The Effect of Exchange Rate Flunctuation on Economic Growth of Nigeria (1981 -2021)

Student: Oluwaseyi James Owolabi (Project, 2025)
Department of Economics
University of Benin, Benin City, Edo State

Abstract

This research work explored the effect of Nigeria’s exchange rate fluctuation on economic growth. This study made use of secondary annual data from the World Bank (World Development Indicator) and focused on establishing the effect of exchange rate fluctuation on Nigerian economic growth with data spanning 1981 and 2021. Employing Autoregressive Distributed Lag (ARDL) and Error Correction Mechanism(ECM) techniques of analysis for the long and short run relationships respectively, the study did not find a relationship between exchange rate fluctuation and GDP growth in Nigeria in the long run. However, an inverse relationship was established between one period lagged exchange rate fluctuation and GDPG in the short run. The study, therefore, recommends that first, the export base of Nigeria need to be strengthened to ensure a sustainable impact of exchange rate fluctuation on economic growth. Also, local manufacturing should be fully encouraged; fiscal and monetary policy should be effective; and infrastructural facilities should be provided so that foreign investors will be attracted to invest in Nigeria. These will stabilise the exchange rate and place Nigeria’s economy on the path of steady growth. Keywords: GDP Growth, Exchange Rate, Gross Fixed Capital Formation and Government Expenditure

Keywords
GDP Growth Exchange Rate Gross Fixed Capital Formation and Government Expenditure
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