Export Diversification, Financial Development and Economic Growth in ECOWAS
- Simeon G. Nenbee
- Joseph Osaro Denwi
- ( paper pages. 1 - 32 )
Abstract
Most
economic scholars maintain that natural and environmental resources
availability in an economy can trigger growth if exported to other countries.
Thus, international organizations like the World Bank and the International
Monetary Fund (IMF) have continually extolled the virtues of economic
prosperity based on export diversification. Export diversification driven by
healthy financial development enables countries to build resilience to external
shocks, stabilize export earnings and more. Motivated by the need to reduce
vulnerability and external exposure, this paper explored the effect of export
diversification and financial development on the economic growth of Economic
Community of West African States (ECOWAS) countries from 1995 – 2022. The panel
threshold method was adopted for data on GDP per capita, export diversification
index, trade openness, foreign direct investment, financial development,
external debt, natural resource rents, exchange rate, and population growth
analyses. The data were sourced from secondary sources, such as the United
Nations Conference on Trade and Development (UNCTAD) and the World Bank’s World
Development Indicator (WDI) databases. The analysis of the data revealed that
while export diversification supports economic growth in the region, a
well-developed financial system is needed for export diversification to be
pro-growth. The panel threshold method equally indicated that financial
development above 24.7814% (broad money to GDP) is required for the economic
benefits of export diversification to be unlocked in most of the countries.
This result seems to strengthen the need to develop the financial institutions
of the ECOWAS countries. It is expected that export diversification will only
produce positive economic outcome if the financial system is efficient and
inclusively developed. The paper recommends that increased allocation of
credits to the real sectors of the economy will boost export commodities
availability and enhance economic growth.
Citation
Simeon G. Nenbee, Joseph Osaro Denwi.
2025.
"Export Diversification, Financial Development and Economic Growth in ECOWAS"
The Nigerian Journal of Economic and Social Studies,
67 (1): 1 - 32.
JEL Classification
F1, F43, O11, O57
