Economic reforms and economic growth in Nigeria: A Chow test approch

Abstract

Abstract. The study examined the impact of economic reform programmes on economic growth in Nigeria for the period 1980 – 2016. This period was selected since it covered the period of three main economic reform programme in Nigeria history. The reform programmes during the period were the Structural Adjustment Programme (SAP) of 1986, The National Economic Empowerment and Development Strategy (NEEDS) of 2004 and the transformation agenda of 2011. A combination of co-integration and error correction modelling techniques and the chow breakpoint test were employed. In the estimation of the specified model, dummy variables were constructed to capture economic reform programmes. The chow test was adopted to confirm the findings from the error correction representation by checking for structural brakes the growth function. The empirical result shows that economic reforms on the aggregate have positive and statistically significant long run impact on economic growth in Nigeria. However, in the short run the impact was negative. This suggest that economic reform had a J curve effect on economic growth in Nigeria. The J curve effect occur when a policy or programme have adverse effect in period immediately after its implementation. However, the effect reverse in the long run and become positive. For the individual reform programme, the structural Adjustment Programme (SAP) of 1986 didn’t enhance economic growth in Nigeria. It even retarded economic growth with its negative coefficient. The National Economic Empowerment and Development Strategy (NEEDS) of 2004 and the transformation agenda of 2011 stimulated economic growth in Nigeria. This propelled the Nigeria economy to become the biggest economy in 2013 overtaking South Africa. Generally, the economic growth stimulated by economic reforms did not transform into economic development as the poverty level is still high, unemployment rate and other social indicator have negative trend. This could be as a result of abandonment of economic reforms following changes in political leadership of the country. This study therefore recommend the need to go back to government deliberate home grown economic reform programme to lunch the country back of a steady growth path which with the mind of attacking the poverty problem in Nigeria particularly as we approach the post covid-19 economic policy.

Keywords. Chow Breakpoint, Economic reform, SAP, NEEDS, Transformation agenda.

JEL. G38, J18.