Balance of Payment and Economic Development in Nigeria

Abstract

The discrepancies in the rates of growth of exports/import have been wider in value terms, because of the balance of payment of developing countries such as Nigeria has deteriorated vis-à-vis those of developed countries. Thus, this study examined the effect of balance of payment on economic development in Nigeria from 2000 – 2022. Import and export were used as a proxy for balance of payment, while per capita income was used for economic development in Nigeria. Data were obtained from secondary sources; International Monetary Fund, Balance of Payments Statistics yearbook and data files (2000-2022). Unit root test on the time series data displayed stationaity at first difference 1(1) for all variables. And Johansen co- integration test was carried out and result confirmed goodness of fit and validity of the model employed for the analysis. Multiple linear regression model was used to test hypotheses since, the data has a uni-lateral direction. Findings reveal that import and export have significant effect on per capita income in Nigeria. In conclusion, balance of payment has significant effect on per capita income in Nigeria. The researcher recommended that both federal and state government should put in place policies that promote industrialization and domestic production in order to promote exportation. This may be done by formulating and implementing dynamic terms of trade and keeping trade openness rate below or at ceiling level in order to ensure economic development, since exportation has positive and significant effect on per capita income in Nigeria.

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