Project Materials

Globalization And Its Impact On Economic Growth Of The Nigerian Economy (1986 – 2008)

ABSTRACT

This research work. Globalisation and its impact on Nigerian economic growth from 1986 to 2008 is primarily concerned with determining the impact of globalisation on Nigerian GDP as well as the impact of financial integration on the Nigerian economy. In recent years, it was discovered that the Nigerian economy has grown economically as a result of globalisation. Globalisation, defined as the interconnection of countries around the world, has had a favourable impact on the Nigerian economy, particularly in the telecommunications and industrial sectors. This paper demonstrates the influence as well as the variables that contribute to it. Based on the examination and analysis of the results, this work concludes that only foreign direct investment has a positive impact on the Nigerian economy through globalisation, and so it should be closely monitored. Other variables considered in assessing the impact of Foreign Direct Investment included Real Interest Rate, Openness, and Real Exchange Rate. Also, important recommendations were made at the end of this work (chapter five) to help enhance Nigeria’s economic growth and development based on the indices employed, if correctly applied and implemented.

CHAPTER ONE

INTRODUCTION

1.1 Background of the Study

Globalisation can be defined as the integration of national economies through trade, money flows, and the resulting convergence of economic policy.

It is the process by which political, social, economic, and cultural ties become more globalised, with far-reaching implications for individuals’ local experiences and daily lives (Bilton, 1997).

According to the concept above, globalisation operates on both global and local levels, influencing a country’s economy and politics, as well as its culture and residents’ well-being.

Globalisation is based on international commercial and investment agreements, as well as trade liberalisation, both in the financial sector and across the economy. The premise behind this policy direction is that promoting commerce increases national wealth.

For example, trade liberalisation under the Uruguay Round of multilateral trade agreements in 1995 was predicted to yield over $100 billion in net benefits per year, primarily to nations that abolished trade barriers (Hausters, Gerd, 2000).

Financial integration, as part of globalisation, envisions the free flow of loanable funds, as well as the openness of capital flows, which, when supplemented with solid domestic policies, allows countries access to a much bigger pool of resources.

High capital flows boost investment and economic growth, especially when the inflows are foreign direct investments, as opposed to potentially volatile short-term portfolio flows.

Furthermore, foreign direct investment not only supplements domestic savings, but it also increases the depth and efficiency of domestic financial systems, as well as the absorption of foreign technologies.

However, the nation’s monetary and fiscal policy frameworks must be appropriate for the economy to profit from financial globalisation (Yusuf, 2001).

Globalisation is not a new phenomenon; it has existed since the late nineteenth century. However, history was conquered and the pace slowed until the new era of global integration

which was facilitated by the removal of trade barriers and capital flows, as well as advancements in communications and computer technologies that made it easier to collect and process data required for decision making.

As a result, global exports of products and services increased more than threefold between 1983 and 2005. These changes have also increased demand for cross-border finance, which, together with financial liberalisation in many countries, has created a pool of global liquidity to meet such demand.

Globalisation has undoubtedly improved chances for domestic and foreign sources to acquire capital financing at lower costs and better conditions.

This is due to technical advancements, which have aided financial sector liberalisation and product innovation in many countries. This improves financial intermediation and generates a more competitive market environment for financial firms.

The disadvantage of these gains is that international capital flows can be extremely erratic, posing a severe danger to financial and macroeconomic stability.

On the other hand, reversal of capital flows as experienced during the Mexican crisis of 1994 to 1995 and the Asian and Russian crises of 1997 to 1998 could undermine the financial stability of the individual countries particularly if banks are weak and poorly regulated. The contagion effect might also jeopardise the stability of the worldwide financial system.

There is also a risk that asset prices could overshoot economic fundamentals during the boom and bust cycle, leaving banks with non-performing loans backed by collaterals that have lost a significant amount of value.

Globalisation has a diverse and complex impact on the financial sector. Capital flows, currency rate crises, and inflationary pressures are some of the most common channels via which the effects of globalisation can be quickly communicated into the domestic economy.

The implication of globalization on monetary policy can be observed through two channels. First, volatile short-term capital flows and exchange rate movements linked with globalisation can raise the uncertainty around monetary policy outcomes.

Second, globalisation compels policymakers to adopt structural changes or reforms that alter the conditions that govern monetary policy aims, tactics, and instruments. It is often assumed that the more discretionary monetary and fiscal measures are restricted, the more open the economy becomes.

Globalisation also requires governments to exert greater discipline and create strong institutional and political frameworks. In other words, it serves as a stabilising force by limiting countries’ ability to pursue policies consistent with medium-term financial stability.

High fiscal deficits and unsound financial policies that result in inflationary pressures, current account deficits, and/or high real interest rates draw the attention of international investors and capital market operators. As a result, the room for budgetary rascality or unsustainable policies is significantly reduced in a globalised society.

Monetary and exchange rate policy, in particular, have changed to reflect broader economic objectives. From independence until 1986, monetary policies were primarily implemented through direct control, which included the imposition of ceilings on aggregate bank credit expansion, sectoral credit allocation, administrative control of interest rates, the prescription of cash reserve requirements, exchange rate controls, and the mandatory holding of government securities.

The financial market was largely underdeveloped during this time, with limited money market products and set and inflexible interest rates.

A fully developed economy has completed the various stages of development. This development will go more quickly if international investors have access to domestic markets.

1.2 Statement of the Problem

There are issues with the development of the Nigerian economy in its various sectors due to the impact of globalisation. These issues could be economic problems caused by the rate of instability, governmental impediments to capital flows, ineffective economic policies, or political instability.

There may also be issues with market liquidity. Using liquidity as a metric of stock market development, it appears that the Nigerian capital market is somewhat illiquid and has contributed very little to the Nigerian economy’s growth (Ibrahim, 2002).

Therefore, this research work shall answer the following questions:

1. Does globalisation result in a quick flow of foreign capital into the Nigerian economy?

2. Does globalisation considerably improve management approaches for enterprises in Nigeria?

3. To what extent has globalisation facilitated the emergence of new technology in the Nigerian economy?

4. Has globalisation caused inequality between Nigeria and Western nations?

1.3 GOALS OF THE STUDY

The study’s aims can be phrased as follows:

1. Determine the impact of globalisation on the Nigerian economy.

2. Assess the impact of financial integration on the Nigerian economy.

1.5 Significance of the Study

The economic importance of examining the influence of globalisation on Nigeria’s economic growth cannot be overstated. This research is critical considering Nigeria’s recent efforts by monetary authorities to relaunch the banking system to new heights.

Globalisation has resulted in a rapid transformation in the Nigerian economy, which tries to enhance its share of financial and direct investment in the international market.

Globalisation has undoubtedly improved options for getting capital money from both domestic and financial sources. Furthermore, investors can now customise their portfolio risk to their tastes.

This study is extremely important to

Globalisation has significantly improved learning approaches in academic institutions. These tactics involve the use of electronic gadgets such as computers, printers, and laptops, which facilitate learning processes while also providing a foundation for comprehending new technical processes that will benefit students academically.

Globalisation has made it easier for firms to produce and distribute goods and services, as well as attract new investors.

· Government; in terms of governance, globalization has enhanced our system primarily in areas of budget. With the help of globalization, revenue collected and expenditure made are accounted for with little or no errors.

1.6 Scope and Limitations of the Study

This study examines the impact of globalisation on the growth of the Nigerian economy from 1986 to 2008.

This study project was constrained by:

vInsufficient fund.

Limited time to carry out study.