Foreign Exchange Market and Economic Performance in Nigeria
Council, Francis & Peter Ego Ayunku
Abstract
This study evaluates the impact of the foreign exchange rate on economic performance in Nigeria from 1996 to 2022. The study adopted an ex-post-facto research design, and the data were sourced from the Central Bank of Statistical Bulletin, 2022. The study used Gross Domestic Product as proxied for economic performance to measure independent variables; whereas, exchange rate, import trade, export trade, and monetary policy rate were used to measure foreign exchange rate in Nigeria. Ordinary Least Squares (OLS) estimation technique was used to test the formulated hypotheses. The study reveals a positive significant impact of exchange rate on Gross Domestic Product in Nigeria. Import trade has a positive significant impact on Gross Domestic Product in Nigeria. Export trade has a negative insignificant impact on Gross Domestic Product in Nigeria. The study also indicates a negative insignificant impact of monetary policy rate on Gross Domestic Product in Nigeria. Coefficient of determination indicates that about 78% of the variations in economic performance can be explained by changes in foreign exchange rate variables in Nigeria. The study concludes that foreign exchange rate has a positive significant impact on economic performance in Nigeria. Hence, the study recommends that policy makers are advised to closely monitor its movements. The deregulation of exchange rate sector policy should be encouraged to ensure the availability of foreign currency.
Keywords
References
economy. International Business Management and Research, 23(8), 241-246
Aderemi, S.K, Salami, S & Tonju, S (2018). The effect of exchange rate fluctuation on the
economic Growth in Nigeria. International Journal of Finance and Business Research,
23(9), 123-134
Adeyemi, G. & Olawoye, A. J. (2014). The impact of Exchange Rate on Economic Growth in
Nigeria (1980-2012). Australian Journal of Business and Management Research, 4(7),
9-19
Aliyu, S.R.U. (2018). Impact of oil price shock and exchange rate volatility on economic
growth in Nigeria: An empirical investigation. Research Journal of International
Studies, 23(8), 12-23.
Ayinde, T. O. (2014). The impact of exchange rate instability on manufacturing performance
in Nigeria. Fountain Journal of Management and Social Sciences. 3(2) 83-92.
Azeez, B. A., Kolapo, F. T & Ajayi, L.B (2017). Effect of Exchange rate Volatility on
Macroeconomic Performance in Nigeria. Interdisciplinary Journal of Contemporary
Research in Business. 4(1), 149-155.
Bala, S. A. & Hassan, A. (2018). Exchange rate and stock market interactions: Evidence from
Nigeria. Arabian Journal of Business and Management Review, 23(8), 123-134.
Balassa, B. (1964). The purchasing power parity doctrine: A reappraisal. Journal of Political
Economy, 72(6), 584-596.
Carolyn, C.L & Daniel, M.N (2019). The influence of foreign exchange rate fluctuations on
the financial performance of commercial banks listed at the Nairobi Securities
Exchange. British Journal of Marketing Studies, 3(6), 34-45.
Chude, D. I., & Chude, N. P. (2019). Impact of inflation on economic growth in Nigeria (2000-
2014). International Journal of Business and Management Review, 3(5), 26-34.
Dada, E.A & Oyeranti, O.A (2017). Exchange rate and macroeconomic aggregates in Nigeria.
Journal of Economics and Sustainable development. 3(2): 93 – 101.
Dauda, D. S & Ahudu, F (2018). The impact of exchange rate fluctuations on Nigeria
manufacturing sector. Global Journal of Business Management and Research 23(9),
19-24.
De Grauwe, P., & Schnabel, G (2018). Exchange rate stability, inflation, central Europe,
Review of Development Economics, 12(3),530-549.
Dogruel, A.S., Dogruel, F., & Izmen, U. (2011). Changes in exchange rates and the
performance of the manufacturing sectors in Turkey. The Economic Journal, 24(12),
234-245.
Egbo, U., & Igbokwe, D. (2021). Import Substitution Industrialization Strategy and Industrial
Development in Nigeria: Issues and Prospects. International Journal of Economics,
Commerce, and Management, 9(1), 1-16.
Ehinomen, C., & Oladipo, T.I (2017). Exchange rate management and the manufacturing sector
performance in the Nigerian Economy. IOSR Journal of Humanities and Social
Science, 5(5), 1-12.
Eme, O. A & Johnson A.A (2017). Effect of exchange rate movements on economic Growth
in Nigeria. CBN Journal of Applied Statistics, 2(2), 1-28.
Ewubare, D. B. & Ushie, U. A. (2022). Exchange rate fluctuations and economic growth in
Nigeria (1981 - 2020). International Journal of Development and Economic
Sustainability, 10(1), 41–55. Eze, G & Okpala, T (2018). Quantitative analysis of the impact of exchange rate policies on
Nigeria’s economic growth: Test of stability of parameter Estimates. International
Journal of Humanities and Social Science, 4(7), 265-272.
Ezeaku, H. C., & Ugwuanyi, G. U. (2020). Export Diversification and Economic Growth in
Nigeria. Open Journal of Social Sciences, 8(5), 217-229.
