ABSTRACT

The study investigated the effect of globalization and balance of payment on the Nigerian economic growth for the period 1985-2014. Time series data on foreign direct investment, foreign portfolio investment, trade openness, external debt service ratio and balance of payment was used to capture globalization. The techniques of Estimation employed in the study include Ordinary Least Square, Augmented Dickey Fuller (ADF) test, and Johansen Co-integration test using E-views statistical package. The results showed that the time series data were found to be stationary at levels and there exist an insignificant long run relationship between globalization and economic growth in Nigeria. Greater effort should be geared towards integration of foreign direct investment through greater foreign participation in the stock market which could be achieved by greater openness to trade. Government authorities and policy makers should come up with policies that are investment friendly and should make sure that external debts must be contracted solely for economic reasons and not for social or political reasons. This is to avoid accumulation of external debt stock overtime and prevent an obscuring of the motive behind external debt

             Background of the Study

The world is fast becoming a global village, a metaphor that is often invoked to depict global interdependence and the increasing interaction among and the integration of economic activities of human societies around the world (Ajayi, 2001). In concrete terms, globalization is the intensification of cross-border trade and increased financial and foreign direct investment flows among nations, promoted by rapid advances in and liberalization of communication and information technology (Islam, 1999 and Aninat, 2002). Thus, globalization conjures the picture of a borderless world with greater economic integration that enhances the living standards of people across the globe. Even then, globalization is not a novelty in the development process. On the contrary, the late 19th century was a period of dramatic integration of the world economy as evidenced by the rapid expansion in world trade, the founding of the Latin Monetary Union in 1865 and the emergence of the gold standard in 1878 (Onwuka, 1998 and O’Rourke and Williamson, 1999). Although the retreat into managed trade by the major trading countries between the first and second world wars dampened the outlook of global economic intercourse, the post–1945 multilateralism has virtually permeated all corners of the globe. Since 1990, increased economic cooperation has lifted the ratio of the growth of world export volume to the growth of gross world product to a range of 2.5-3 from an average of below 2 in the 1970s and 1980s (United Nations, 2001).

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