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

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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