EXAMINING THE IMPACT OF MACROECONOMIC FACTORS ON NIGERIA’S LIVING STANDARDS USING ARDL APPROACH

Abstract

This study investigated the impact of macroeconomic indicators on the standard of living in Nigeria, using the Human Development Index (HDI) as the dependent variable, and Crude Oil Revue (COR), USD/NGN Exchange Rate (EXR), and Non-Oil Revenue (NOR) as independent variables. Time series data spanning from 1981 to 2022 as obtained from the Central Bank of Nigeria (CBN), was analysed to explore the long-run and short-run relationships among the variables. The methodology adopted was the ARDL bounds testing approach, which is suitable for variables with mixed orders of integration. The results of the ARDL bounds test confirmed a significant long-run relationship between HDI and the independent variables, with an Fstatistic of 17.56677, surpassing critical values at all significance levels. In the short run, the lagged exchange rate was found to have a positive and significant effect on HDI, while the error correction term indicated a stable long-run relationship. The long-run results showed that exchange rates negatively affected HDI, with a coefficient of -0.055215, while non-oil revenue positively influenced HDI, with a coefficient of 0.117625. Crude Oil Revenue was found to have an insignificant long-run effect on HDI. The diagnostic tests revealed no issues with serial correlation or heteroscedasticity, confirming the robustness of the model. The findings suggest that exchange rate stability and increased non-oil revenue are critical for improving the standard of living in Nigeria. This study contributes to the literature on the economic determinants of human development, offering valuable insights for policymakers