DOLLARIZATION AND SELECTED MACROECONOMIC INDICATORS IN NIGERIA: AN EMPIRICAL ANALYSIS

Abstract

The contagious effects of dollarization continue to ravage the Nigerian economy through fiscal and monetary transmission channels. With the debate for or against dollarization tendencies skyrocketing alongside, this paper investigates the relationship between dollarization and selected economic growth indicators in Nigeria using a fractional cointegration analysis over the period 1986-2014. It also adopted the Ordinary Least Squares (OLS) techniques to ascertain the effects of the selected variables. Our findings established that fact that the phenomenon of dollarization exists in the Nigerian economy and if not checked will result in serious economic crisis since its dominance is an indicator of misalignment in exports, external debt, foreign direct investment and economic growth. The paper thus recommends among others the adoption of prudential measures to boost confidence in the local currency as well as anti-inflationary measures.