MACROECONOMIC INSTABILITY AND ECONOMIC DEVELOPMENT IN NIGERIA

Abstract The study investigated the impact of macroeconomic instability on economic development in Nigeria from 1981 to 2024. It utilized time series data obtained from the publications of the Central Bank of Nigeria, the National Bureau of Statistics, and the World Development Indicators. The autoregressive distributed lag (ARDL) econometric technique was employed to analyze the effects of macroeconomic instability variables on economic development. The findings revealed that economic development in Nigeria is influenced by the dynamics of macroeconomic instability variables. Specifically, the study identified a negative relationship between fiscal imbalances, inflation, interest rates, and unemployment rates and economic development at current and lagged periods (first and second lags), and these relationships were statistically significant. However, a positive relationship was observed between openness, balance of payments, and economic development, consistent with a priori expectations. Additionally, the results highlighted that population growth, the human development index, and openness are critical drivers of economic development in Nigeria. The study recommended: Structural Reforms, whereby the government should implement comprehensive structural reforms to address underlying economic challenges and promote macroeconomic stability. Fiscal tools such as taxation and government spending should also be effectively utilized to stabilize the economy. Moreover, the Central Bank of Nigeria should deploy monetary tools such as reduced interest rates, reserve requirements, and improved balance of payments management to stabilize the economy. Policies aimed at maintaining favourable exchange rates should be formulated and implemented to enhance export growth and economic performance. The government should prioritize human capital development by formulating investment-friendly policies that attract both local and foreign investors, thereby boosting productivity and fostering economic growth. In conclusion, addressing macroeconomic instability through well-coordinated policies and reforms can significantly contribute to sustainable economic development in Nigeria. Keywords: Economic development, macroeconomic instability, exchange rate, inflation rate, fiscal imbalances, and openness