Exploring the Relationship Between Exchange Rate Movements and Economic Growth in Nigeria

Abstract

This study investigates the relationship between exchange rate fluctuations and economic growth in Nigeria. Over the past decades, Nigeria has experienced significant volatility in its exchange rates, primarily due to factors such as oil price shocks, political instability, and macroeconomic policies. This research employs both qualitative and quantitative analyses to assess how exchange rate movements have influenced key economic indicators, including GDP growth, inflation, and trade balances. Using time-series data spanning from 1980 to 2020, we apply econometric models, including the Autoregressive Distributed Lag (ARDL) approach, to understand both short-term and long-term dynamics. Our findings indicate a complex relationship between exchange rate fluctuations and economic growth, with significant impacts observed in sectors such as manufacturing, agriculture, and exports. The study concludes that while exchange rate volatility poses challenges to sustainable economic growth, strategic policy adjustments, such as flexible exchange rate systems and diversification of the economy, could help mitigate the negative effects and stabilize growth. The findings contribute to a deeper understanding of how exchange rate movements affect emerging economies, particularly in resource-dependent countries like Nigeria.

Keywords

Exchange rate fluctuations, economic growth, econometric analysis