ARDL - BOUND TESTING APPROACH TO THE CONNECTION BETWEEN EXTERNAL RESERVE AND ECONOMIC GROWTH IN NIGERIA.

This study investigated the connection between external reserve and economic growth in Nigeria. It covered the period of 1986 to 2018. Data were soured from Central Bank of Nigerian Statistical Bulletin (2018). The techniques adopted for analysis were Augmented Dickey-Fuller Unit Root, Philip Perron Unit Root, Autoregressive Distributed Lag (ARDL) and Granger Causality techniques. Base on Bound Co-integration test result it was found that external reserve, exchange rate, trade openness and inflation rate had long run relationship with real gross domestic product. The ARDL result indicated that external reserve and exchange rate positively influenced economic growth while trade openness and inflation rate were found to exert negative effect on economic growth. The causality result indicated that external reserve had bidirectional causality with economic growth in Nigeria. The implication of these findings is that the policy of holding and managing reserves will enhance liquidity position of a nation, serve as cushion during economic crisis, prevent exchange instability and provide long term resources for investment in infrastructural facilities which are growth inducing in the long run. [ABSTRACT FROM AUTHOR]