THE IMPLICATION OF NAIRA DEVALUATION IN NIGERIA’S ECONOMY (2009–2023)

ABSTRACT This investigation studied the consequences of naira devaluation on Nigeria’s economy from 2003 to 2023. Its main goal was to assess how naira devaluation affects economic expansion in Nigeria, while its specific goals were to look at the impacts of exchange rate, inflation, foreign direct investment, and trade balance on GDP. The research used secondary data from the Central Bank of Nigeria Statistical Bulletins and the World Bank Database across 21 years. Gross Domestic Product (GDP) was the dependent factor, while exchange rate (EXR), inflation rate (INF), foreign direct investment (FDI), and trade balance (TRB) were the independent factors. The investigation followed an ex post facto research framework. It applied time series methods like unit root tests, cointegration evaluation, and Autoregressive Distributed Lag (ARDL) modeling to handle variables with mixed integration orders. Findings showed that exchange rate had a strong positive effect on GDP, meaning naira depreciation was tied to higher economic output in dollar terms. Inflation had a positive but mildly strong effect on GDP. Foreign direct investment showed a negative but nearly strong effect on GDP, going against common belief. Trade balance had a clear positive link with GDP, showing how vital strong trade positions are. The study concluded that Nigeria’s growth path is complex and often does not fit textbook patterns. It recommended a managed float exchange rate system, focus on moderate inflation, support for quality FDI with strong local ties, broad export diversification plans, and better trade support systems to boost Nigeria’s economic strength. Keywords: Exchange rate, inflation, foreign direct investment, trade balance, GDP, ARDL model, Nigeria, macroeconomic variables.