Okafor, M. C (Ph.D)
Department of Accounting
College of management sciences
Michael Okpara University of Agriculture Umudike
0Okoro, C E. (Ph.D)
Department of Banking and finance
College of management sciences
Michael Okpara University of Agriculture Umudike

The paper examined the effect of exchange rate fluctuation on Nigerian economy using annual
time series data for the period; 1986-2018. This study highlighted the 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 Central Bank of Nigeria statistical bulletin. Following the existence of unity in the
order of integration, Johansson co-integration 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.
Key Words: Exchange rate fluctuation, Nigerian economy, Error Correction

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