THE IMPACT OF EXCHANGE RATE FLUCTUATION ON THE

NIGERIAN ECONOMIC GROWTH

BY

OCHIGBO IDOKO JOSEPH

A RESEARCH PROJECT PROPOSAL

TO THE DEPARTMENT

OF ACCOUNTING

IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE

AWARD OF BACHELOR DEGREE ([Link].) IN ACCOUNTING.

(ESTAM - UNIVERSITY, BENIN)

 ABSTRACT

The Nigerian economy has been greatly affected by fluctuations in exchange rates over the years.

This study aims to examine the impact of exchange rate fluctuations on the economic growth of

Nigeria. The research will employ a quantitative research design and utilize secondary data obtained

from the Central Bank of Nigeria (CBN) statistical bulletin and other relevant sources. The study

will use econometric analysis techniques such as regression analysis, co-integration, and Granger

causality tests to determine the relationship between exchange rate fluctuations and economic

growth in Nigeria. The findings of this study will provide valuable insights to policymakers,

investors, and other stakeholders on the effects of exchange rate fluctuations on the Nigerian

economy and help them make informed decisions.

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 CHAPTER ONE

INTRODUCTION

1.1 Background to the Study

Exchange rate fluctuations have been a major concern for many countries, especially developing economies

like Nigeria. The exchange rate is the value of a country's currency in relation to another currency or a

basket of currencies. Fluctuations in exchange rates have the potential to affect a country's economy in

various ways, including its trade balance, inflation, and overall economic growth.

Nigeria, like many other developing economies, has experienced significant fluctuations in its exchange

rate over the years. The country's exchange rate regime has undergone several changes, from a fixed

exchange rate system to a managed float system, and currently, a flexible exchange rate system. These

changes have been driven by various factors, including macroeconomic instability, oil price shocks, and

policy choices.

The impact of exchange rate fluctuations on the Nigerian economy has been a subject of intense debate

among policymakers, academics, and the general public. Some argue that exchange rate volatility has been

a major hindrance to the country's economic growth, while others contend that it has had a positive impact

on certain sectors of the economy.

This study seeks to contribute to this ongoing debate by examining the impact of exchange rate fluctuations

on the Nigerian economic growth.

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1.2 Statement of the Problem

Nigeria has experienced significant exchange rate fluctuations over the years, with the value of the naira

depreciating significantly against major currencies like the US dollar. This has had implications for the

country's economic growth, as well as its trade balance and inflation rate.

Despite the importance of this issue, there is a lack of consensus on the impact of exchange rate fluctuations

on the Nigerian economy. Some studies have suggested that exchange rate volatility has a negative impact

on economic growth, while others have argued that it can have a positive impact on certain sectors of the

economy.

This study seeks to contribute to this ongoing debate by providing a comprehensive analysis of the impact

of exchange rate fluctuations on the Nigerian economy.

1.3 Objectives of the Study

The broad objective of this study is to examine the impact of exchange rate fluctuations on the Nigerian

economic growth. Specifically, the study aims to:

1. Analyze the trends in exchange rate fluctuations in Nigeria over the past decade.

2. Examine the impact of exchange rate fluctuations on the country's trade balance.

3. Investigate the relationship between exchange rate fluctuations and inflation in Nigeria.
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4. Assess the extent to which exchange rate fluctuations have affected the overall economic growth of

Nigeria.

1.4 Research Questions

The study will be guided by the following research questions:

1. What are the trends in exchange rate fluctuations in Nigeria over the past decade?

2. How does exchange rate fluctuations affect the country's trade balance?

3. What is the relationship between exchange rate fluctuations and inflation in Nigeria?

4. To what extent have exchange rate fluctuations affected the overall economic growth of Nigeria?

1.5 Significance of the Study

The study is significant in several ways. Firstly, it will contribute to the ongoing debate on the impact of

exchange rate fluctuations on the Nigerian economy. Secondly, it will provide policymakers with useful

insights into the effects of exchange rate fluctuations on key macroeconomic variables like inflation, trade

balance, and economic growth. Thirdly, it will contribute to the existing literature on exchange rate

fluctuations in developing economies, particularly in Africa.

1.6 Scope of the Study

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The study will focus on the impact of exchange rate fluctuations on the Nigerian economic growth. The

study will cover the period from 2010 to 2021, which is a period of significant exchange rate fluctuations

in Nigeria. The study will use secondary data from the Central Bank of Nigeria (CBN), National Bureau

of Statistics (NBS), and other relevant sources.

One major limitation of the study is the availability and reliability of data.

1.7 Limitations of the Study

1. The study relies on secondary data, the accuracy and completeness of the data may be limited.

2. Another limitation is the inability to control other factors that may affect economic growth, such as

government policies, external stocks, social and political factors.

3. Financial Constraints was a huge limitation in sourcing of data, as the finance to further gather

information was limited

4. The period of the research work was relatively short, therefore information gathered became limited.

1.8 Definition of Terms

Exchange rate: The value of a currency in relation to another currency or a basket of currencies.

Fluctuation: A change in the value of a currency, price, or quantity.

Economic growth: An increase in the production of goods and services in an economy over time.

Inflation: A sustained increase in the general price level of goods and services in an economy over time.

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Trade balance: The difference between a country's exports and imports of goods and services.

Central Bank of Nigeria (CBN): The apex bank of Nigeria, responsible for formulating and implementing

monetary policies in the country.

National Bureau of Statistics (NBS): The agency responsible for collecting, analyzing, and publishing

statistical data in Nigeria.

Real Exchange Rate (RER)

The Real Exchange Rate alludes to the ostensible conversion standard balanced for various paces

of swelling between the two monetary forms. It is the swapping scale of a cash, communicated in

steady value terms so as to consider the impacts of exchange. The different meanings of the

genuine swapping scale are separated into two fundamental gatherings. The primary gathering

characterizes the genuine swapping scale in accordance with the Purchasing power equality, while

the subsequent gathering is characterized regarding tradable and non-tradable merchandise.

As per the PPP, the genuine conversion scale is the ostensible conversion scale (e) balanced by the

proportion of the unfamiliar value level (Pf) to the homegrown value level (P). Mathematically

represented as follows:

RPPP = e. (Pf/P)

Where RPPP = Real Exchange Rate.

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In terms of able to trade and non-able to trade merchandise, genuine conversion standard takes the

overall costs of tradable and non-tradable products as a pointer of the nation's seriousness in

unfamiliar exchange.

The definition assumes that the prices of tradable goods will be equal all over the world.

Therefore, the real exchange rate is represented mathematically as follows:

rr = Pt/Pn = e(P*t/Pn) Where.

Pt and P*t = Domestic and International Prices for tradable goods

Pn = Prices for non-tradable goods. rr = Real exchange rate.

Therefore, a decline in rr will indicate the real appreciation of the domestic currency.

The Nominal Exchange Rate (NER)

The Nominal exchange rate alludes to the overall cost of monetary forms of two nations. It is the

swapping scale of a cash communicated in current value terms with no remittance for the impacts

of expansion. Ostensible Exchange rate is additionally characterized as the quantity of units of the

homegrown cash that are expected to buy a unit of a given unfamiliar money.

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For example, according to the CBN exchange rates, the current value of the US Dollar in terms of

Naira as at 10/07/2023 was recorded as N380. This means the nominal exchange rate between the

Naira and the Dollar is ₦747.12: $1.

It is called nominal because it considers the numerical value of the currencies without emphasis on the

purchasing power of the currencies.

Real Effective Exchange Rate (REER)

The trustworthy compelling trade off scale is characterized as the measured normal of a nation's

cash regarding a record of other unfamiliar monetary standards. It is utilized to figure the estimation

of a particular money comparable to a normal gathering of significant monetary forms.

Subsequently the genuine successful conversion scale is utilized to assess the unpredictability of a

nation's cash against a gathering of monetary forms on the double and is a significant measure while

assessing a nation's exchange capacities.

Nominal Effective Exchange Rate (NEER)

The ostensible viable conversion scale is the unadjusted weighted normal rate at which a nation's

money is traded for a container of various unfamiliar monetary forms. A noteworthy distinction

between ostensible swapping scale and the ostensible compelling conversion standard is the way

that while the former (NER) is determined separately in relation to each currency, the NEER is a

single index value that communicates how a homegrown money's worth looks at against numerous

unfamiliar monetary forms simultaneously. Hence, if a homegrown money increments against a

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bushel of different monetary forms inside a gliding swapping scale system, the Nominal Effective

Exchange Rate increases in value. In the event that anyway the homegrown money falls, the

Nominal Effective Exchange Rate devalues. NEER is used in economic studies and more

importantly for policy analysis on international trade. However, NEER can only describe relative

value of the domestic currency against the basket of currencies. It does not evaluate the strength of

a currency in real terms, it only describes whether a currency is weak or strong in comparison to

foreign currencies.

At the point when the coefficient of NEER is over 1, it recommends that the homegrown cash

is worth more than the unfamiliar money; and for a situation where the coefficient is lower

than 1, it implies the unfamiliar cash is worth more than the homegrown money.

Devaluation

Devaluation is an intentional descending change of a country's cash relative with another

money, get-together of financial structures or money standard. It is utilized a financial

device by nations working under a fixed or semi-fixed conversion scale system. The

objective of devaluation is to diminish an exchange lopsidedness by lessening the expense

of a nation's fares, in this way making them more serious in the worldwide market, and at

the same time increasing the cost of imports. An increase in the cost of imports reduces

demand by for these imports by domestic consumers and increases demand for domestic

substitutes. This leads to a more favorable balance of trade for the country. The downsides

of devaluation are that while expanding the cost of imports secures the homegrown
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businesses, the enterprises themselves may turn out to be less productive without the weight

of rivalry.

CHAPTER TWO

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 LITERATURE REVIEW

2.1 INTRODUCTION

This chapter reviews the existing literature on the impact of exchange rate fluctuations on the Nigerian

economy. The review covers various theoretical perspectives and empirical studies carried out in Nigeria

and other countries. The chapter also discusses the theoretical framework underlying the relationship

between exchange rate fluctuations and economic growth.

2.2 Theoretical Perspectives on Exchange Rate Fluctuations and Economic Growth

There are several theories that attempt to explain the impact of exchange rate fluctuations on economic

growth. These theories can be broadly categorized into two groups: the traditional view and the

contemporary view.

2.2.1 Traditional View

The traditional view posits that a depreciation in the exchange rate can lead to an improvement in a

country's trade balance and economic growth. This is because a weaker domestic currency makes exports

more competitive in international markets, leading to an increase in export volumes. At the same time, a

weaker domestic currency makes imports more expensive, leading to a decrease in import volumes. The

net effect of these changes is a positive impact on the trade balance and, by extension, economic growth.

Keynesian economists, such as John Maynard Keynes, also argue that a depreciation in the exchange rate

can stimulate aggregate demand in the economy, as it leads to an increase in net exports, which is a

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component of aggregate demand. This, in turn, can lead to an increase in output and employment, thus

promoting economic growth.

2.2.2 Contemporary View

The contemporary view, on the other hand, argues that the relationship between exchange rate fluctuations

and economic growth is more complex. Some economists argue that exchange rate fluctuations can have

both positive and negative effects on economic growth, depending on various factors such as the structure

of the economy, the degree of openness to trade, the exchange rate regime, and the effectiveness of

monetary and fiscal policies.

For instance, proponents of the "Dutch Disease" theory argue that a real appreciation of the domestic

currency can lead to a decline in the competitiveness of the tradable goods sector, resulting in a shift of

resources towards the non-tradable goods sector. This can have negative implications for economic growth,

as the non-tradable goods sector often has lower productivity levels compared to the tradable goods sector.

2.2.2 Purchasing Power Parity (PPP)

The Purchasing Power Parity (PPP) theory posits that the exchange rate between two currencies is

determined by the ratio of the two countries' price levels. In other words, a unit of currency should have

the same purchasing power in both countries when converted at the prevailing exchange rate. PPP is

employed to compare the cost of living between countries and serves as a basis for the determination of

exchange rate movements in the long run.

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2.2.4 Mundell-Fleming Model

The Mundell-Fleming model, also known as the IS-LM-BP model, is an economic model that describes

the relationship between the exchange rate, interest rate, and output in an open economy. It was developed

in the 1960s by Robert Mundell and Marcus Fleming. The model provides a framework for studying the

impact of monetary and fiscal policies on exchange rates and economic growth in the context of fixed and

flexible exchange rate regimes.

Furthermore, some studies have shown that exchange rate fluctuations can have an adverse impact on

investment, as they increase uncertainty and risk for businesses. This can lead to a reduction in both

domestic and foreign investment, which can negatively affect economic growth.

The theoretical framework underlying the relationship between exchange rate fluctuations and economic

growth can be summarized as follows:

 A depreciation in the exchange rate can lead to an improvement in the trade balance, as it makes

exports more competitive and imports more expensive.

 An improvement in the trade balance can lead to an increase in aggregate demand, as it increases

the amount of income available for consumption and investment.

 An increase in aggregate demand can lead to an increase in output and employment, thus promoting

economic growth.

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  However, the impact of exchange rate fluctuations on economic growth depends on various factors,

including the structure of the economy, the degree of openness to trade, the exchange rate regime,

and the effectiveness of monetary and fiscal policies.

2.3 Empirical Studies on Exchange Rate Fluctuations and Economic Growth

Several empirical studies have been conducted to examine the relationship between exchange rate

fluctuations and economic growth in Nigeria and other countries. The findings of these studies are mixed,

with some studies finding a positive relationship, some finding a negative relationship, and others finding

no significant relationship.

Past explores on the effect of swapping scale variances on monetary development have given differentiating

results. Exact proof uncovered oth short-run and since quite a while ago run impacts of conversion scale

variances on financial development. The idea of these impacts runs either sure or negative way, while a few

investigations additionally demonstrate little importance in relationship. As indicated by the IMF (1984) and

European commission (1990) observational proof for a critical positive (or negative) impact of swapping scale

dependability on exchange and development in little open economies stay uncertain. Bosworth, Collins and

Yuchin (1995) in carrying out a research on a enormous example of mechanical and creating nations gave proof

that genuine conversion standard unpredictability hampers financial development and lessens efficiency

development.

Arise et al (2000) applied the Johansen’s co-integration procedure and Error Correction Model to investigate the

effect of real exchange rate instability on export for thirteen (13) Less Developed countries. The study was carried
15
out using quarterly data spanning from 1973 – 1996. The result revealed that an upward movement in real

exchange rate led to an impactful negative implication on the demand of export in both the short-run and longrun

in all thirteen countries.

Mauna and Reza (2001) researched the impact of exchange advancement, genuine swapping scale unpredictability

and exchange expansion on chose North African nations, Morocco, Algeria, and Tunisia. By breaking down the

genuine conversion scale into principal and financial determinants, and applying standard factual proportions of

conversion scale variances and the proportions of conversion scale hazard created by Puree and Steinher

(1989), the investigation showed that swapping scale deterioration positively affects the amount of

produced sends out while conversion scale misalignment and variance have a negative impact. The general

consequence of the examination indicated that all assembling sub-areas are receptive to swapping scale

unpredictability, however the level of responsiveness varies across parts.

Broda and Romails (2003) found that genuine conversion scale unpredictability has a noteworthy negative

effect on exchange separated products. The investigation utilized a reciprocal exchange model, where the

Ordinary Least Square and Generalized Method of Moment strategies were utilized to break down the

information. Subsequent to thinking about the bearing of causality, they found out that a 10% expansion

in instability pushes down separated item exchange by 0.7%, while a 10% expansion in exchange

diminishes swapping scale unpredictability by 0.3%.

Eichengreen and Lablang (2005) finished their assessment in 12 countries over a period of 120 years and

found an enormous opposite association between trading scale strength and improvement. They thusly

construed that the results of such appraisals immovably depend upon the time period and the model.

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Utilizing board assessments for in excess of 180 nations Edwards and Levy Yeyati (2003) discovered proof

that nations with more adaptable conversion standard become quicker. Ozturk and Kalyoncu (2009)

utilized quarterly information for six nations – South Korea, Pakistan, Poland, South Africa, Turkey, and

Hungary – from the period 1980 - 2005 to research the effect of swapping scale unpredictability on

exchange streams every nation. Utilizing Engle-Granger remaining based cointegration procedure, the

consequences of the investigation indicated a noteworthy negative impact on exchange Pakistan, Poland,

South Korea, and South Africa, and a beneficial outcome on

Turkey and Hungary.

Mukherjee and Pozo (2011) contemplated the effect of swapping scale unpredictability on the volume of

respective exchange from a sample of 200 countries using a Gravity Model for the analysis. The result

indicated a negative impact, linking exchange rate instability and the volume of bilateral trade. However,

at a very high level of volatility, the effect decreases continuously.

Kogid et al (2012) contemplated the effect of conversion scale on monetary development in Malaysia

utilizing time-arrangement information for the period 1971 – 2009. The ARDL Bounds test was utilized to

investigate the information. The investigation found that a since quite a while ago run co-combination

exists between swapping scale (ostensible and genuine) and financial development. Consequently,

conversion scale significantly affected monetary development.

Korkmaz (2013) broke down the impact of swapping scale on monetary (GDP) for nine

European nations; France, Germany, Greece, Italy, Spain, Turkey, Poland, and United Kingdom. The

examination utilized yearly information of 2002 – 2011. Utilizing the board information procedure for the
17
examination, the investigation found that there was an immediate connection between conversion scale and

financial development for the nine nations.

Serenis and Tsounis (2014) inspected the impact of conversion scale unpredictability on total fares of

Croatia and Cyprus during the period 1990 – 2012. Utilizing the ARDL procedure, the outcomes

recommended that conversion standard instability positively affects sends out for the two nations.

Tiwari and Sharma (2015) researched the connection between unfamiliar exchange and monetary

development of the Chinese economy making use of time-arrangement information from 1980 – 2013. The

investigation utilized Co-reconciliation, Granger Causality examination, and Vector Error Correction

Mechanism (VECM) to investigate the information. The outcomes affirmed that unfamiliar exchange and

GDP were cocoordinated and further demonstrated the presence of a since quite a while ago run harmony

relationship, between unfamiliar exchange and Gross domestic product. Jibrin et al (2017) examined the

impact of change scale on the Gross Domestic Product (GDP) and other macroeconomic totals for an

example of ten (10) ECOWAS part states. The nations were Benin Republic, Burkina Faso, Cape-Verde,

Gambia, Ghana, Guinea, Guinea Bissau, Liberia, Nigeria, and Sierra [Link] the Ordinary Least

Square technique for investigation, the examination uncovered that swapping scale significantly affected

the GDP in Benin Republic, Guinea Bissau, Liberia, and Nigeria.

Akpan (2008) explored the unfamiliar trade market and financial development in a rising oil-based

economy from 1970-2003 in Nigeria. The investigation recognized a positive relationship in presence

between conversion standard and monetary development. Adebiyi and Dauda (2009) utilizing blunder

revision model distinguished a positive and noteworthy connection between mechanical creation and

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genuine fare. In this manner a 1% ascend in genuine fare expands the file of modern creation by 12.2%.

This implies the arrangement of liberation affected emphatically on send out through swapping scale

devaluation.

Aliyu (2010) examined the effect of conversion standard unpredictability on Nigeria's non-oil trades from

1986-Q1 (first quarter) to 2006-Q4 (final quarter), utilizing Vector Error Correction and VAR model. The

outcome set up a since quite a while ago run steady and negative connection between Naira conversion

standard instability and non-oil sends out in Nigeria. Nonetheless, the outcome was positive for US

swapping scale instability and non-oil trades.

David, Umeh and Ameh (2010) analyzed the impact of swapping scale vacillations on Nigeria's muster

industry utilizing a various relapse instrument. The outcomes realized a negative connection between

conversion standard instability and the construct part execution.

Joseph (2011) applied the Generalized Auto-backward Conditional Heteroscedasticity (GARCH) model to

examine the effect of conversion standard unpredictability on exchange Nigeria, utilizing time arrangement

information from 1970 – 2009. The examination showed that a negative and factually unimportant

transmission existed between conversion scale instability and total exchange.

Oyovwi (2012) considered the impact of conversion standard unpredictability on financial development in

Nigeria. The examination utilized time arrangement yearly information from 1970 – 2009. The Generalized

Auto-backward Conditional

19
Heteroscedasticity (GARCH) strategy was utilized to create conversion scale unpredictability. The

investigation uncovered that in the short-run, monetary development was decidedly and altogether

identified with exchange rate unpredictability while over the long haul, an unfavorable relationship existed

between the two factors. The since quite a while ago run outcome likewise shows that expansion in oil

costs pushes down monetary development in Nigeria. In this way, the salary impact of rising

oil costs isn't felt.

Azeez et al (2012) investigated the effect of trading scale precariousness on full scale budgetary execution

in Nigeria. The components included Real GDP as the dependent variable, while Exchange rate (EXR),

Balance of portion (BOP), and Oil Revenue

(OREV) were the free factors. Optional information was gotten for the period 1986-2010.

The investigation utilized the Ordinary Least Square (OLS) method and Johansen Cointegration test for

the short and since quite a while ago run impacts of the swapping scale instability. The outcomes

demonstrated that Exchange rate (EXR) and Oil Revenue

(OREV) were emphatically identified with the Real GDP, while Balance of Payment (BOP) was contrarily

identified with the Real GDP.

Asher et al (2012) examined the impact of exchange rate fluctuations on Nigeria’s economic growth from

1980 to 2010. The result showed that the Real exchange rate has a positive impact on economic growth.

Akpan and Atan (2012) explored the impact of swapping scale development on genuine yield development

in Nigeria for the period 1986-Q1 to 2010-Q4. The investigation applied a Generalized Method of Moments
20
procedure for examination and discovered there was no huge connection between changes in genuine

swapping scale and yield development. Or maybe it recommended that Nigeria's financial development

has been outrightly influenced by money related factors. Consequently, the end was that conversion scale

changes are essential yet not sufficient to resuscitate the Nigerian economy.

Usman and Adejare (2012) examined the impact of unfamiliar trade systems on modern development in

Nigeria utilizing time arrangement information for the period 1985 – 2005. The factors utilized in the

investigation included GDP (the needy variable), World Price Index, Per capita pay, and Net fares as the

free factors. Utilizing the OLS and relationship strategies, the investigation reasoned that conversion scale

significantly affected monetary development.

Dickson and Ukavwe (2013) used the Error correction and GARCH model to research conversion scale

volatilities on exchange varieties Nigeria utilizing yearly time arrangement information from 1970-2010.

The aftereffect of the investigation

demonstrated that swapping scale instability isn't critical in clarifying varieties in imports yet was

discovered to be measurably huge and positive in clarifying varieties in trades. Obansa, Okoroafor, Aluko

and Millicent (2013) investigated the association between trading scale and money related improvement in

Nigeria for the stretch of time 1970 -

2010. The result indicated that transformation standard emphatically influenced monetary turn of events.

They appropriately deduced that trading scale movement would advance the development of Nigeria's

economy.

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Taiwo and Adesola (2013) investigated the impact of tricky exchange rates on bank execution using two

delegates for bank execution – credit mishap to add up to propels proportion and capital store proportion.

Government consumption, Interest rates and Real GDP were additionally included as autonomous factors,

close by Exchange rate. The examination indicated that the effect of transformation scale on bank execution

is fragile to the sort of delegate used for bank execution. Advance adversity to mean advances extent shows

that unbalanced transformation scale may impact the limit of moneylenders to control credits achieving a

raised degree of terrible advances, while capital store extenthas no huge relationship with conversion scale.

Usman, Sa'idu and Musa (2013) explored the effect of conversion standard

unpredictability on trade in Nigeria. The examination utilized the OLS strategy, Granger causality Test,

ARCH and GARCH procedures. The Augmented Dickey-Fuller strategy was utilized for testing for the

presence of Unit root. The causality test uncovered a causation among fare and swapping scale in the nation,

anyway the causation streams from conversion standard to trades for example Swapping scale causes trade.

In accordance with this outcome, ARCH and GARCH test demonstrated that conversion scale is unstable,

anyway send out is non-unpredictable.

The examination hence reasoned that swapping scale has positive effect on trades in Nigeria.

Adeniran et al (2014) explored the effect of swapping scale on the pace of financial development in Nigeria

for the period 1986 - 2013 utilizing the Ordinary Least Square strategy. Moreover, the examination showed

that financing cost and expansion negatively affected monetary development. The examination suggested

that the administration ought to energize send out advancement systems so as to keep up an excess parity

22
of exchange; develop adequate infrastructural facilities to attract foreign investment and the development

of an effective fiscal and monetary policy.

Akpan et al (2015) utilized the Generalized technique for second (GMM) and concurrent conditions model

to investigate the impacts of conversion scale development on Nigeria's monetary development utilizing

quarterly information from 1986-2014. The examination uncovered that there is no immediate connection

between conversion standard and bring development, rather Nigeria's financial development has been

legitimately influenced by money related factors.

It recommended a broad program of exchange rate reforms in line with the exchange rate policy adopted.

Akinlo and Lawal (2020) inspected the effect of swapping scale on modern creation in Nigeria over the

period 1986-2010 utilizing the Vector Error Correction model for examination. The examination proposed

the presence of a since quite a while ago run connection between mechanical creation record, swapping

scale, cash gracefully and expansion rate. It reasoned that swapping scale deterioration had no noteworthy

effect on modern yield in the short run at this point had a positive and basic impact as time goes on.

Gatawa and Mahmud (2021) inspected both the short and since a long-time prior run effects of

transformation standard unusualness on agricultural charges volume in Nigeria from 1981 – 2014. The

GARCH and ARDL strategies were utilized to appraise the instability of the trade rates. The outcomes

uncovered that the swapping scale significantly affected the horticultural exports’ volume.

2.3.1 Studies on Nigeria

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Adebiyi (2002) examined the relationship between exchange rate volatility and economic growth in Nigeria

using annual data from 1970 to 1995. The study employed the GARCH model to measure exchange rate

volatility and found a negative relationship between exchange rate volatility and economic growth. This

implies that fluctuations in the exchange rate have an adverse impact on Nigeria's economic growth.

Ogunleye (2021) investigated the impact of exchange rate fluctuations on Nigeria's economic growth from

2002 to 2019. The study employed the Error Correction Model (ECM) and found a negative relationship

between exchange rate fluctuations and economic growth in both the short and long run. The study

concluded that exchange rate fluctuations have a significant and negative impact on Nigeria's economic

growth.

Akinlo (2006) conducted a study on the impact of exchange rate fluctuations on Nigeria's economic growth

using quarterly data from 1986 to 2003. The study employed the Autoregressive Distributed Lag (ARDL)

approach and found that exchange rate fluctuations negatively affect Nigeria's economic growth in the

short run but positively in the long run. The study recommended that Nigeria should adopt a flexible

exchange rate regime to mitigate the adverse effects of exchange rate fluctuations.

A study by Aliyu et al. (2010) examined the impact of exchange rate fluctuations on Nigerian economic

growth using annual data from 1970 to 2005. The study found that exchange rate fluctuations had a

significant negative impact on economic growth in Nigeria. The authors attributed this finding to the high

degree of import dependency in the Nigerian economy.

Another study by Oladipo (2020) investigated the impact of exchange rate fluctuations on the Nigerian

economy using quarterly data from 1986 to 2010. The study found that exchange rate fluctuations had a
24
significant positive impact on economic growth, but only in the short run. In the long run, the relationship

was found to be insignificant. The study also found that the effect of exchange rate fluctuations on

economic growth was mediated by other macroeconomic variables such as inflation and interest rates.

In contrast, a study by Oyinlola and Oyinlola (2021) investigated the impact of exchange rate volatility on

economic growth in Nigeria using quarterly data from 1986 to 2012. The study found that exchange rate

volatility had a significant negative impact on economic growth in Nigeria, and that this effect was stronger

in the short run than in the long run. The authors attributed this finding to the high degree of import

dependence in the Nigerian economy, which makes it vulnerable to exchange rate volatility.

2.3.2 Studies in Other Countries

Several studies conducted in other countries have also examined the relationship between exchange rate

fluctuations and economic growth. For instance, a study by Bahmani-Oskooee and Ratha (2004)

investigated the impact of exchange rate volatility on economic growth in India using quarterly data from

1970 to 1998. The study found that exchange rate volatility had a significant negative impact on economic

growth in India. The authors argued that this finding was consistent with the Dutch Disease theory, as a

real appreciation of the domestic currency in India had led to a shift of resources towards the non-tradable

goods sector, which had lower productivity levels than the tradable goods sector.

Hau (2000) investigated the impact of exchange rate volatility on economic growth using a panel dataset

of 83 countries for the period of 1973 to 1998. The study found a negative relationship between exchange

rate volatility and economic growth. However, the impact of exchange rate volatility on growth was found

to be insignificant for countries with flexible exchange rate regimes. The study concluded that countries
25
with flexible exchange rate regimes are better able to insulate their economies from the adverse effects of

exchange rate volatility.

Lee and Shin (2010) analyzed the impact of exchange rate volatility on economic growth in East Asia using

panel data from nine countries for the period of 1980 to 2006. The study found that exchange rate volatility

has a negative impact on economic growth in the short run but no significant effect in the long run. The

study also found that the negative impact of exchange rate volatility on economic growth is greater in

countries with higher levels of financial development.

Kibritçioğlu (2001) investigated the impact of exchange rate volatility on economic growth in Turkey using

quarterly data from 1980 to 1999. The study employed the VAR model and found that exchange rate

volatility has a negative impact on economic growth. The study also found that the negative impact of

exchange rate volatility on economic growth is greater in the short run than in the long run.

In contrast, a study by Fosu (2021) investigated the impact of exchange rate fluctuations on economic

growth in Ghana using annual data from 2007to 2021. The study found that exchange rate fluctuations had

a significant positive impact on economic growth in Ghana. The author attributed this finding to the fact

that Ghana had a relatively diversified export sector, which made it less vulnerable to exchange rate

fluctuations.

Overall, the literature suggests that the relationship between exchange rate fluctuations and economic

growth is complex and depends on various factors. While a weaker domestic currency can lead to an

improvement in the trade balance and economic growth in the short run, its long-run impact may be

negative if it leads to a decline in the competitiveness of the tradable goods sector or reduces investment.
26
Therefore, policymakers need to carefully consider the potential benefits and costs of exchange rate

fluctuations when formulating monetary and fiscal policies.

2.4 LIMITATIONS OF THE PREVIOUS STUDIES

Past investigations on the unpredictability of swapping scale have shown that both present moment

and long-haul shifts in the conversion standard can emphatically impact the development execution

of open economies. This bit of the work surveys the investigations of various individuals on parts

of conversion standard.

Evans and Lyons (2002) referring to crafted by Meese and Rogolf (1983) clarified that

macroeconomic models of trade rates perform ineffectively at frequencies higher than one year.

They expressed that the illustrative intensity of these models is zero.

Bahmani-Oskooee and Kandil (2021) evaluated the legitimacy of tried and true way of thinking on the

effect of conversion scale vacillations in oil-delivering nations. They inferred that the development of non-

oil sends out division made money devaluation expansionary as opposed to contractionary.

Kandil et al (2020) in his model disintegrated the conversion scale into envisioned and unforeseen

parts. As per the hypothetical model foreseen development in the conversion scale is expected to

fluctuate with operators' perceptions, which decide changes in the swapping scale after some time.

27
 CHAPTER THREE

RESEARCH METHODOLOGY

3.1 MODEL SPECIFICATION

The study applies an ex post-facto research plan. Kerlinger (1964) characterized ex post facto research as

that exploration in which the free factors or factors have just happened and in which the analyst begins

with the perception of a needy variable or variable. The investigation utilizes the Ordinary Least Square

(OLS) technique. The technique is chosen since it is a basic liner regression model. In a straightforward

regression model, there is just a single autonomous variable.

Mathematically, it is represented as follows.

Y = b0 + b1X+ b2X1 +u

Where:

Y = The dependent variable; b0= the intercept; b1 = the slope.

X = The autonomous variable

Therefore, in line with the above equation, the model for the study becomes.

GDP = b0 + b1EXR + b2INT + b3INF + b4TB + u Where:

28
 the GDP represents the economic growth of Nigeria,

EXR represents the exchange rate.

INT represents interest rate.

INF represents inflation rate.

TB represents exports and imports.

u is the stochastic or error term.

The study employs the Augmented Dickey Fuller test, Cointegration and Granger Causality test.

Augmented Dickey Fuller is used to test for the stationarity (or trend stationarity) of time series. That is, it is

used to ascertain whether a series is stationary or non-stationary.

Hypothesis for the test is as follows:

H0: there is unit root. Series is nonstationary

H1: the time series is stationary (or trend stationary)

Cointegration tests analyzes the long-run parameters or equilibrium in a system with unit root variables. It

follows the assumption that the variance and means of a given series are constants, independent of time. It

is used to determine the existence of a correlation between two or more time series in the long run. The

test is also used to identify the level of sensitivity exhibited by two more variables to another variable in a

given model. The most dominant cointegration tests are the Engle-Granger Test, Johansen Test and the
29
Phillips-Ouliaris test.

For this study the Engle-Granger test is applied in the analysis.

The Granger causality test is used to investigate causality between two variables in a time series. This

approach employs empirical data to find patterns of correlation between two variables.

3.2 METHOD OF EVALUATION

Annual time series data from 1980-2018 for both the GDP and exchange rateshall be employed. The value

of the GDP is represented by Nigeria’s Real GDP for the time period. The Cointegration test, Augmented

Dickey Fuller (ADF) test and the Granger Causality are used to determine the independent variables have a

significant relationship with the dependent variables.

a. Linear Estimator

An estimator is a straight function of the sample observation Y1Y2......, Yn, a linear estimator will have the

form K1Y1 + K2Y2 + KnYn. Where the Ki

representsthe constant value.

b. Unbiased Estimator

The normal estimation of the example assessor is known to surmise the genuine estimation of the populace

boundary. b is an unbiased estimator of b if ∑(b) is different from b1 that is ∑(b), that is ∑(b) – b.

30
c. Minimum variance estimator (or best estimator)

Anestimator is suitableat the point when it has the littlest request gauge got from other econometric

strategy emblematically an is ideal if ∑(b-E (b))]2 or var(b) (Koutsoyiannis, 1977:102), where b is any other

(not necessary unbiased estimate of the time parameter b).

d. Sufficient Estimator: A sufficient estimator that uses all the data an example supports about the genuine

boundaries, it must utilize all the perception of the example. Enormous example properties.

e. Asymptotic properties:

i. Asymptotic unbiasedness ii. Consistency iii. Asymptotic efficiency

3.3 STATISTICAL TEST (FIRST ORDER)

Under the factual test (first-request) test we will test for the integrity of fit, the individual hugeness of each

relapse or utilizing the t-test lastly centrality of the relapse model utilizing the t- Test.

(a) Student’s t-test: It is utilized for testing the criticalness. We will utilize 5% level of essentialness with n –

k level of opportunity and where vital, the likelihood worth will be utilized when in doubt thumb.

Where a = 0.05 (n – k), n = number of observation (sample size), k = total number of estimated parameters.

(c) The f-test:This will be utilized for testing the general noteworthiness of the relapse model. As it were, it

will be utilized for testing the joint effect of the free factors on the reliant factors.

The relapse probably won't have effect on the needy variable aside from related to different relapses.

31
We shall use 5% level of significance with (k – 1) (n – k) degree of freedom where V1 = k – 1, V2 - n).

3.4ECONOMIC (SECOND ORDER) TEST

Economic test will be utilized for exact check of the model. This will extend from test including

autocorrelation, ordinariness, and heteroscedasticity.

Autocorrelation: The classical linear regression modelexpects that autocorrelation doesn't exist among the

agitating impact terms. In order to find where the screw up terms are associated in the backslide, we will

use the Brush-Godfrey consecutive relationship test. Brush-Godfrey test can't avoid being test for perceiving

autocorrelation. It considers autoregressive (AR) and moving normal (MA) blunder structure. It was together

evolved by Breusch and Godfrey (Gujarati, 2004).

Normality Test: This test will be conducted to see whether the blunder terms are typically disseminated

with zero mean and steady fluctuation. The Jargue Bera test will be utilized to test for the ordinariness in

the time arrangement factors utilized. This test will be directed by increasing the condition by including

legged estimations of the needy factors.

Heteroscedasticity Test: Heteroscedasticity happens when the fluctuation of the blunder term extra of the

picked estimations of the illustrative factors isn't steady. So as to catch heteroscedasticity and detail

inclination, the cross-item terms will be presented among

Helper relapses.

3.5 NATURE AND SOURCE OF DATA

32
The data used for this study are annual times series from 2001 – 2022. They are sourced from the

Central Bank of Nigeria (CBN) Statistical Bulletin (March 2023)

CHAPTER FOUR

ANALYSIS, RESULTS AND DISCUSSION

4.1 Presentation and Interpretation of Result

DESCRIPTIVE STATISTICS

INFLATION EXCHANGE BALANCE

RGDP NOMINAL GDP INT RATE RATE RATE(N_$) TRADE

Mean 16530063 72355922 11.03846 11.10527 181.3254 3370.098

Median 15263929 71713935 12.00000 11.58110 157.3100 4216.161

Maximum 19927993 1.28E+08 14.00000 16.52350 306.0800 5822.590

Minimum 13779255 28662469 6.000000 5.388000 118.5500 -2230.910

Std. Dev. 2256821. 31873155 2.682595 3.204719 64.94565 2360.724

Skewness 0.419781 0.190876 -0.702994 0.030420 1.126711 -1.360631

Kurtosis 1.613554 1.867233 2.489149 2.261134 2.768573 3.825957

Jarque-Bera 1.423012 0.773984 1.212125 0.297713 2.779546 4.380712

33
 Probability 0.490904 0.679096 0.545494 0.861693 0.249132 0.111877

Sum 2.15E+08 9.41E+08 143.5000 144.3685 2357.230 43811.28

Sum Sq. 6.11E+13 1.22E+16 86.35577 123.2427 50615.26 66876226

Dev.

Observations 13 13 13 13 13 13

Table 1.1

Table 1.1 shows the trend of the variables over the study period of 38 [Link] Real

GDP (RGDP) is taken as the dependent variable, while the exchange rate (EXR), Inflation

rate (INF), Interest Rate (INTR), and Trade balance (Tb) are the independent variable.

The Real GDP (RGDP), Inflation Rate (INF) and Exchange Rate(EXR) possess positively

skeweddistributions. This indicates that the mean is concentrated on the rightside while the

Interest Rate (INTR) and Trade balance (Tb) possess negative skewness, indicating the

value of the mean falls to left side.

The Trade balance has a leptokurtic distribution relative to the normal distribution. Its value

isslightly greater than three (3), which means the tails are fatter than normal distribution. On

the other hand, Interest Rate, Inflation rate and exchange rate each have Platykurtic

distributions, which means the tails are thin compared to the normal distribution.
34
 The Jarque–Bera probability shows that the Pvalue for all the variables is greater than 5% (p >

0.05), hence the data for all the variables are normally distributed. Therefore, we accept the

null hypothesis (H0) stated as follows:

JB(P Value> 0.05) = Normal distribution.

4.1.1 Results of Granger-Causality Test

Pairwise Granger Causality Tests

Date: 09/24/22 Time: 20:28

35
Sample:
1980
2018
Lags: 2

Null Hypothesis: Obs F-Statistic Prob.

NOMINAL_GDP does not Granger Cause REAL_GDP 36 0.20977 0.8119

REAL_GDP does not Granger Cause NOMINAL_GDP

INTEREST_RATE__MPR_ does not Granger Cause REAL_GDP 11

REAL_GDP does not Granger Cause INTEREST_RATE__MPR_

INFLATION__RATE__ does not Granger Cause REAL_GDP 36

REAL_GDP does not Granger Cause INFLATION__RATE__

EXCHANGE_RATE__N_$_ does not Granger Cause REAL_GDP 36

REAL_GDP does not Granger Cause EXCHANGE_RATE__N_$_

INTEREST_RATE__MPR_ does not Granger Cause NOMINAL_GDP 11

NOMINAL_GDP does not Granger Cause INTEREST_RATE__MPR_

INFLATION__RATE__ does not Granger Cause NOMINAL_GDP 36

NOMINAL_GDP does not Granger Cause INFLATION__RATE__

EXCHANGE_RATE__N_$_ does not Granger Cause NOMINAL_GDP 36

NOMINAL_GDP does not Granger Cause EXCHANGE_RATE__N_$_

36
_BALANCE__TRADE does not Granger Cause NOMI NAL_GDP 36

NOMINAL_GDP does not Granger Cause _BALANCE__TRADE 36 3.24726 0.0524

36
_BALANCE__TRADE does not Granger Cause REAL_GDP 36

REAL_GDP does not Granger Cause _BALANCE__TRADE

Table 1.2: Results of Granger-Causality Test

In carrying out the Granger-causality, the hypothesis is stated as follows.

H0: The independent variables do not explain the changes in the dependent variable H1: The

independent variables explain the changes in the dependent variable.

Mathematically.

If F statistic<Fvalue: Accept Null Hypothesis (H0)

If F statistic> Fvalue: Reject Null Hypothesis (H0) and Accept H1

From the above table the result, the value of F-statistic is greater than probability F-value for each

of the independent variables (Exchange Rate, Inflation Rate, Interest Rate and Trade balance) when

tested against the dependent variable (Real GDP). This confirms that the independent variables

have a causal effect on both nominal and real GDP.

37
4.1.2 Results of Augmented Dickey Fuller (UNIT ROOT) Test

Null Hypothesis: NOMINAL_GDP has a unit root

Exogenous: Constant

Lag Length: 1 (Automatic - based on AIC, maxlag=9)

t-Statistic Prob.*

Augmented Dickey-Fuller test statistic 2.964797 1.0000

Test critical values:

1% level -3.626784

5% level -2.945842

10% level -2.611531

*MacKinnon (1996) one -sided p- values.

Augmented Dickey-Fuller Test Equation

Dependent Variable: D(NOMINAL_GDP)

Method: Least Squares

Date: 09/25/20 Time: 04:08

Sample (adjusted):2018-2022

Included observations: 36 after adjustments

38
 Coefficient Std. Error

Variable t-tatistic Prob.

NOMINAL_GDP( - 0.051957 0.017525 2.964797

1) 0.0056

D(NOMINAL_GDP(- 0.559281 0.166858 3.351831 0.0020

1))

C 452224.6 337812.3 1.338686 0.1898

0.865658

R-squared Mean dependent var 3543940.

Adjusted R-squared 0.857517 S.D. dependent var 4011836.

S.E. of regression 1514347. Akaike info criterion 31.37852

Sum squared resid 7.57E+13 Schwarz criterion 31.51048

Log likelihood -561.8134 Hannan-Quinn criter. 31.42458

F-statistic 106.3212 Durbin-Watson stat 2.080386

Prob(F-statistic) 0.000000

Table 1.3a: Results of ADF – Unit Root Test

39
 Null Hypothesis: REAL_GDP has a unit root

Exogenous: Constant

Lag Lengt h: 1 (Automatic - based on AIC, maxlag=9)

t - Statistic Prob.*

Augmented Dickey - Fuller test statistic - 2.225535 0.2012

- 3.626784

Table 1.3b

The Augmented Dickey Fuller (ADF) Test is used to determine whether the time series variables are non-

stationary and possess a unit root. Therefore, under this the test, the null hypothesis and alternative

hypothesis are stated as follows:

H0: The time-series is nonstationary and there is a unit root H1: The time

series is trend stationary.

The values for the test statistic are taken at 1%, 5% and 10%

4.1.3 Result of cointegration analysis.

Date: 09/24/20 Time: 21:48

Series: REAL_GDP NOMINAL_GDP INTEREST_RATE__MPR_ INFLATION__RATE__
EXCHANGE_RATE__N_$_
_BALANCE__TRADE
Sample (adjusted): 2006 2018
Included observations: 13 after adjustments
Null hypothesis: Series are not cointegrated
Cointegrating equation deterministics: C
Automatic lags specification based on Schwarz criterion (maxlag=1)

40
 tau-
Dependent statistic Prob.* z-statistic Prob.*

-
REAL GDP 3.279324 0.6751 -12.19192 0.5735
4.396340
NOMINAL GDP 0.3151 -38.54750 0.0000
4.652786
INTEREST RATE 0.2407 -15.70881 0.2668
4.668673
INFLATION RATE 0.2374 -15.97249 0.5616

3.860083
EXCHANGERATE 0.4672 -13.59347 0.4075
-
BALANCE 2.240377 -7.667389
TRADE 0.9530 0.9666
*MacKinnon (1996) p -valu es.
Warning: p-values may not be accurate for fewer tha n 30 observation
s.
Intermediate Results:
NOMINAL_GD REAL_GDP P EXCHAN
INT_RATE INFL_RATE
GE_RAT BALANCE
Rho - 1 -1.015993 -1.592270 -1.309068 -1.331041 -1.132789 -0.638949
Rho S.E. 0.309818 0.362181 0.281351 0.285101 0.293462 0.285197
Residual variance 3.03E+11 1.77E+13 1.914095 3.334872 188.2078 2794593.
Long-run residual variance 3.03E+11 8.57E+13 1.914095 3.334872 188.2078 2794593.
Number of lags 0 1 0 0 0 0
Number of observations 12 11 12 12 12 12
Number of stochastic trends** 6 6 6 6 6 6

**Number of stochastic trends in asymptotic distribution

Table 1.3c

41
In applying the co-integration test, this study utilizes the following assumptions.

H0: The variables are not co-integrated i.e. no co-integration exist

H1: The variables are co-integrated

From the table, the value of the t-statistic is greater than the critical value for all the variables.

Therefore, we reject the null hypothesis (H0). Based on the above results, co-integration exists

among the time series of all variables. Therefore, the alternative hypothesis H1 is accepted.

42
 CHAPTER FIVE

SUMMARY, CONCLUSIONS AND RECOMMENDATIONS

5.1 SUMMARY OF FINDINGS

This study focuses on exchange rate fluctuations and its impact Nigeria’s economic growth, with specific

focus on its production capacity. The study carried out its analysis by employing the exchange rate (EXR),

interest rate (INT), inflation rate (INF). and trade balance (Tb) as the independent variables and Real GDP

as the dependent variable. All data used are secondary data obtained from the Statistical Bulletin of Central

Bank of Nigeria. Inflation rate negatively affects the GDP. The loan cost positively affects the GDP.

Exchange receptiveness negatively affects the GDP. In the autocorrelation, we acknowledge the invalid

speculation. The assessors have a consistent difference and are well specified. From the experimental

evaluated work, a couple of makers fought that change scale is earnestly related to yield improvement,

while a couple of makers battled that it is conflictingly related. Regardless, from observational examination

of the assessment, it was found that trading scale is conversely related to yield improvement.

5.2 CONCLUSION

Since exchange rate fluctuation have an impact on the economy. There is need to develop an

effective exchange rate regime. An efficient exchange rate policy would help to curtail inflation,

improve Nigeria’s balance of trade, and boost Nigeria’s production capacity.

These are key indicators of positive economic growth.

43
5.3 RECOMMENDATIONS

In line with the findings of this study, the following policy recommendations are suggested to

develop a more stable exchange rate as follows.

1. Incentives should be provided for small scale manufacturing industries, to ease cost of

production and enable them increase output level in terms of both quality and volume.

The government should develop effective export promotion strategies in order to

encourage domestic industries to produce and export more. This would strengthen the

country’s export base against its import base resulting in a surplus balance of trade. The

government should stimulate export diversification in agriculture, agro-investments, and

agro-allied industries. These will improve foreign exchange earnings and strengthen the

real GDP.

2. The government should invest more in infrastructural development, in both rural and

urban centres, to attract foreign investments into the economy. Such infrastructure

will foster job creation, increase income, and improve the standard of living of the

people.

3. The government should focus its attention on developing policies that will impact the

country’s balance of payment, thus creating a favorable balance between the domestic and

foreign sectors.

44
4. Stricter import tariffs should be put in place to discourage importers from bringing foreign

goods into the country.

5. Finally, the government should influence the foreign exchange rate, by positive economic

reforms that will reduce the adverse effect of unstable foreign exchange rate on the Nigerian

economy with respect to trade flow.

45
 REFERENCES

Adebiyi, M.A, Dauda, R.O.S, 2009. Trade Liberalization Policy and Industrial Growth

performance in

Nigeria: An Error Correction Mechanism Technique, being a paper presented at the 45th

Annual Conference of the Nigerian Economic Society, 24th to 26th August

Adeniran J.O, Yusuf S.A, Adeyemi Olatoke A, 2014. The Impact of Exchange Rate Fluctuation

on the

Nigerian Economic Growth: An Empirical Investigation. International Journal of

Academic Research in Business and Social Sciences, Vol. 4, No.8 Victoria K.S, 2019.

Exchange Rate Management and Economic Growth: An FMOLS Approach. Munich

Personal RePEc Archive (MPRA) Paper No. 93125. April 2019. Wasiu Akintunde Yusuf,

Abdulrahman Isik, Nafisa Ibrahim Salisu; 2019. Relative Effects of Exchange Rate and

Interest Rate on Nigeria’s Economic Growth. Journal of Applied Economics and Business,

Vol. 7, Issue 2 – June 2019, PP. 28 – 37

Adeyemi, G, Olawale, A, 2014. The Impact of Exchange Rate on Economic Growth in Nigeria \

(1980- 2012). Australian Journal of Business and Management Research, 9 – 18.

Anuanwaokoro, M. (1999). Theory and Policy of Money and Banking. Hosanna Publication.

Anyanwu, A. (1995). Fundamentals of Economics. Jonance: Educational Publisher Ltd. Onitsha.

Chinelo, I.M. (2006). Basic Statistics and Probability. Nigeria: Prince and Communication.

Cole, A. and Obstrald, S. (1991). The International Economy. London: McGraw Hill Inc.

Denis, A. and Alfred, J. (1998). International Economics. New York, Irewin C.B.N Publication.
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 Mankiw, N.G. (1994). Macro Economics. New York: Worth Publishers. Obandan, M.I

(1993). Overview of Nigeria’s Exchange rate Policy and Management. Lagos: C.B.N

Publications.

Micheal C. N, 2018. Effect of Naira Rate on Economic Growth in Nigeria. HARD International

Journal of Banking and Finance Research. Vol. 4, Issue 1. 2018, Pp 58 – 66.

Ndubuaku, V.C, Onwuika, K., Onyedika, C. Chimezie, I. C, 2019. Impact of Exchange Rate

Fluctuation on Selected Economic Sectors of the Nigerian Economy. International Journal

of Sustainable Development & World Policy. Vol. 8, Issue No. 1. 2019, Pp 21-36

Eme O. Akpan, Johnson A. Atan, 2018. Effects of Exchange Rate Movements on

Economic Growth in Nigeria. CBN Journal of Applied Statistics. Vol. 2, No. 2.

Oleka, P. (2004). Macro Economics Theory and Practice. Lagos: C.B.N

Publication.

Robert, J.C. (1998). International economics. United states: Little Brown and Company Inc.

Soludo, C.C. (1998). Macro-Economic Policy Modelling of African

Economics. Lagos: Acena Publisher.

47
APPENDIX

DATA FOR THE STUDY

NOMINAL_G INTEREST_R INFLATION__ EXCHANGE_

REAL_GDP D P ATE__MPR_ RATE__ RATE__N_$_

1980 NA NA NA 9.9723 NA

1981 69799942 144831.2 NA 20.8128 0.636900

1982 68490980 154978.4 NA 7.6977 0.670200

1983 67931236 162999.8 NA 23.2123 0.748600

1984 69023930 170377.8 NA 17.8205 0.808300

1985 67152786 192273.3 NA 7.4353 0.999600

1986 63218722 202436.2 NA 5.7172 3.316600

1987 59929893 249439.1 NA 11.2903 4.191600

1988 57511042 320328.5 NA 54.5112 5.353000

1989 54612264 419196.4 NA 50.4667 7.650000

1990 49856099 499676.9 NA 7.3644 9.000100

1991 46012515 596044.7 NA 13.0070 9.754500

1992 42922408 909803.3 NA 44.5888 19.66090

1993 39995505 1259070. NA 57.1653 22.63090

1994 37474949 1762813. NA 57.0317 21.88610

1995 35020549 2895201. NA 72.8355 21.88610

48
1996 31709447 3779133. NA 29.2683 21.88610

1997 28957710 4111641. NA 8.5299 21.88608

1998 25267542 4588990. NA 9.9964 21.88600

1999 23688280 5307362. NA 6.6184 92.34000

2000 22449410 6897482. NA 6.9333 101.7000

2001 22332867 8134142. NA 18.8736 111.2300

2002 21789098 11332253 NA 12.8766 120.5800

2003 21177921 13301559 NA 14.0318 129.2200

2004 20353202 17321295 NA 14.9980 132.8900

2005 19979123 22269978 NA 17.8635 131.2700

2006 19927993 28662469 10.00 8.2252 128.6500

2007 19620190 32995384 9.50 5.3880 125.8100

2008 19199060 39157884 9.75 11.5811 118.5500

2009 19305633 44285561 6.00 12.5550 148.9000

2010 17294676 54612264 6.25 13.7202 150.3000

2011 16215371 62980397 12.00 10.8400 153.8600

2012 15263929 71713935 12.00 12.2178 157.5000

2013 15237987 80092563 12.00 8.4758 157.3100

2014 14953913 89043615 13.00 8.0625 158.5500

2015 13779255 94144960 11.00 9.0094 192.4400

2016 13849725 1.01E+08 14.00 15.6753 253.4900

2017 14985078 1.14E+08 14.00 16.5235 305.7900

49
2018 15258004 1.28E+08 14.00 12.0947 306.0800

DESCRIPTIVE STATISTICS

INTEREST INFLATIO EXCHANG _BALANC

REAL_GD NOMINAL _RATE__M N__RATE_ E_RATE__ E__FOR_T

P _GDP PR_ _ N_$_ RADE

Mean 16530063 72355922 11.03846 11.10527 181.3254 3370.098

Median 15263929 71713935 12.00000 11.58110 157.3100 4216.161

Maximum 19927993 1.28E+08 14.00000 16.52350 306.0800 5822.590

Minimum 13779255 28662469 6.000000 5.388000 118.5500 -2230.910

Std. Dev. 2256821. 31873155 2.682595 3.204719 64.94565 2360.724

Skewness 0.419781 0.190876 -0.702994 0.030420 1.126711 -1.360631

Kurtosis 1.613554 1.867233 2.489149 2.261134 2.768573 3.825957

Jarque-Bera 1.423012 0.773984 1.212125 0.297713 2.779546 4.380712

Probability 0.490904 0.679096 0.545494 0.861693 0.249132 0.111877

Sum 2.15E+08 9.41E+08 143.5000 144.3685 2357.230 43811.28

Sum Sq.

Dev. 6.11E+13 1.22E+16 86.35577 123.2427 50615.26 66876226

50
 13 13 13 13 13 13

Observations

ANGER CAUSALITY TEST

Pairwise Granger Causality Tests

Date: 09/24/20 Time: 20:28

Sample: 1980 2018

Lags: 2

F-Statistic Prob.

Null Hypothesis: Obs

0.20977

NOMINAL_GDP does not Granger Cause REAL_GDP 0.8119

36
REAL_GDP does not Granger Cause NOMINAL_GDP 3.01320 0.0637

INTEREST_RATE__MPR_ does not Granger Cause REAL_GDP 0.92625 0.4461

11
REAL_GDP does not Granger Cause INTEREST_RATE__MPR_ 0.0584

4.73266

51
 3.34862

INFLATION__RATE__ does not Granger Cause REAL_GDP 0.0482

36
REAL_GDP does not Granger Cause INFLATION__RATE__ 4.04415 0.0275

0.71179

EXCHANGE_RATE__N_$_ does not Granger Cause REAL_GDP 0.4986

36
REAL_GDP does not Granger Cause EXCHANGE_RATE__N_$_ 1.37524 0.2678

_BALANCE__TRADE does not Granger Cause 0.41224

REAL_GDP REAL_GDP does not Granger Cause 0.6657

36
_BALANCE__TRADE 4.52523 0.0189

0.25379

INTEREST_RATE__MPR_ does not Granger Cause NOMINAL_GDP 0.7838

11
NOMINAL_GDP does not Granger Cause INTEREST_RATE__MPR_ 3.13735 0.1168

0.26155

INFLATION__RATE__ does not Granger Cause NOMINAL_GDP 0.7715

36
NOMINAL_GDP does not Granger Cause INFLATION__RATE__ 1.77221 0.1867

52
 9.04810

EXCHANGE_RATE__N_$_ does not Granger Cause NOMINAL_GDP 0.0008

36
NOMINAL_GDP does not Granger Cause EXCHANGE_RATE__N_$_ 6.14464 0.0057

_BALANCE__TRADE does not Granger Cause 3.77868

NOMINAL_GDP NOMINAL_GDP does not Granger 0.0340

36
Cause _BALANCE__TRADE 3.24726 0.0524

INFLATION__RATE__ does not Granger Cause

INTEREST_RATE__MPR_ 0.87079

INTEREST_RATE__MPR_ does not Granger Cause 0.4655

11
INFLATION__RATE__ 0.01756 0.9826

EXCHANGE_RATE__N_$_ does not Granger Cause

INTEREST_RATE__MPR_ 1.03266

INTEREST_RATE__MPR_ does not Granger Cause 0.4117

11
EXCHANGE_RATE__N_$_ 1.01936 0.4158

_BALANCE__TRADE does not Granger Cause 0.67813

INTEREST_RATE__MPR_ INTEREST_RATE__MPR_ does not 0.5426

11
Granger Cause _BALANCE__TRADE 1.39872 0.3172

53
 EXCHANGE_RATE__N_$_ does not Granger Cause

INFLATION__RATE__ 1.72498

INFLATION__RATE__ does not Granger Cause 0.1948

36
EXCHANGE_RATE__N_$_ 0.78940 0.4630

1.31979

_BALANCE__TRADE does not Granger Cause INFLATION__RATE__ 0.2818

36
INFLATION__RATE__ does not Granger Cause _BALANCE__TRADE 0.61771 0.5457

71

_BALANCE__TRADE does not Granger Cause 36 9.23381 0.0007

EXCHANGE_RATE__N_$_

EXCHANGE_RATE__N_$_ does not Granger Cause 6.77152 0.0036

_BALANCE__TRADE

ADF UNIT ROOT TEST

Null Hypothesis: Unit root (individual unit root process)

Series: REAL_GDP, NOMINAL_GDP, INTEREST_RATE__MPR_,

INFLATION__RATE__, EXCHANGE_RATE__N_$_,

_BALANCE__TRADE

Date: 09/24/20 Time: 20:43

Sample: 1980 2018

Exogenous variables: Individual effects

54
Automatic selection of maximum lags

Automatic lag length selection based on SIC: 0 to 2

Total number of observations: 194

Cross-sections included: 6

Method Statistic Prob.**

ADF - Fisher Chi-square 11.7147 0.4689
ADF - Choi Z-stat 2.20183 0.9862

** Probabilities for Fisher tests are computed using an asymptotic Chi

-square distribution. All other tests assume asymptotic normality.

Intermediate ADF test results UNTITLED

Series Prob. Lag Max Lag Obs

REAL_GDP 0.2012 1 9 36

NOMINAL_GDP 1.0000 1 9 36

INTEREST_RATE_

_MPR_ 0.5911 0 1 12

INFLATION__RAT

E__ 0.0464 0 9 38

EXCHANGE_RATE

__N_$_ 0.9995 0 9 37

_BALANCE__TRA

55
 DE 0.5188 2 9 35

COINTEGRATION TEST

Date: 09/24/20 Time: 21:48

Series: REAL_GDP NOMINAL_GDP INTEREST_RATE__MPR_ INFLATION__RATE__

EXCHANGE_RATE__N_$_

_BALANCE__TRADE

Sample (adjusted): 2006 2018

Included observations: 13 after adjustments

Null hypothesis: Series are not cointegrated

Cointegrating equation deterministics: C

Automatic lags specification based on Schwarz criterion (maxlag=1)

tau-

Dependent statistic Prob.* z-statistic Prob.*

56
*MacKinnon (1996) p -values.

Warning: p-values may not be accurate for fewer tha n 30 observations.

Intermediate Results:

REAL GDP 3.279324 0.6751 -12.19192 0.5735

EXCHANG
NOMINAL
INTEREST_R INFLATION_E_RATE__ _
GDP 4.396340 0.3151 -38.54750 0.0000
BALANCE_ NOMINAL_GDP ATE__MPR_
INTEREST
REAL_GDP _RATE__ N_$_ _TRADE
RATE 4.652786 0.2407 -15.70881 0.2668
Rho - 1 -1.015993 -1.592270 -1.309068 - - -
INFLATION
1.331041 1.132789 0.638949
RATE 4.668673 0.2374 -15.97249 0.5616
Rho S.E. 0.309818 0.362181 0.281351 0.285101 0.293462
-
0.285197
EXCHANGERATE 3.860083 0.4672 -13.59347 0.4075
Residual variance 3.03E+11 1.77E+13 1.914095 3.334872 188.2078
BALANCE
2794593.
TRADE 2.240377 0.9530 -7.667389 0.9666
Long-run residual variance 3.03E+11 8.57E+13 1.914095 3.334872 188.2078

2794593.

Number of lags 0 1 0 0 0 0

Number of observations 12 11 12 12 12 12

Number of stochastic trends** 6 6 6 6 6 6

**Number of stochastic trends in asymptotic distribution

TREND ON THE VARIABLES

57
 REAL GDP NOMINAL GDP

80,000,000 140,000,000

70,000,000 120,000,000

60,000,000 100,000,000

50,000,000 80,000,000

40,000,000 60,000,000

30,000,000 40,000,000

20,000,000 20,000,000

10,000,000 0
1980 1985 1990 1995 2000 2005 2010 2015 1980 1985 1990 1995 2000 2005 2010 2015

INTEREST RATE (MPR) INFLATION RATE %

16 80

14
60
12

10 40

8
20
6

4 0
1980 1985 1990 1995 2000 2005 2010 2015 1980 1985 1990 1995 2000 2005 2010 2015

EXCHANGE RATE (N:$) TRADE BALANCE (FOR OIL &NON OIL EXPORTS +

IMPORTS

320 6,000

280
4,000
240

200 2,000
160

120 0

80
-2,000
40

0 -4,000
1980 1985 1990 1995 2000 2005 2010 2015 1980 1985 1990 1995 2000 2005 2010 2015

58
59