Abstract
The management, administration and utilization of Foreign External Reserves- foreign currency deposits of the apex bank (Central Banks) or other monetary or financial institutions has been a major macroeconomic challenge especially for developing economies like Nigeria. Over the past three decades, Nigeria has witnessed fluctuations in its reserve accumulation and taken numerous policy measures in the management of its external reserves. This study investigated the impact of foreign reserve accumulation and the country’s reserve management policies on its economic growth for the period 1990 to 2018. Secondary data from the United Nations Center for Trade and Development (UNCTAD), World Bank, IMF and Index Mundi Statistical Bulletin were used in the study. The data were subjected to unit root test, cointegration test and Granger Causality tests, The tests revealed that all the variables were integrated at I(1) and are cointegrated. The ECM result showed a long run relationship among the variables in our model. The OLS regression result shows an inverse and insignificant relationship between reserve accumulation and the country’s economic growth. The Reserve to GDP ratio of the country is found to be so low and significantly inversely related to the GDP per capita. Other variables in our model- MPR, BOP, FDI and Foreign Remittances were all found to have positive relationship with the MPR and Exchange rate found to be insignificant. The Granger Causality test shows that exchange rate ad foreign remittances are the dominant variables in our model. The study recommends a holistic reappraisal of the country’s exchange reserve policy, a judicious and sustainable use of foreign reserve and need to strengthen the domestic capital market. Keywords : Balance of Payment, Foreign Reserve Management, Foreign Remittances, Granger Causality. DOI : 10.7176/JESD/10-18-16 Publication date :September 30 th 2019
Highlights
Foreign reserves often referred to as international reserves, external reserves or foreign exchange reserves
1.2 Objectives of the Study In view of the debate about the effect of a well coordinated and administered Foreign External Reserve on the economic development of a developing economy like Nigeria, this paper investigates the following: 1. The relationship between foreign external reserve and the exchange rate of the local currency and Foreign Direct Investment (FDI) in Nigeria
The study makes use of secondary data sourced from the United Nations Center for Trade and Development (UNCTAD stat), World Bank and Central Bank of Nigeria (CBN) Publications for various years, Index Mundi Statistical Bulletin and publications from the International Monetary Fund (IMF)
Summary
Foreign reserves often referred to as international reserves, external reserves or foreign exchange reserves. While there may be many definitions of foreign reserves, CBN (2017) reaffirms the International Monetary Fund (IMF) proposed definition in its BOP Manual, 5th edition as the most widely accepted definition. It defined Foreign Reserve as ‘consisting of official public sector foreign assets that are readily available to, and controlled by the monetary authorities, for direct financing of payments of imbalances, and directly regulating the magnitude of such imbalances through intervention in the exchange markets to affect the currency exchange rate and/or for other purposes’. The economy has witnessed an exchange rate instability standing at N360 per dollar in 2017 and has remained unstable over time. The CBN in its fiscal policy measure publication in 2012 maintains that the evolution of the foreign exchange market in Nigeria is influenced by a number of factors such as changing pattern of international trade, institutional changes in the economy and structural shifts in production
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Free) 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call
