INFLUENCE OF CURRENCY EXCHANGE RATE ON INTERNATIONAL TRADE FLOWS IN NIGERIA
Abstract
This study examines the impact of currency exchange rate fluctuations on international trade flows in Nigeria. Using quarterly data from 2000 to 2023, the study employs econometric techniques to investigate the relationship between exchange rates and trade volumes, which are descriptive statistics test, covariance analysis, ordinary least square (OLS), heteroscedasticity test and normality test. This make used of variables like exchange rate, tariff rate, inflation rate, trade volume and GDP. The findings reveal that exchange rate volatility significantly affects Nigeria’s trade balance, with a depreciation of the naira leading to increased export volumes and decreased import volumes. However, the study also finds that exchange rate fluctuations have a negligible impact on trade flows in the long run. The study contributes to the existing literature by providing empirical evidence on the influence of exchange rates on trade flows in Nigeria. The results have implications for policymakers, highlighting the need for exchange rate stability, flexible exchange rate regime, and to invest in export-oriented sectors, and also investigate the impact of exchange rate volatility on specific sectors to promote trade growth and economic development.
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