Effect of Exchange Rate Fluctuations on Inflation Rate in the Nigerian Economy: 1986-2019

AFRAG028

Effect of Exchange Rate Fluctuations on Inflation Rate in the Nigerian Economy: 1986-2019

Angela Ngunan Atsanan (PhD) Email: angela.atsanan@fulokoja.edu.ng, Tel: +2348056463499, +2347032169200

Department of Banking & Finance, Faculty of Management Sciences, Federal University Lokoja, Kogi State

Kelechukwu Stanley Ogbonna (PhD) Department of Banking & Finance, Nnamdi Azikiwe University, Awka Anambra state Nigeria.

Nandak Godwill Yadok Email:nandak.yadok@fulokoja,edu.ng Tel: +238065797221, +2349076095292

Department of Accounting, Faculty of Management Sciences, Federal University Lokoja,

Kogi State Abdulazeez Eneye Ismaila

Email:abdulazeezismaila@fulokoja.edu.ng

, Tel: +238065335484, +237051769010

Department of Accounting, Faculty of Management Sciences, Federal University Lokoja, Kogi Sate

Abstract

The study examined the effect of exchange rate fluctuation on inflation rate in Nigeria. The study covered the period of deregulated economy from 1986 till 2019. Exchange rate fluctuation was represented by nominal exchange rate and supported with control variables which includes interest rate, money supply, imports and Gross Domestic Product (GDP). The Error Correction Model was used for data analysis and the result has shown that interest rate has insignificant and positive relationship with inflation rate at 5% level which indicates that increase in interest rate can positively but insignificantly influence inflation in Nigeria. The study also has shown that exchange rate and other macroeconomic variables including interest rate, money supply, imports and GDP does not necessitate significant changes in inflation in Nigeria. This suggests that macroeconomic variables are not the major causes of inflation rate in Nigeria. Social and political issues such as unrests, consumer confidence, and political landscape and so on can trigger inflation. The study therefore recommended that despite the use of monetary and fiscal policies on controlling inflation and unemployment, governments should pursue diplomatic missions aimed at creating good image for the country and public confidence in the citizenry and monetary authorities should ensure that interest rates measures are put on check Keywords: Exchange rate, Inflation, Fluctuations, interest rate, Economy.

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