MODELING NIGERIA’S EXTERNAL RESERVE USING TIME DOMAIN MODEL APPROACH

Abstract

The paper is concerned with modeling Nigeria’s external reserve using a time domain model approach such as ARIMA. The monthly external reserve (EXTR) data collected covers the period of 1981 to 2021.  The unit root test result shows that EXTR is non-stationary in its natural series and stationary in its first difference. Three possible ARIMA (p, 1, q) models identified are compared using Akaike information criterion (AIC) and the result indicates that ARIMA (5, 1, 2) model is preferred with the smallest value of AIC. However, the ARIMA (5, 1, 2) can be used in predicting Nigeria’s external reserve for better economic management.