Keywords: international reserves, Nigeria, bounds test, sustainability, oil prices, sustainable development, cointegration, crude oil extraction, export earnings, lagged value, GDP per capita, carbon dioxide, CO2, carbon emissions
Determinants and sustainability of international reserves accumulation in Nigeria
The study examined the determinants of international reserves accumulation in Nigeria between 1970 and 2010 with a view to determining its sustainability. The three major dimensions of sustainable development (social, economic and environment) are considered in the adopted model that was estimated using error correction and bounds testing approach to cointegration. Findings suggest that variability of export earnings and the one period lagged value of international reserves had a positive impact on international reserves holding in Nigeria. The economic (GDP per capita) and environmental (CO2 emission) measures of sustainable development also affect international reserves accumulation in the long–run. Observably, oil price negatively affects reserve holding in the long–run but is positive in the short–run. The findings suggest the need to diversify Nigeria's sources of external reserves accumulation towards more environmentally and economically sustainable activities such that the negative effects of volatile oil export earnings and crude oil extraction are reduced.