Exchange Rate and Economic Growth in Nigeria: Reconsidering the Evidence

Abstract

This study investigates how exchange rate movements have shaped Nigeria's economic growth over nearly four decades, spanning from 1986 to 2024. To measure economic growth, RGDP growth rate is adopted as the outcome variable in the data analysis. The variables that explained this nexus consisted of exchange rate, exports, imports and inflation rate. Data on these macroeconomic indicators were sourced from CBN Statistical Bulletin (2024) which were analyzed using Autoregressive Distributed Lag (ARDL) model. The estimated results revealed that exchange rate marginally exerted significant negative impact on RGDP growth in the long run at 8% level of significance but had no impact on econonic growth in the short run. Exports impacted positively on RGDP growth both in the long-term and short-term periods, while imports and inflation rate both exhibited significant negative impact on RGDP growth in the long run but had mixed impact on RGDP growth in the short run. The study concludes that the marginal negative impact of exchange rate on RGDP growth has implications for trade policy as well as monetary and fiscal policies. The study recommended among other things that the CBN and other financial sector regulators should adopt policies the reduce the volatility of the Naira. This may involve reducing over-reliance on imported goods and boosting foreign exchange earnings from non-oil exports