MACROECONOMIC INSTABILITY AND ECONOMIC DEVELOPMENT IN NIGERIA
Abstract
The study investigated the impact of macroeconomic instability on economic development in Nigeria from 1981 to 2024. It utilized time series data obtained from the publications of the Central Bank of Nigeria, the National Bureau of Statistics, and the World Development Indicators. The autoregressive distributed lag (ARDL) econometric technique was employed to analyze the effects of macroeconomic instability variables on economic development. The findings revealed that economic development in Nigeria is influenced by the dynamics of macroeconomic instability variables. Specifically, the study identified a negative relationship between fiscal imbalances, inflation, interest rates, and unemployment rates and economic development at current and lagged periods (first and second lags), and these relationships were statistically significant. However, a positive relationship was observed between openness, balance of payments, and economic development, consistent with a priori expectations. Additionally, the results highlighted that population growth, the human development index, and openness are critical drivers of economic development in Nigeria. The study recommended: Structural Reforms, whereby the government should implement comprehensive structural reforms to address underlying economic challenges and promote macroeconomic stability. Fiscal tools such as taxation and government spending should also be effectively utilized to stabilize the economy. Moreover, the Central Bank of Nigeria should deploy monetary tools such as reduced interest rates, reserve requirements, and improved balance of payments management to stabilize the economy. Policies aimed at maintaining favourable exchange rates should be formulated and implemented to enhance export growth and economic performance. The government should prioritize human capital development by formulating investment-friendly policies that attract both local and foreign investors, thereby boosting productivity and fostering economic growth. In conclusion, addressing macroeconomic instability through well-coordinated policies and reforms can significantly contribute to sustainable economic development in Nigeria.
Downloads
References
Adebayo, S., &Ogunrinola, I. O. (2021). "Inflation and exchange rate volatility as determinants
of investment in Nigeria." African Journal of Economic Policy, 28(3), 45-61.
Adegbite, O., &Akinlo, E. (2020). "Fiscal deficits, external debt, and economic growth in
Nigeria." Journal of Development Studies, 56(4), 589-603.
Adepoju, A. O., Fapohunda, T. M., & Olawale, K. (2022). "Economic diversification as a pathway to sustainable growth in Nigeria." Nigerian Economic Review, 33(2), 120-138.
Aero, O. and Ogundipe, A. A. (2018). Fiscal deficit and economic growth in Nigeria: Ascertaining a feasible threshold. International Journal of Economics and Financial Issues, 8(3),296-306.
Aiyedogbon, J.O. and Ohwofasa, B.O. (2011). Impact of Military Expenditure on Inflation in
Nigeria. Being a Paper Presented at the International Social & Management Sciences
Research Conference. Kaduna: Kaduna state University, Kaduna.
Aiyedogbon, J. O. and Ohwofasa, B. O. (2011). Financial deepening and economic growth in Nigeria, 1986 – 2011: An empirical investigation. Journal of Economics and Development Studies, 1(1): 24 – 42.
Aiyedogbon, J.O. and Ohwofasa, B.O. (2012). Impact of Military Expenditure on Inflation in Nigeria. Journal of American Research Institute for Policy Development on Review of Arts and Humanities, 1-17.
Ajayi, I. (2000). External Debt, Capital Flight and Economic Growth in Nigeria. A paper Presented at the International Conference on Sustainable Debt and Development Strategy, May 17 – 18, 2000.
Akinleye, O. and Adekunle, I. (2019) Institutions and Macroeconomic Instability in Nigeria.
Online at https://mpra.ub.uni-muenchen.de/98829/ MPRA Paper No. 98829, posted 29 Feb 2020 14:15 UTC
Amin, S. (1976). Unequal Development in black African Origins. Journal of Modern African Studies, 10(4), 503 – 524.
Apanisile, T.A. and Okunlola, O.C. (2015). An Empirical Analysis of Effects of Military Spending on Economic Growth in Nigeria: A Bound Testing Approach to Cointegration 1989-2013. Journal of Public Administration, Finance and Law, 117-128.
Aroride, O. R. and Ogunbadejo, H. K. (2014) Impact of Macroeconomic Economic Policy on
Agricultural Growth in Nigeria: IOSR Journal of Agriculture and Vertinary Sciences
(7),11-46.
Barro, R. J. (1989), “Economic Growth in a Cross Section of Countries”, Quarterly Journal of economic review. (145 -167)
Calvo, G. and Vegh, C. (1999). Inflation stabilization and BOP crises in developing countries. In J. Taylor and M. Woodford (eds.). Handbook of Macroeconomics, Volume C, Amsterdam: North Holland.
Catao, L. and Terrones, M. E. (2003). Fiscal deficits and inflation. IMF Working Paper WP/03/65.
Central Bank of Nigeria (CBN). (2023). "Annual Statistical Bulletin 2023."
Debt Management Office (DMO). (2023). "Nigeria’s External Debt Report Q3 2023."
Easterly, William. and Wetzel, R. (1989). “Fiscal Policy and Economic Growth: An
Empirical Investigation.” NBER Working Paper No. 4499.
Ebilika S., Agada F.A, Lucky. T & Matthew B. (2018) Impact of money supply on some
macroeconomics variables on the Nigeria economy: International Journal of scientific
and research publications 8(8)18-32.
Effiong, U. and Okijie, S. (2021) Fiscal Imbalance and Macroeconomic Instability in Nigeria:
Implications for National Development. Acta Universitatis Danubius 17, No. 3,
Effiong, C. E., Ubi, P., Udah, E. and Ebi, B. O. (2022). Macroeconomic policies and inclusive
growth in Nigeria, 1840p. The Seybold Journal Report, 17: 1533 – 9211
Ijirshar, V. U, Fefa, J. and Gadoo, B. N. (2016). The Relationship between External Debt and Economic Growth in Nigeria. International Journal of Economics & Management
International Monetary Fund (IMF). (2023). "Nigeria Country Report 2023."
Jhingan, M. L. (2007). Macroeconomic theory. New Delhi: Vrinda Publishers.
Kolawole, B. O. (2013). Growth-Effects of Macroeconomic Stability Factors: Empirical
Evidence from Nigeria. Developing Country Studies. 3(14), 47 - 55
Lucas, R. E. (1988). On the mechanics of economic development. Journal of Monetary Economics, 22: 3 – 42. Journal of Economics, 106(2), 407-433
Maddison, A. (1970). Economic Progress and Policy in Developing Countries. London: Allen and Unwin (313)
Martins, A. L. (1992). Trade policy and Economic Development. Journal of International Financial Markets, Institutions and Money, 43: 95 – 112.
Momoh, A. and Hundeyin, T. (1999).” Perspective on Political Economy in Elements of Politics”, edited by Remi Anifowose and Francis Enemuo, (38 -450); Lagos, Nigeria: Sam Iroanusi Publication.
National Bureau of Statistics (NBS). (2023). "Nigerian Unemployment and Poverty Report Q3
"
Ndiyo, N. A. (2005). Fundamentals of Research in Behavioural Sciences and Humanities. Calabar: Excel Publishers. ISSN 578 – 051 – 780 – 4.
Nasarawa, P. E., & Harrison, V. (2025). Impact of exchange rate and inflation on economic growth in Nigeria. International Journal of Economic Policy. https://doi.org/10.47941/ijecop.3512
Ndume, M. M. (2025). Exchange rate volatility and inflation dynamics in Nigeria: A structural
VAR approach. Journal of Information Systems Engineering & Management, 10(49s), 317–330.
Omebere, H. I., Ezenekwe, R. U., Uzoechina, B. I., & Nwokoye, S. E. (2024). Impact of selected macroeconomic variables on economic growth in Nigeria. Journal of Economic Studies, 21(1).
Ojede, A., Amin, M. and Daigyo, S. (2013). Macroeconomic policy reforms and productivity
growth in Africa agriculture. Journal Contemporary Economics Policy, 31(4), 814-880.
Olaniyi. (1993). Nigeria's National Defense & Economic Development: An Impact Analysis.
Scandinavian Journal of Development Alternative, 241-254.
Omotosho, B. (2023). The Imperatives for Monetary-Fiscal Alignment in Nigeria and Pathways
to Improved Policy Coordination. The Nigerian Economic Summit Group. (1 – 18)
Onwioduokit, E. (2020). Education, inclusive growth and development in Nigeria: empirical examination. Bullion, 44(2): 3 – 30.
Osakwe, C. I., Okoye, N. J. and Arinze, V. C. (2022). Macroeconomic Variables and Economic
Development: The Nigeria Experience. Journals of accounting Business and finance Research, 16(1), 30-35.
Olabisi, O. E., and Akeju, K. F. (2024). The impact of exchange rate volatility and inflation on the Nigerian economy. Business and Management Compass, 68(2), pp.5–16.
Paul A. A. and Akindele J. O. (2016). The impact of human capital development on economic
growth in Nigeria: ARDL approach: IOSR Journal of humanities and social
sciences (IOSR-JHSS)21(3)01-07
Romer, P. M. (1989). “The prewar business cycle reconsidered: New estimates of Gross
National Product, 1869 – 1918”. Journal of Political Economy 97, 1 (1- 37)
Ranis, G., Ramirez, A. and Stewart, F. (2009). Economic Growth and Human Development. QEH Working Paper Series - QEHWPS18(18)
Todaro, M. P. (2003). Economic development. United Kingdom: Harlow Publishers.
Transparency International. (2023). "Corruption Perceptions Index 2023."
UNDP (1997). Human Development Report. Available at http://hdr.undp.org
United Nations Development Programme (UNDP). (2023). "Human Development Report 2023."
Venus, K L (2004). Which Lag Length Selection Criteria Should We Employ? Economic Bulletin 3(33) pp 1 – 9.
World Bank. (2022). "Nigeria Development Update."
The authors and co-authors warrant that the article is their original work, does not infringe any copyright, and has not been published elsewhere. By submitting the article to GPH-International Journal of Business Management, the authors agree that the journal has the right to retract or remove the article in case of proven ethical misconduct.
