The Impact of External Reserves and Investment on the Wealth of Nigerians
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The Department of Accounting, University of Jos, Jos - Nigeria
Abstract
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External reserves constitute an integral part of the wealth of the nation such that the lack
of it brings worry to most nations and can limit the ability ofthe country to make foreign
currency denominated payments and limits its spending abroad. With the continual increase
in the price of crude petroleum in the world markets, Nigeria has been enjoying increases
in the external reserves position in the international markets. However, the paradox is
that the poverty level in Nigeria contradicts the country s immense wealth and external
reserves. Therefore, the objectives of this paper are basically two. One, is to find out if
Nigerians are better off in the process of accumulation of the external reserves, and if the
wealth of the nation is impacting their lives, and second, what best opportunity to apply
this funds to enable Nigerians share in and benefit from the external reserves. To achieve
these, two regressions were used for the measurements. A single regression ofTwo Stage
Least Squares method (I'SLS) was adopted in order to solve the problem of simultaneity
bias which violates the assumptions of classical regression. The result showed that the
investment or Gross Fixed Capital Formation is significant and more important in the
wealth of Nigerians than in the external reserves. Thus the paper recommended that public
investment be undertaken to improve the quality of life of Nigerians and their wealth in
the process
Keywords
HF5601 Accounting, HG Finance