Journal of
Economics and International Finance

  • Abbreviation: J. Econ. Int. Finance
  • Language: English
  • ISSN: 2006-9812
  • DOI: 10.5897/JEIF
  • Start Year: 2009
  • Published Articles: 363

Full Length Research Paper

External reserve holdings in Nigeria: Implications for investment, inflation and exchange rate

Usman Abdullateef1* and Ibrahim Waheed2
  1Department of Economics, University of Ilorin, Ilorin, Nigeria. 2Department of Economics, Al-Hikmah University, Ilorin, Nigeria.
Email: [email protected]

  •  Accepted: 24 August 2010
  •  Published: 30 September 2010



The paper investigates the impact of change in external reserve positions of Nigeria on domestic investment, inflation rate and exchange rate. Using a combination of ordinary least square (OLS) and vector error correction (VEC) methods, it was observed that change in external reserves in the country only influences foreign direct investment (FDI) and exchange rates and no influence of it was found on domestic investment and inflation rates. The results suggest that there is the need for broader reserve management strategies that will aim at maximizing the gains from oil export revenue by utilizing more of these resources to boost domestic investment.


Key words: External reserve, inflation rate, exchange rate, vector error correction.