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International financial risk, investment and growth in Nigeria
Pat Donwa* and Osaro Agbontaen**
This study analyzes the impact of international finance risk and domestic
investment on the levels of growth in the Nigerian economy. Essentially, the
researchers adopted the ARDL approach of the co-integration method taking
into consideration macroeconomic variables such as exchange rate volatility
which was used to represent international financial risk. Investment was
captured by gross capital formation and real GDP growth in order to determine
the short-run and long-run dynamics associated with international financial risk
and investment in relation to economic growth in Nigeria. In order to specify an
appropriate model for this research, the structural and the political changes of
Nigeria through the period of financial deregulation, trade liberalization and the
present financial sector reform were considered. The variables used in the
model indicated basic statistical significance levels and it was noticed that the
present levels of international financial risk seriously distorts the levels of growth
in the economy. Also, one period lagged investment inhibits growth and growth
at its second lag slows present levels of economic growth. Therefore, the
impact exhibited by international financial risk, the first lag value of investment
and the second lag value of economic growth exhibited negative impacts on the
present levels of growth in the Nigeria economy. This indicates that distortions
as a results of fluctuations in international financial risk and the levels of
uncertainties in the previous levels of investment and growth shrinks the
present levels of growth in the economy. This study has implications for
investors, scholars and policy makers.
Key words: Economic growth, policy regulation, growth analysis
JEL code: F43, G28, L51, R11
*Senior Lecturer, Department of Accounting, University of Benin, Benin City, Edo State.
**Research Assistant, Department of Accounting, Economics and Finance, Lagos Business
School, Lagos State, Nigeria.