Accounting for sustainable economic growth in Nigeria: the role of external factors

This study investigates the contribution of external factors to Nigeria’s economic growth. To achieve the study objectives, we divide external indicators into two categories: the goods market and financial capital inflows market, using annual frequency time-series data over the period 1980–2019. Using the autoregressive distributed lag bounds testing model for empirical estimation, results confirm the financial capital inflows-led growth hypothesis. At the same time, the goods market contributes insignificantly to economic growth and environmental degradation both in the short run and in the long run. From a policy standpoint, we think that to promote sustainable economic growth in the region, government and policymakers (1) must properly channel capital inflows and pursue an all-inclusive foreign direct investment policy that will not isolate a particular sector of the economy, (2) may need to reconsider the reliance on FDI and trade openness as primary drivers of economic growth. Instead, efforts could be directed towards diversifying economic strategies to explore alternative avenues for sustainable growth. Thus, continuous monitoring and evaluation of economic policies and their impacts are essential. Policymakers should regularly assess the effectiveness of FDI and trade policies in driving economic growth and be prepared to adapt strategies based on empirical evidence and changing economic dynamics.