FOREIGNRESERVES ACCUMULATION AND MACROECONOMICENVIRONMENT: THE NIGERIAN EXPERIENCE (2004-2014)

This study examines the impact of Nigeria’s foreign reservesaccumulationonmacroeconomic environment. Seven macroeconomic variables were selected torepresent macroeconomic environment (GDP, inflation, exchange rate andunemployment, investment, external debt and total trade). Data were sourced fromthe Central Bank of Nigeria’s Statistical Bulletin between 2004 and2014. Theordinary least square (OLS) econometric model was employed in the analysis ofthe data. The study conducted the unit root test using both the Augmented Dicker-Fuller and Philip Perron with and without trend and the result showed that allvariables were stationary at first difference except inflation. The cointegrationresult obtained from the analysis showed the existence of a long run relationshipbetween foreign reserves and the explanatory variables. The paper concludes thatforeign reserveis a necessary tool in the macroeconomic stability of the country.It recommended that government should adopt proper and well articulatedstrategies of managing the nation’s reserve in order to achievethe desiredobjectives