An evaluation of the contribution of globalization and capital account liberalization on economic development: the case of Nigeria

Uma Kalu Ebi and Obidike Pau

Abstract

The study focused on finding out the extent globalization and capital account liberalization have supported Nigerian economic development from 1975 to 2009. The study employed both Augmented Dickey-Fuller (ADF) and Phillips-Perron to examine the features of the data for analysis. The state of integration of the variables led to test for co-integration, which showed a long-run relationship among variables. Error correction model (ECM) was eventually employed. The result revealed that some of the explanatory variables such as capital account liberalization, proxied by current account balances (CAB) and foreign direct investment (FDI) impacted positively on real gross domestic product (RGDP), a proxy for economic development, but at an insignificant level. Trade openness and foreign exchange reserve also show statistically insignificant on RGDP. Consequently, among the recommendations made are: policy makers should target on macroeconomic stability, by avoiding structural distortions and creation of business-friendly environment to enhance domestic production capacity; thorough reforms, especially financial reform should be vigorously pursued.