Impact of Exchange Rate Movement on the Economic Growth in nigeria

ABSTRACTThe exchange rate is a fundamental concept in international economics and finance. It represents the value of one country's currency in terms of another country's currency. The broad objective of this study is to evaluate the impact of exchange rate movement on the economic growth in Nigeria. This research, which is based on Hirschman's (1969) contemporary unbalanced development, changes the work of Boadiary and Trendenick (2022) by analyzing the effect of exchange rate fluctuation on Nigeria's economic development. It makes use of secondary time series data from 1980 to 2022 that were obtained from the World Bank Development Indicators and the Central Bank of Nigeria Statistical Bulletin. This study explores the impact of exchange rate volatility and other macroeconomic variables on Nigeria's economic development from 1980 to 2022. The regression analysis reveals a statistically significant negative relationship between exchange rate volatility and Real GDP (RGDP). Fluctuations in the exchange rate increase uncertainty, which deters investment, trade, and economic activities. The study highlights the importance of a stable policy environment to reduce exchange rate volatility, enhance trade, and attract foreign investments. Policies aimed at fostering monetary stability and reducing borrowing costs are critical for sustainable growth. This study concludes that exchange rate levels and volatility significantly affect Nigeria’s economic growth. While a stable and favorable exchange rate supports economic activities by encouraging exports and investments, excessive volatility disrupts production, inflates import costs, and undermines investor confidence and reinforce the importance of sound exchange rate management policies for Nigeria’s economic development. The study also highlights the interconnectedness of exchange rate stability with other macroeconomic factors such as inflation, trade, and foreign investments.