Foreign Reserve and Economic Growth: A Comparative Analysis of Nigeria and Ghana

Abstract

This paper examined the comparative analysis of the effect of foreign exchange reserve on the economic growth of Nigeria and Ghana. The foreign reserve was proxy by country external reserve, while economic growth was equally proxy by Gross Domestic Product. Data extracted for the sampled period were analysed using descriptive and inferential statistics. An ex-post facto research design was adopted for the study. Data were obtained for sixty-four (64) years (1960-2023) from the reports of World Bank for Ghana and Nigeria. Regression test for the hypothesis was set at a significance level of 5%. The findings showed that external reserve was jointly positive and significant on the economic growth of Nigeria and Ghana (p-value = 0.0000; <0.05) and (p-value = 0.0000; <0.05) respectively. The findings also showed that Ghana had a stronger positive relationship between external reserve and economic development. The Adjusted R-Square of Ghana and Nigeria stood at 0.95 and 0.77 respectively. This implied that 5% and 23% are factors outside foreign reserve that are responsible for economic growth. This study recommends that the leaders of the two countries under consideration should pay more attention to developmental policy that will lead to accumulation of reserve, since it enhanced economic growth and currency stability of the two countries.