Economic Reforms, Trade-Off and Growth in Nigeria

Abstract

This study examined the relationship between economic reforms, trade-offs, and growth in Nigeria between 1986 and 2024, using annual time series data obtained from the Central Bank of Nigeria Statistical Bulletin. Economic reforms were measured through trade openness, domestic credit to the private sector, government expenditure, and foreign direct investment inflows, while the trade-off was captured by gross capital formation, with real GDP representing economic growth. The study employed an ex-post facto research design and estimated an ordinary least squares (OLS) regression model to evaluate the impact of these variables. The results revealed that trade openness exerted a negative but insignificant effect on growth, highlighting the limited benefits of liberalisation policies in Nigeria. Domestic credit to the private sector significantly and positively influenced growth, underscoring the importance of financial sector reforms. Government expenditure showed a negative and significant effect, reflecting the dominance of recurrent spending over capital projects. Similarly, foreign direct investment inflows were insignificant in driving growth, suggesting their volatility and weak contribution. Conversely, gross capital formation exhibited a positive and significant impact, confirming its role as the key trade-off channel through which reforms affect growth. The findings suggest that sustained investment and restructured fiscal priorities are crucial for Nigeria’s long-term growth.