Exchange Rate and Economic Growth in Nigeria
Abstract
Exchange rate being the value for which the Naira could exchange for another has been found to be volatile in Nigeria as it accounted for the sluggish economic performance and distorted growth pattern. The study set out to find if a relationship exist between the gross domestic product and exchange rate using time series data from 1980 – 2024 and it was discovered that a significant positive relationship exist as the independent variables jointly accounted for the variation in the dependent variable. The value of R2 = 0.645219 implies that about 64 % of the total variation in gross domestic product is explained by the independent variables. The remaining 36% is attributed to the variables not included in the model. The F* = 13.73480 with (31, 2) degree of freedom > F0.05 value (3.32), i.e. Fcal = 13.73480 > F0.05= 3.32. On this account, the null hypothesis is rejected and the alternative hypothesis accepted. This indicates that F-statistics is statistically significant implying that the explanatory variables are significant. Overall, the Durbin-Watson test result of 0.080360 < 2.50 bench mark signifies absence of auto-correlation in the model. From the result, exchange rate management should be taken very seriously while government officials are advised to shun corruption in the system as government creates atmosphere for stability of the exchange rate of the Naira. On interest rate, a total reduction will improve investment and productive activities to create employment and increase output of goods and services.
Keywords
Exchange rate
Interest rate
Naira
Fluctuations
Economic growth
References
Abdoh, W. M. Y. M., Yusuf, N. H. M., Zulkifli, S. A. M., Bulot, N., & Ibrahim, N. J. (2016). Macroeconomic factors that influence exchange rate fluctuation in ASEAN countries. International Academic Research Journal of Social Science, 2(1), 89-94. Abdulkadir., Ali, I. O. Ajibola, B. S. ,Omotosho, Olutope O. A. & Abiola O. A. (2015). Real exchange rate misalignment and economic growth in Nigeria. Journal of Applied Statistics, 6 (2), 103 – 131. Adeniran, J. O., Yusuf, S. A., & Adeyemi, O. (2014). The impact of exchange rate fluctuation on the Nigerian economic growth: An empirical investigation. International Journal of Academic Research in Business and Social Sciences, 1(1), 1 – 5. Aidi, H. O.1, Saidu, I.A., and Suleiman, Hussein, I. (2018). Exchange rate volatility and the Nigerian industrial sector performance. Saudi Journal of Economics and Finance, 208-215. Alagidede, P., & Ibrahim, M. (2017). On the causes and effects of exchange rate volatility on economic growth: Evidence from Ghana. Journal of African Business, 18(2), 169-193. Alasha, R. U. (2020). The Impact of exchange rate fluctuations on economic growth in Nigeria. Department of Economics, Faculty of management and Social Science, Baze University, Abuja. Project Paper. Ani, G. A., & Udeh, S. N. (2021).Exchange rate and economic growth in Nigeria. Advance Journal of Management and Social Sciences, 5 (5), 18-26. Anifowose, A.D (2021) Economic growth and exchange rate dynamics in Nigeria. Imo State University /Business & Finance Journal, 12(1), 23-34. Anyanwu, F. A., Ananwude, A. C., and Okoye, N. T. (2017). Exchange Rate Policy and Nigeria’s Economic Growth: A Granger Causality Impact Assessment. International Journal of Applied Economics, Finance and Accounting, 1(1), 1 – 13. Asteriou, D., Masatci, K., & P?lbeam, K. (2016). Exchange rate volatility and international trade: International evidence from the MINT countries. Economic Modelling, 58(3), 133-140. Avdjiev, S., Bruno, V., Koch, C., & Shin, H. S. (2019). The dollar exchange rate as a global risk factor: evidence from investment. IMF Economic Review, 67(1), 151-173. Ayobami, O. T. (2019). Exchange rate volatility and the performance of manufacturing sector in Nigeria (1981 – 2016). African Journal of Economic Review, 7(2), 27–40. Bakhshi and Ebrahimi, 2016). The effect of real exchange rate on unemployment. Marketing and Branding Research, 3(1), 4 - 13. Cassel, V. A. I. (2017). An Empirical investigation into the relationship between exchange rate volatility and economic growth in Liberia (1980 to 2012). A Thesis Submitted in Partial Fulfillment of the Requirements for the Degree of Master of Science in Economics?of?the University of Namibia, 1 – 74. Emerah, A. A., Adeleke, E. & David, J. O. (2015). Exchange rate volatility and economic growth in Nigeria (1986-2013). Journal of Empirical Economics, 4(2), 109-115. Ewubare, D. B & Ushang, A. U. (2020). Exchange rate fluctuations and economic growth in Nigeria (1981 - 2020). International Journal of Development and Economic Sustainability, 10(1), 41-55. Ezebunwo, N. (2024).Impact of exchange rate on economic growth in Nigeria. International Journal of Advanced Economics, 6(6), 243-256. Fang, Y. (2020). Research on the impact of RMB exchange rate fluctuation on employment in my country. Academic Journal of Business & Management, 2(6), 87-99. Fauceglia, D. (2020). Exchange rate fluctuations and quality composition of exports: Evidence from Swiss product?level data. The World Economy, 43(6), 1592-1618. Henry, E., Murtadho, A.M & Bhaumik, A. (2020). The relationship between the exchange rate fluctuations and economic growth in Nigeria. International Journal of Management and Human Science (IJMHS), 4(4), 11-18. Idaka, S. E., Ugwoke, R. O., Ajuh, A. I. and Onyeanu, E. O. (2021). Effect of economic variables on the financial performance of listed firms manufacturing consumer’s goods in Nigeria. Universal Journal of Accounting and Finance, 9(6), 1235 – 1246. Iheanachor, Nkemdilim; Ozegbe, Azuka Elvis (2021). The consequences of exchange rate fluctuations on Nigeria's economic performance: An autoregressive distributed lag (ARDL) approach. International Journal of Management, Economics and Social Sciences, 10(2-3), 68- 87. Isola, L. A., Oluwafunke, A. I., Victor, A., & Asaleye, A. (2016). Exchange rate fluctuation and the Nigeria economic growth. Euro Economica, 35(2), 127-142. Iyeli, I. I., & Clement, U. (2017). Exchange rate volatility and economic growth in Nigeria. International Journal of Economics, Commerce and Management, 5(7), 583-595. Jadoon, A., & Guang, Y. (2019). The effect of exchange rate fluctuations on trade balance of Pakistan. International Journal of Economic Sciences, 8(1), 68 - 80. Koirala, S. (2018) An Analysis of the Impact of Real Effective Exchange Rate on Economic Growth of Nepal. Parvaha Journal of Economic Management, 3(5), 206-216. Lawal, I.A., Atunde, I. O. & Ahmed, A.A. (2016). Exchange rate fluctuation and Nigeria economic growth. Euroeconomica, 135 (2), 1 – 15. Mahonnye, N., & Tenda, Z. (2019). Exchange rate impact on output and inflation: A historical perspective from Zimbawe. African Journal of science, Technology and development, 53, 717- 725. Mileva, M. M., E., & Stracca, L. (2017). The real exchange rate and economic growth: Revisiting the case using external instruments. Journal of International Money and Finance, 73(6): 386- Musa, K.S., Muhammad, A., Mohammed, N., & Adamu S.(2019) Foreign exchange rate and economic growth nexus: New evidence from Nigeria (1981 to 2017). Journal of Economics and Sustainable Development, 10(18), 78-89. Nsofor, E. S., Takon, S. M., & Ugwuegbe, S. U. (2017). Modeling exchange rate volatility and economic growth in Nigeria. International Journal of Finance, 2(3), 50-60. Odoh, C; Ugwoke, O.V., & Onyeanu, E. O. (2023).Exchange rate fluctuations and economic development in Nigeria. International Journal of Mechanical Engineering and Technology (IJMET), 14 (03), 46-61. Olawuni, J. O. (2020). Exchange rate and macro-economic aggregates in Nigeria. Journal of economics and sustainable development, 3(2), 111-121. Udeh, S. N., Ugwu, I. J., & Onwuka I. O. (2016). External debt and economic growth: The Nigeria experience. European Journal of Accounting Auditing and Finance Research 4, 33 – 48. Ugochukwu, P. U. (2015). Exchange rate volatility and economic growth. Research Journal of Economics, 3(3), 1-15. Ufoeze, L. O., Okuma, C. N., Nwakoby, C., & Alajekwu, U. B. (2018). Effect of foreign exchange rate fluctuations on Nigerian economy. Annals of Spiru Haret University Economic Series, 1(3), 33-345
