ABSTRACT

This study analysed Forex Reserves and their impact on the economy of Nigeria using time series data from 1980 to 2016. The study utilized Multiple Linear Regression analysis, Augmented Dickey Fuller (ADF) Test for unit root, Johansen Cointegration Methods and other stability tests. The results of the Augmented Dickey Fuller test, showed that the data became stationary at the first difference thus, integrated of order one while the Johansen Cointegration method was used to test for the existence of long run relationship among the variables and the results showed that there is no long run relationship between forex reserves and economic growth. The results of the Multiple Linear Regression analysis showed that the estimated coefficient of the predictor variable, forex reserves (FOREX) was 0.76729. By implication, a unit increase in External reserves resulted to an increase in economic growth by 0.77% in Nigeria. The policy implication of this is that measures that will enhance the stability and accumulation of foreign reserves should be encouraged. In addition, variables like foreign direct investment (FDI), and Exchange rate (EXR) were all independent variables used as independent variables. FDI has a positive relationship on GDP while EXR has a negative relationship with GDP through their coefficients. It was recommended that accumulation of forex reserves will have long term benefits for the economy of Nigeria.