Exchange Reserve

AKIDI, Victor, NWANKWO Nneka Uchenna, AKPALAKPA, Victor Tamarakuro

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Abstract

Following palpable instabilities in critical international economic fundamentals and the implications on the health of individual economies, this study examines selected external economic uncertainty indicators to ascertain effects on foreign exchange reserves accumulation in Nigeria over the sample period, 1986 to 2022. To achieve this goal, data on crude oil price, Eurobonds, food imports bill, exchange rate, debt services and external reserves were sourced from the Statistical Bulletin of the Nigeria’s apex bank, 2023. The processes of Autoregressive Distributed Lag (ARDL) estimation were applied. The results indicated that Eurobonds, exchange rate and oil price had positive and significant short-run effects on external reserves accumulation while food imports and debt services exhibited negatively insignificant effects. In the long, Eurobonds and exchange rate exerted positively significant effects on external reserves, but oil price positively and insignificantly impressed on external reserves, debt services and food import exerted negative and significant effects. The study also revealed that about 59 percent of total variation in the external reserve of Nigeria was explained by changes in the selected uncertainty indicators. Thus, the researcher concluded that the selected external economic uncertainty indicators indisputably influenced external reserves accumulation in Nigeria over the sampled period. It is thus, recommended among others that the Nigerian government should ensure to establish contingency plans for economic uncertainty, including the creation of stabilization fund. This fund can be utilized during economic downturns to cushion the impact on external reserves and maintain financial stability.

keywords:

External Economic Uncertainty Indicators, Foreign Exchange Reserve, Nigeria,

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