The Impact of Capital Account Liberalization on Economic Growth in Nigeria

Abstract

Capital account liberalization is a parameter used in measuring the degree of openness of an economy, signaling the rate of inflow and outflow of capital from one economy to another without undermining its territorial integrity and independence. The greatest challenge facing the country today is how to grow the economy and reduce poverty. Meeting this challenge is particularly difficult, if Nigeria should rely solely on domestic resources, given the low rate of savings and the attendant savings-investment gap. Against this background, it becomes crucial to try and attract foreign resources into the economy. This study examines the impact of capital account liberalization on economic growth in Nigeria. The period of study covers between 1971 and 2011. This period was divided into Pre-Liberalization and Post-Liberalization eras. The technique of analysis is the Ordinary Least Square Method using the E-view statistical software. The study reveals that capital account liberalization had positive and significant impact on economic growth in Nigeria, therefore, the removal of restrictions from international transactions related to the movement of capital leads to an increase in economic growth.

Keywords: Capital Account Liberalization, Economic Growth and Nigeria