ABSTRACT

This study examined the impact of external reserves accumulation on the Nigerian economy. Secondary data on real gross domestic product, special drawing rights, foreign exchange reserves, international monetary fund (IMF) reserves position and foreign currency deposit, covering the period from 1986 to 2019 were sourced from the statistical bulletin of the Central Bank of Nigeria. Special drawing rights, foreign exchange reserves, international monetary fund (IMF) reserves position and foreign currency deposit were used as explanatory variables and proxy for external reserves accumulation while real gross domestic product (RGDP) was used to proxy the economy. Data collected were analysed using econometric technique of autoregressive distributed lag (ARDL) model. The study found that special drawing rights (t = 3.51622, p < 0.05) and international monetary fund (IMF) reserves position (t = 4.8945, p < 0.05) had positive and significant impact on economic growth in Nigeria while foreign currency deposit (t = -2.6542, p < 0.05) and foreign exchange (t = -2.2642, p < 0.05) both had negative and statistically significant impact on economic growth in Nigeria. The study concluded that external reserves accumulation does promote economic growth in Nigeria. The study recommend that Government and private institutions should invest more domestically especially in the infant industries, SME’s, agricultural sector so as to boost the level of domestic outputs for exportation which will equally generate more foreign exchange, Monetary authorities should endeavor to make policies that will keep the monetary policy rate at a competitive level in order to stimulate economic growth through the activities of the local investors, government should implement good policies which will enhance the relationship of the country with foreign investors so as to encourage them to invest more in the Nigerian economy.