Economic Recessions and Global Shocks Spillovers: Navigating Nigeria’s Economy towards Economic Development and Prosperity

Abstract

This paper examines the spillover effects of global shocks to domestic output in Nigeria. The study becomes important now due to the unprecedented global events that shaped several economies and severely affected most countries in the world within the last two decades, including lower-middle income countries like Nigeria. To achieve the objectives of the study, we employ a simple Bayesian Time-Varying Parameter Structural Vector Autoregressive Model (B-TVP-SVAR) with Stochastic Volatility, using monthly data series from 2000 to 2022. The aim is to assess the ex-ante and ex-post of the spillover effects of global shocks to the domestic economy. Thus, we consider two distinct episodes and their respective impacts and deduce policy measures on how to moderate the impacts of similar shocks in the future. The episodes are the 2007/2008 Global Financial Crisis (GFC) and its spillover effects to Nigeria and the Global COVID-19 pandemic of 2020 as well. Subsequently, we establish that the impact of COVID-19 pandemic was more severe to the Nigerian economy relative to the 2007/2008 GFC. Finally, in addition to the measures proffered in this study on how to navigate Nigeria’s economy toward economic development and prosperity, we recommend both monetary and fiscal policy options that would serve as buffers to moderate the impacts of future unanticipated global shocks when they occur.