Balance of Payments and Economic Growth in Nigeria
Abstract
This study explored the effect of balance of payments on economic growth in Nigeria. The objectives of the study were to establish the connection between the balance of payments and economic growth. Secondary data were gathered from the Central Bank of Nigeria Statistical Bulletin. The Augmented Dickey-Fuller (ADF) test were used to test for stationarity, the results reveal that the variables were statistically at mixed order also the study found that there is cointegration using ARDL method. 99.8 per cent variation in gross domestic product in Nigeria were explained by variation in balance of payment variables. The results found that exceptional financing have positive and significant effect on economic growth, the variables added 0.02 per cent to gross domestic product, capital account have positive but no significant effect and added 0.003, net errors and commission have positive effect and added 0.003 while current account have negative and reduced 0.015 to gross domestic product. The study concludes that balance of payment effect variation in economic growth in Nigeria. The study recommends 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 growth, since capital account has positive effect on economic growth in Nigeria.
Keywords
Balance of PaymentsEconomic GrowthNigeria
References
Abaidoo & Rexford (2019). Economic growth and energy consumption in an emerging economy: Augmented Granger Causality Approach. Research in Business and Economic Journal, 4 (2), 11-14. Abebefe, I. C. (2019). Terms of trade shocks: Are they short–lived or long–lived. International Journal of Development and Sustainability, 2(1), 1- 23. Adegbemi, V. T. (2018). Trade, trade liberalization and economic growth: theory and evidence. The African development bank economic, 3(1), 2-22. Adegbola, O. O., Onyegiri, P. K., Damilola, F. E., Okoye, N. J., & Ayomide, I. (2022). Do microfinance banks’ activities affect Nigeria’s economic development? Banks and bank systems, 17(2), 1-12. Adelegan, A. E. & Abraham, A. (2022). The determinants of balance of payments in Nigeria. Saudi J Econ Fin, 6(7): 222-229. Ahmed, A.D., & Suardi, S. (2011). Macroeconomic volatility, trade and financial liberalization in Africa. World Dev. 37 (10), 1623–1636. Ajayi, O.F. (2014). Determinants of balance of payments in Nigeria: A partial adjustment analysis. Journal of African Macroeconomic Review, 5(1), 304-310 Alfonso, R. Y. (2017). Exports, imports and economic growth in semi-industrialized countries. Journal of Development Economics, 3(1): 3-16. Antwi, N., Mills, B. U. and Zhao, S. R. (2013). Trade openness, foreign investment and economic growth in Nigeria: a long-run analysis. European Journal of Globalization and Development Research, 2(1): 1-28. Asiedu, E (2012). On the determinants of trade developing countries: is Africa different? World Dev. 30 (1), 107–119. Atesoglu, S. (2019). Balance of payments constrained growth model and its implications for the United States. Journal of Post Keynesian Economics; Spring 19 (7), 327. Bairam, E.I., (2018). Balance of payments, the Harrod foreign trade multiplier and economic growth: the European and North American experience. Applied Economics 20, 1635.1642 Baldwin (2019). Economic growth factor in Nigeria: The role of global trade. American Journal of Humanities and Social Sciences, 2(2): 1-25. Baldwin, R.E., (2012). Measurable dynamic gains from trade. J. Polit. Econ. 100, 162–174. Barro, R. J. (2010). Economic Growth in a cross-section of Countries. Quarterly Journal of Economics, 106(2): 407-43. Barro, R., & Sala-i-Martin, X. (2019). Economic growth. New York: McGraw-Hill. Bola, J. R. (2015). Macroeconomic impact of trade on Nigerian Growth: An empirical evaluation. Research Journal of Business Management and Accounting, 4(1), 1-23. Busse, M., & Groizard, J.L., (2008). Technology trade in economic development. World Econ. 31 (4), 569–592. CBN (2012). Effects of international trade on economic growth: The Case Study of Nigeria. International Journal of Academic Research in Progressive Education and Development, 2(1): 1-13. Dele, W. B. (2010). Capital flows, trade openness and economic growth dynamics: New empirical evidence from Nigerian Economy. Department of Economics and Econometrics, University of Nigeria. Dickey, D.A. and Fuller, W.A (1979). Distribution of the estimates for the autoregressive Time series with a Unit Root. Journal of the American Statistical Association, 74, 427-431. Dixon, R. & Thirlwall, A. (2005). A model of Regional Growth Differences along Kaldorean lines. Oxford Economic Papers. 27(2): 201-14. Dollar, D., (2012). Outward-oriented developing economies do grow more rapidly: evidence from 95 LDCs, 1980 –2015. Econ. Dev. Cult. Change. 40, 523–544. Edwards, S. (2008). Openness, Productivity, and Growth: What Do We Really Know? Economic Journal, 108(1): 383-98. Edwards, S., (2012). Trade orientation, distortions and growth in developing countries. Journal of Development Economics. 39(1): 31-57. Efanga, U. O., Etim, R. S. & Jeremiah, M. S. (2020). The Impact of Balance of Payment on Economic Growth in Nigeria. Journal of Applied Financial Econometrics, 1(2), 145- 160. Efanga, U. Okon., Ihemeje, J. C., Egwu, E. M., Yamta, H. A., Biradawa, K. I. and Ikwuagwu, H. C. (2020). The role of balance of payment on economic growth in Nigeria. International Journal of Advanced Science and Technology, 29 (3), 1 – 12. Eleanya, G. R. Jude, T. U. and Kalu, A. V. (2013). Commodity prices and the terms of trade, Review of International Economics, 2(2): 1-16. Emeka, K. C. Frederick, S. D. & Peter, E. W. (2015). The impact of terms of trade and real exchange rate volatility on investment and growth in Nigeria. Journal of Development Economics, 2(2), 1 – 15. Ezenwa, C. V. (2010). Does trade promote growth in developing countries? Empirical evidence from Nigeria. International Journal of Development and Sustainability, 3(1): 3-17. Fasanyan, G. and Olayemi, E. W. (2018). Terms of trade shocks and policy responses in Africa: An analysis of impacts on economic stability and growth”, Unpublished Ph.D dissertation, Dept. of Economics, Nnamdi Azikiwe University, Awka, Anambra State, Nigeria. Frankel, J., & David R. (2011). Does Trade causes Growth? American Economic Review. 89(3): 379-99. Grosman, G., & Elhanan H. (2010). Comparative advantage and long-run growth. American Economic Review 80(4): 796-815. Harrison, A. (2016). Openness and Growth: A time-series cross-country analysis for developing countries. Journal of Development Economics, 48(3), 419-47 Igbinoba, E. (2017). Balance of payments constrained economic growth in Nigeria. African Journal of Economic Review, 5 (2), 1-13. Imoisi, A.I. (2014). Trends in Nigeria’s balance of payments: An empirical analysis from 1970- European Journal of Business and Management, www.iiste.org, 21 (04), 2222- 2839. Ismaila, A. & Imougbele, P. M. (2015). Foreign trade and economic growth in Northern Nigeria: A time series analysis. International Research Journal of Finance and Economics, 2(1), 1- Iwedi, M. C. (2019). Openness to international trade and economic growth: A Cross-Country Empirical Investigation. International Journal of Development and Sustainability. 3(2): 1- Jhingan, J. L. (2016). Terms-of-Trade Uncertainty and Economic Growth. Journal of Development Economics 2(2): 3–30. Johansen, S. (1991). Estimation and hypothesis testing of co-integration vectors in gaussian vector autoregressive models. Econometrica 59, 15511580. Kolawale, E. F. (2018). International trade and its effect on economic growth in Nigeria. International Journal of Development and Sustainability, 2(1), 1- 24. Krueger, O. (2013).Trade policy and economic development: How We Learn,' American Economic Review, 87(1), 1-21. Leontief, W.W. (1953). Domestic production and foreign trade: The American position reexamined. Proceedings of the American Philosophical Society, 97(3), 332-49. McCombie, J. (2009). Thirlwal’s Law and balance of payments constrained growth – A comment on debate. Applied Economics, 21(5), 611-29. McCombie, J. (2012). Thirlwal’s Law and balance of payments constrained growth - more on the debate. Applied Economics, 24(5), 493-512. McCombie, J. (2013). Economic Growth, Trade linkages, and The Balance of Payments Constraint. Journal of Post Keynesian Economics, 15(4): 471-505 Obidike, A. & Nduke, W. A. (2020). Impact of international trade on the economy of Nigeria. International Research Journal of Finance and Economics, 2(2), 1-17 Ocampo, J.A. & Taylor L. (2008). Trade Liberalization in Developing Countries: Modest benefits but Problems with Productivity Growth, Macro Policies, and Income Distribution. Working papers Series I, n.8. Cepa, New School. Ochei, C. K. Tochukwu, M. K. & Areghan, E. F. (2019). Dynamic effects of terms of trade shock: The impact on debt and growth. Journal of Money Finance, 2(1), 1-21. Ogejide, S. T. (2020). The impact of terms of trade and real exchange rate volatility on investment and growth in Nigeria. Journal of Development Eco
More Articles from IIARD INTERNATIONAL JOURNAL OF BANKING AND FINANCE RESEARCH
Effect of Monetary Policy on Profitability of Deposit Money Banks in Nigeria
Author: Stephanie Nguhemen Gbande, Mike T. Soomiyol, Timothy Tyona, Gaius Msendoo Asombo
Examining the Impact of Corporate Social Responsibility on Financial Performance: Evidence from Small and Medium-Sized Enterprises in Hanoi
Author: Nguyen Mai Phuong
Cognitive Diversity and Performance of Deposit Money Banks in Nigeria
Author: 1Nwangwu, Okwudiri Iheanyi, 2 Pepple, Grace Jamie PhD
Banking Innovations and Industrial Sector Performance in Nigeria: Evidence from ARDL Model
Author: Peter Ngbede Ajam, Abiodun Edward Adelegan, Benson Emmanuel
Environmental Sustainability and Entrepreneurial Performance in Nigeria: A Case Study of Enugu State
Author: i, Azolike Nkiru Nkechi, ii, Okwor Emmanuel Ejimnkonye, iii, Eneaniofu Daniel Mmaduakonam