IIARD International Institute of Academic Research and Development

INTERNATIONAL JOURNAL OF ECONOMICS AND FINANCIAL MANAGEMENT (IJEFM )

E-ISSN 2545-5966
P-ISSN 2695-1932
VOL. 9 NO. 3 2024
DOI: https://doi.org/10.56201/ijefm.v9.no3.2024.pg117.132

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Relationship Between Currency Devaluation and Economic Growth in Nigeria: An Empirical Evidence

Bakari Wadinga, Abdullahi Ahmed

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Abstract

This study investigated the relationship between currency devaluation and economic growth in Nigeria, utilizing a comprehensive quantitative approach. Historical trends of the Nigerian Naira's value against the US Dollar from 1961 to 2022 are analysed, revealing periods of stability followed by pronounced depreciation. Unit root tests confirm the stationarity of key variables, while cointegration analysis demonstrates a significant long-term relationship between currency devaluation and economic growth. Short-run analysis suggests a potential positive relationship between currency devaluation and economic growth, although further investigation is warranted. In the long run, currency devaluation exhibits a significant negative relationship with economic growth, highlighting the adverse consequences of depreciation on Nigeria's economic performance. Recommendations are provided to policymakers and stakeholders, including strengthening macroeconomic management, diversifying the economy, enhancing trade competitiveness, improving governance and transparency, and investing in human capital and education. By implementing these recommendations, Nigeria can overcome the challenges posed by currency devaluation and foster sustainable economic growth.

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References:

Adediran, O. S., George, E. O., & Alege, P. O. (2017). Assessing the influence of monetary
policy tools on external credit-economic growth nexus in Nigeria. In Paper presented
at the 3rd international conference on advances in education and social science
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Alemu, A. M., & Jin-sang, L. (2014). Examining the Effects of Currency Depreciation on Trade
Balance in Selected Asian Economies. International Journal of Global Business, 7(1).

Aliyu, S.R.U. (2011) “Impact of Oil Price Shock and Exchange Rate Volatility on Economic
Growth in Nigeria: An Empirical Investigation” Research Journal of International
Studies, 11, 103 – 120.

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