EXCHANGE RATE VOLATILITY AND ECONOMIC PERFOMANCE IN NIGERIA
Abstract
This study investigated the impact of exchange rate volatility on economic performance in Nigeria from 1990 to 2023, specifically focusing on economic growth (Gross Domestic Product). Employing Granger causality tests, the AutoRegressive Distributed Lag (ARDL) method, and the Nonlinear ARDL (NARDL) model, the research examined causal relationships, short-run and long-run effects, and asymmetric impacts respectively. Findings revealed a unidirectional causality from Gross Domestic Product (GDP) to exchange rate, indicating that GDP influences exchange rate dynamics but not vice-versa. Exchange rate volatility was found to have a negative impact on economic growth both in the short-run and long-run. The study also identified asymmetric effects. Increases in exchange rate volatility significantly reduced GDP in the short run, while decreases had no immediate meaningful effect. However, in the long run, increased volatility retarded growth, whereas greater stability significantly improved Nigeria’s economic performance. The study concluded that erratic exchange rate movements hindered economic stability and growth, emphasizing that sustained exchange rate stability was crucial for long-term economic growth. Therefore, the Central Bank of Nigeria should adopt a consistent exchange rate policy to foster sustainable growth.
Full-Text Access Notice
In accordance with the NERD Policy on promoting peer-reviewed publication, public access to the full text of a project, thesis or dissertation is restricted for three years, allowing the author and supervisors sufficient time to pursue peer-reviewed publication.
During this period, researchers with legitimate academic or research purposes may request authorisation directly from the author to enable NERD to release the indexed full texts of the work using the form below.