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| Effect of Foreign Exchange Fluctuations on Economic Growth in Nigeria
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AJAYI Lawrence Boboye and AJAYI Ibidolapo Ezekiel
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Abstract:
The study examined the effect of foreign exchange fluctuations on economic growth in Nigeria. Specifically, examined the relationship between exchange rate and economic growth in Nigeria; investigated the effect of effect of balance of payment on economic growth in Nigeria and evaluated the effect of trade openness on economic growth in Nigeria. The quantitative and qualitative research design was adopted in the study. Secondary time series data spanning thirty-one years (1989-2020) was gathered in the study. Data gathered in the study was estimated using descriptive statistics, unit root analysis, Autoregressive Distributed Lag (ARDL) analysis, parsimonious error correction model and other post estimation tests. Findings from the study established that Balance of payment exerts negative insignificant effect on economic growth in Nigeria both in the long and short run with coefficient estimate of -1.163405 (p=0.8400<0.05) and -3.223405 (p=0.0535>0.05) respectively; exchange rate affects economic growth in Nigeria positively and significantly both in the short and long run with coefficient estimate of 76.64195 (p=0.0000<0.05) and -57.92612 (p=0.0000>0.05) respectively; trade openness exerts negative significant effect on economic growth in Nigeria in the short and long run with coefficient estimate of -110.2135 (p=0.0086<0.05) and -32.10217 (p=0.0087<0.05) respectively and inflation rate exerts positive significant effect on economic growth in Nigeria in the long run and positive insignificant effect in the short run with coefficient estimate of 84.76427 (p=0.0350<0.05) and 19.95149 (p=0.0858>0.05) respectively. Premised on these findings, Central Bank of Nigeria should create satisfactory exchange rate management towards regulating exchange rate and moderates its volatility for sustainable economic growth; monetary authorities should deploy satisfactory policies towards changing permanent inflation trend in the economy and ensures that it remains at a level suitable for sectoral output and ultimately boost economic growth and government and other monetary agencies should seek sound measures to reduce import and promote exports.
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