Rethinking the Effects of Macro-Economic Variables on Nigeria's Economic Growth: A Time Series Analysis

Abstract

Overcoming economic problems and achieving economic growth is the desire of every nation, especially developing nations with myriads of economic problems. To determine how macroeconomic variables are associated with economic growth is useful in effective and efficient management of the economy. This study examined the relationship between macro-economic variables and economic growth in Nigeria, using time series data obtained from CBN statistical bulletins as well as National Bureau of Statistics (NBS) records from 2000 to 2019. Macro-economic variables included interest rates, inflation rate and exchange rate, while economic growth was measured using unemployment rate and real GDP. The study was anchored on Keynes Theory. The researchers adopted the ex post facto research design, while descriptive, correlational and Ordinary Least Square regression techniques were used to analyze the data collected. The results showed that both inflation rate and exchange rate have positive signs, which do not really conform to the a priori expectations of the study. On the other hand, the relationship between foreign exchange and GDP growth is negative but significant, implying that an increase in the exchange rate will lead to a fall in economic growth. The two models tested by the study have statistical fit as shown by the p-values of the F-statistics. It was recommended, amongst others; that government should ensure macroeconomic stability by making sure that those dynamics are regularly monitored and put under control; in order to grow the GDP as well as level of employment in the country.

Keywords

• Macro-economic variables
• economic growth
• interest rate
• inflation rate
• exchange rate

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