Effects of Exchange Rate Fluctuation on Economic Growth in Nigeria 1981-2018

Abstract

The fluctuations in the exchange rate between the domestic currency (naira) and other nations currency has actually caused a great destabilization in the economic growth of Nigeria this is because imports and exports constitute a large part of the economy. This study therefore examine the effects of exchange rate fluctuation on economic growth in Nigeria from 1981-2018 using non-experimental research design. Autoregressive Distributed Lag Model (ARDL) model was used for data analysis, dependent variable for the study is Real Gross Domestic Product (RGDP) which is used as a proxy for Economic Growth and the independent variables are Import (IMPO), Export (EXP), Exchange rate (EXR), government capital expenditure (GOCEXP) and Inflation rate (INFR). The findings of the study revealed that exchange rate, export, government capital expenditure have positive impact on RGDP both in the long-run and short-run however IMP has a negative impact on RGDP both in the short-run and long-run meanwhile INFR has a negative and statistically significant impact on RGDP in the shortrun. Therefore, the study suggested the following recommendations for policy purposes: Government is advised to formulate and implement policies that would discourage importation but rather encourage exportation of goods and services into other nations of the world, Government should engage in capital intensive project for this will positively contribute to economic growth of the nation, Finally government should develop and implement exchange rate policies that are aimed at minimizing fluctuations in the country currency.