Globalization And Its Impact On Economic Growth Of The Nigerian Economy (1986 – 2008)
abstract
This investigation Globalization and its impact on the growth of the Nigerian economy from 1986 to 2008 is primarily concerned with determining the impact of globalization on the Nigerian economy’s Gross Domestic Product as well as the impact of financial integration on the Nigerian economy. In recent years, it has been discovered that the Nigerian economy has grown economically as a result of globalization. Globalization, as a process of interconnections between countries around the world, has proven to be beneficial to the Nigerian economy, particularly in the telecommunications and industrial sectors.
This work demonstrates the impact and the variables that cause it. Based on the evaluation and analysis of the results, this work concludes that only Foreign
Because direct investment has had a positive impact on the Nigerian economy as a result of globalization, it should be closely monitored. Other variables considered in determining the impact of Foreign Direct Investment were Real Interest Rate, Openness, and Real Exchange Rate.
At the conclusion of this work (chapter five), necessary recommendations were made to help boost Nigeria’s economic growth and development based on the indices used if properly applied and implemented.
CHAPTER ONE
1.1 BACKGROUND OF THE STUDY
Globalization can be defined broadly as the integration of national economies through trade, capital flows, and the resulting convergence of economic policies. It is the process by which political, social, economic, and cultural relations increasingly take on a global scale, with profound implications for individuals’ local experiences and daily lives (Bilton, 1997). According to the definition above, globalization operates at both the global and local levels, and thus has an impact on a country’s economy and politics, as well as its citizens’ culture and well-being.
Globalization is based on multinational trading and investment agreements, as well as trade liberalization through financial and economic liberalization. The rationale for this policy initiative is
that the promotion of trade enriches the wealth of nations. For example, trade liberalization under the Uruguay round of multilateral trade agreements in 1995 was estimated to provide over $100 billion in net benefits per year, primarily to countries that removed trade barriers (Hausters, Gerd, 2000). As part of globalization, financial integration envisions the free flow of loanable funds. Openness of capital flows, when combined with sound domestic policies, allows countries access to a much larger pool of capital. High capital flows boost investment and economic growth, especially when they are in the form of foreign direct investments rather than potentially volatile short-term portfolio flows.
Furthermore, FDI not only supplements domestic savings but also boosts them.
the depth and efficiency of domestic financial markets, as well as the adoption of foreign technologies. However, the nation’s monetary and fiscal policy framework must be appropriate for the economy to benefit from financial globalization (Yusuf, 2001).
Globalization is not a new phenomenon; it has been occurring since the late nineteenth century. However, history was conquered, and the pace slowed until the new era of global integration, which was facilitated by the removal of trade barriers and capital flows, as well as advancements in communications and computer technologies that facilitated the collection and processing of data required for decision making. As a result, global exports of goods and services more than tripled between 1983 and 2007.
2005. These changes have also stimulated demand for cross-border finance, promoting a pool of global liquidity to meet such demand in the context of financial liberalization in many countries.
Globalization has undoubtedly increased opportunities for domestic and foreign sources to access capital funds more cheaply and on better terms. This is because financial sector liberalization and product innovations have in many countries been helped by technological advances. As a result, financial intermediation improves and the market environment for financial institutions becomes more competitive.
The disadvantage of these advantages is that international capital flows may be highly volatile, posing a serious threat to financial and macroeconomic stability. Reversal of capital flows, on the other hand, as seen during the Mexican crisis of
The Asian and Russian crises of 1994 to 1995, as well as the Asian and Russian crises of 1997 to 1998, could jeopardize individual countries’ financial stability, particularly in countries with weak and poorly regulated banks. The contagion effect may also endanger the international financial system’s stability. There is also the risk that asset prices will outperform economic fundamentals during the boom-bust cycle, leaving banks with non-performing loans backed by collateral that has lost much of its value.
Globalization has various and complex effects on the financial sector. Capital flows, exchange rate crises, and inflationary pressures are some of the major channels through which globalization’s impact can be quickly transmitted into the domestic economy. Globalization’s Implications for Monetary Policy
There are two ways to look at policy. First, volatile short-term capital flows and exchange rate movement associated with globalization can increase the uncertainty surrounding monetary policy outcomes. Second, globalization forces policymakers to make structural changes or reforms, which alters the conditions under which monetary policy targets, strategies, and instruments are implemented. The more discretionary monetary and fiscal policies are restricted, the more open an economy is thought to become.
Globalization also requires governments to exercise greater fixed discipline and to establish sound institutional and political frameworks. In other words, it acts as a stabilizing force by limiting countries’ ability to pursue policies that are consistent with medium-term financial stability. High financial
International investors and capital market participants are drawn to deficit and unsound financial policies that result in inflationary pressures, current account deficits, and/or high real interest rates. As a result, in a globalized world, there is much less room for fiscal rascality or unsustainable policies.
Monetary and exchange rate policies, in particular, have changed in accordance with broad economic objectives. From independence until 1986, monetary policies were primarily implemented through direct control, which included the imposition of ceilings on aggregate bank credit expansion, sectoral credit allocation, administrative control of interest rates, prescription of cash reserve requirements, exchange rate controls, and mandatory holding of government securities. During this time, the financial market was largely underdeveloped, with few money market instruments available. as well as a fixed and unchangeable interest rate. A fully developed economy is one that has progressed through all stages of development. This progress will be accelerated if foreign investors have access to domestic markets.
1.2 STATEMENT OF THE PROBLEM
Based on the impact of globalization, there are issues associated with the development of the Nigerian economy in various sectors. These issues could be economic issues based on the rate of insecurity, policy barriers to capital flows, ineffective economic policies, or political instabilities. There could also be issues with market liquidity. Using liquidity as a measure of stock market development, it appears that the Nigerian capital market is illiquid to some extent and has contributed very little to Nigerian economic growth (Ibrahim, 2002).
As a result, the following research questions must be addressed.
1. Does globalization result in a rapid influx of foreign capital into the Nigerian economy?
2. Does globalization significantly improve management techniques for Nigerian firms?
3.
In what ways has globalization aided the advancement of new technologies in the Nigerian economy?
4. Has globalization caused inequity between Nigeria and Western nations?
1.3 OBJECTIVES OF THE STUDY
The specific objectives of this study are as follows:
1. To assess the impact of globalization on the Nigerian economy.
2. To assess the effect of financial integration on the Nigerian economy.
1.4 STATEMENT OF HYPOTHESIS
The hypothesis of this research would be based on the aforementioned objectives.
Ho: Globalization has had little effect on the Nigerian economy.
H1: Globalization affects the Nigerian economy significantly.
Ho: Financial integration has no effect on Nigeria’s GDP.
H1: Financial integration benefits the Nigerian economy.
1.5 SIGNIFICANCE OF THE STUDY
The economic importance of researching the impact of globalization on Nigerian economic growth cannot be overstated. Given recent efforts by Nigerian monetary authorities to re-launch the banking sub-sector to glorious heights, this study is critical. Globalization has caused a rapid change in the Nigerian economy, which is attempting to increase its share of financial and direct investment in the international market. Without a doubt, globalization has increased opportunities by allowing access to capital funds from both domestic and financial sources. Furthermore, investors can now tailor the risk of their portfolio to their preferences.
This research is critical to
Academic institutions; globalization has played an important role in the advancement of learning techniques. These techniques include the use of electronic devices such as computers, printers, laptops, and so on, which facilitate learning processes while also providing a foundation for understanding new technological processes that will aid students academically.
Firms; thanks to globalization, there is an easy and accessible communication network that facilitates production, distribution of goods and services both domestically and internationally, as well as attracting new investors.
Government; in terms of governance, globalization has significantly improved our system in terms of budgeting. Revenue and expenditure are accounted for with little or no errors thanks to globalization.
1.6 SCOPE AND LIMITATIONS OF THE STUDY
This study examines the impact of globalization on the growth of the Nigerian economy from 1986 to 2008.
This study was hampered by the following factors:
Inadequate funding.
There isn’t enough time to conduct research.
Leave a Comment