EFFECT OF EXCHANGE RATE FLUCTUATION ON NIGERIAN ECONOMY

EFFECT OF EXCHANGE RATE
FLUCTUATION ON NIGERIAN
ECONOMY
Okafor, M. C (Ph.D)
Department of Accounting
College of management sciences
Michael Okpara University of Agriculture
Umudike
michassociates@yahoo.com
&
Okoro, C E. (Ph.D)
Department of Banking and finance
College of management sciences
Michael Okpara University of Agriculture
Umudike
charlesokoro109@gmail.com
ABSTRACT
The paper examines the effect of exchange
rate fluctuation on Nigerian economy using
annual time series data for the period; 1986-

  1. This study highlighted frameworks for
    articulating the various views and analyzing
    the various factors that affect the stability of
    naira exchange rate in Nigeria. After historical
    review of some milestones in exchange rate
    management in Nigeria, steps in achieving a
    stable exchange rate based on country’s
    overall economic objective and fiscal policy
    were provided, various methods of exchange
    rate
    determination
    which
    have
    metamorphosed over the years in Nigeria
    were examined and compared with the reality
    of the economic base of the country.
    Empirical data was sourced from the CentralBook of Abstract
    Bank of Nigeria statistical bulletin. Following
    the existence of unity in the order of
    integration, Johansson cointegration test and
    the error correction mechanism (ECM) was
    used to examine the relationship between
    exchange rate and the Nigerian economy
    (proxy GDP growth rate). The study found
    that there is significant relationship between
    exchange rate and economic growth in
    Nigeria. It is therefore suggested that Nigeria
    improve its competitive capacity in the
    international
    market
    through
    export
    diversification.
    Keywords: Exchange rate fluctuation, Nigerian
    economy, Error Correction mechanism.

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