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Article Title:
An Empirical Investigation into the Effect of Openness of the Economy on the Growth of Output (RGDP) In Nigeria from 1986-2010
by Aminu Umaru, Manu Donga and Salihu Zummo Hayatudeen

Abstract:
The purpose of this paper is to investigate the effect of openness of the Nigerian economy on its growth, especially, as its affect growth of real GDP. The paper employed two models, viz: Ordinary Least Square (OLS); linear regression model and double-log regression model and also Phillips-Perron (PP) technique was used in testing the presence of unit root and Vector Autoregressive (VAR) was used the detect the flow of causation among the variables of the models. The results of unit root suggested that all the variables in the model were stationary, though at different levels, the results of VAR result revealed the existence of causation between RGDP and openness (OPEN), no causation existed between RGDP and FDI, TEDEBT, FEXR and BOP. One way causation also existed between openness (OPEN) and total external debt (TEDEBT). No causation existed between OPEN and FDI, FEXR and BOP. The result revealed no flow of causation existed from all the other included variables of the model to FDI, FEXR. The result further revealed the existence of causation between TEDEBT and FDI while one way causation between TEDEBT and BOP at only lag one (-1). Lastly, the VAR result revealed no flow of causation from all the included variables to BOP. This implied that RGDP, OPEN, FDI, TEDEBT, and FEXR do not caused BOP in Nigeria for the period under review. The results also discovered that openness, foreign exchange rates, and balance of payment were impacting positively on growth of output (RGDP) in Nigeria; while foreign direct investment and total external debt were impacting negatively on growth of output (RGDP) in Nigeria as shown by the regression results. The elasticity results indicated that, the growth of real GDP in Nigerian was less susceptible to changes in openness, foreign direct investment, total external debt, foreign exchange rates and balance of payment, their elasticities were inelastic. The significance of this paper is that, it stands to be a guide to policy makers. It has also push forward empirical discourse and provided literature to future research. Finally, this paper recommends the pursuance of stable and sustainable foreign policies such as export promotion and import substitution, effective control and utilization of external debt. Also to put in place, measures that will promote greater exchange rate stability and improve conditions of terms of trade, promote greater openness of the economy in order to enhance growth of the economy (RGDP). There is the need for the government to devalue its currency, reduce total external debt as well as reduction in the inflow of foreign direct investment for their negative impact on real GDP in Nigeria. It is hoped that coming up with the above measures could greatly promote the growth of real GDP in the country.

Keywords: economic growth, openness, FDI, foreign exchange rate, BOP and total foreign indebtedness

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