Impact of exchange rate on the nigeria economic growth project material. Cbn, pwc estimates with the outlook on the oil price and level of reserves accretion usd40. The gross domestic product growth is a long term rise in the capacity to supply increasingly diverse economic goods o its population. Quantitative analysis of the impact of exchange rate policies on nigerias economic growth. The study employed the ordinary least square ols multiple regression technique for the analysis. The findings also shows that there is strong relationship between inflation and economic growth in nigeria, that exchange rate has positive impact on economic growth and that high interest rate discourages investment and hence forestalls economic growth. Uniprojects aim of providing impact of exchange rate on the nigeria economic growth project research material is to reduce the stress of moving from one school library to another all in the name of searching for. Exchange rate instability is menacing economic growth in nigeria. Statement of the problem the main purpose of this study is to try to identify the. Following this, the study recommended among others that monetary authority should ensure exchange rate stability in order to stem inflationary tendencies in nigeria which have adverse effect on the growth. Evidence from nigeria, authorokwuchukwu odili, year2015. The major purpose of this work is to assess the inflation, interest and exchange rate effect on some economic development indicators in nigeria which includes the life expectancy index, human development index, consumption per capita, physical quality of life, and health and education index.
The study is therefore limited to the core economic growth in nigeria and not the sociopolitical factors of the foreign exchange rate. The nigerian economy goes through the difficulties of exchange rate and. The conclusion is that improvements in exchange rate management are necessary but not adequate to revive the nigerian economy. Exchange rate is the rate of transformation of one currency to another. Please, sit back and study the below research material carefully. Effects of exchange rate fluctuations on economic growth. It is a veritable instrument of economic management and therefore an important macroeconomic indicator. Nigeria economic outlook top 10 themes for 2019 top 10 economies in africa in 2018 egypt 8. The study will examine the impact of interest rate as one of the main variables that affects economic growth in nigeria jelilov, gylych. Effect of inflation on the growth and development of the. Effect of foreign exchange rate fluctuations on nigerian economy. Scenarios 2019 elections three emerging scenarios nigeria s risk matrix. This paper seeks to assess the impact of oil price shock and real exchange rate volatility on real economic growth in nigeria on the basis of quarterly data from 1986q1 to 2007q4. In the model, real gdp rgdp was used as the proxy for economic growth while inflation rate if, exchange rate exc, interest rate int and money supplym2.
The study employed simultaneous equations model sem and generalised methods. Nigeria has witnessed strong economic growth in the past few years, averaging 8. Expost facto research design was adopted for the study. Exchange rate policy has been identified as one of the endogenous factors that can affect the economic performance of a nation. It is a quest for increasing productivity in relation to import substitution and export expansion, creating foreign exchange earnings capacity, raising employment, promoting the growth of investments of a faster rate than any other sector of the economy, as well as wider and more efficient linkage among different sectors fakiyesi, 2005. The cbn was specifically set up to manage the countrys currency with the objective of attaining a sound and stable national currency. Pdf real exchange rate volatility, economic growth and. Pdf impact of oil price shock and exchange rate volatility. The impact of exchange rate on nigeria nonoil exports. The study concludes that in nigeria, the factors that influence the level of growth rate are extent of exchange rate and its variables. The purchasing power parity rate is a rate at which one countrys currency is exchanged for another. Exchange rate fluctuation on nigeria economic growth. This study therefore examine exchange rate fluctuation during the different exchange rate regime, its impact on economic growth rate to determine which of the exchange rate regime significantly influence. Effect of exchange rate fluctuations on manufacturing.
Fixed effects and pooled regression for 16 developing countries have been incorporated as the methodologies techniques for data. The impact of exchange rate fluctuations on private. Effects of exchange rate movements on economic growth in nigeria. Interest rate has significant impact on the gdp of the economic growth in nigeria.
Over the years, nigeria has adopted various exchange rate regime ranging research work is centered on the impact of exchange rate on the nigeria economic growth with special emphasis on the purchasing power of the average nigeria and the level of international trade transaction. Nigeria economic outlook top 10 themes for 2019 exchange rate ngnusd oil price usdbbl. From his findings, exchange rate of naira to dollar has negative correlation with the. Pdf the impact of exchange rate regimes on economic growth. Effect of exchange rate fluctuations on manufacturing sector. The impact of exchange rate fluctuation on the nigerian. The pegged exchange rate system was the first exchange rate regime adopted in nigeria. Impact of interest rate on economic growth in nigeria. The exchange rate policy seems to be the lifewire of the nigeria economy following the introduction of structural adjustment programme in 1986 which the mark. This page has economic forecasts for nigeria including a longterm outlook for the next decades, plus mediumterm expectations for the next four quarters and shortterm market predictions for the next release affecting the nigeria economy.
During the time of fixed exchange rate, the movement of exchange rate seemed to be stable but the economy were getting worse everyday, the alarming deterioration of the economy called for a change, hence the switch over to flexible exchange rate, the management of the floating exchange rate has not proved better as the naira deteriorates everyday and many macroeconomic variables are not stable. The main objective of the study is to ascertain the effect of exchange rate and inflation on nigeria s economic growth. Between 2000 and 2014, nigerias gross domestic product gdp grew at an average rate of 7% per year. Exchange rate depreciation and nigeria economic performance after structural adjustment programmes saps ismaila, mohammed ph. The study covered the period of years from year 2000 to year 2012. Failure to properly manage the exchange rate induces distortions in consumption and production patterns. Ayodele 2014, analyzed the impact of exchange rate on the economic performance of nigeria using the ordinary least squares ols method. Exchange rate behaviour and trade balances in nigeria.
The implication is that no matter the exchange rate regime, whether fixed or flexible, what matters is the effectiveness of the management. Exchange rate fluctuation on nigeria economic growth mensch mind. D department of economics, ambrose alli university, ekpoma, nigeria tel. To examine the relationship between exchange rate regimes and economic growth. All in all, the findings suggest that fi xed exchange rates constrai n the performance of. Major problems identified were that over some years now, exchange rate among the major traded currency dollar and the naira has fluctuated significantly thereby affecting the delivery of market transactions spot and forward. To do this, the classical linear regression model is applied and.
Modeling and forecasting naira usd exchange rate in. In 1977 it became the nigerian stock exchange, with branches established in some of the major commercial cities of the country with lagos as the head office of the nigerian nigerian stock exchange and economic development. Undervaluation and economic growth in selected developing countries, 19502004 china 0 4 2 6 8 0. The study is structured to evaluate the nigeria exchange rate as the pilot of economy growth and development. Impact of exchange rate fluctuation on nigeria s economic growth 19812015, full project materials. Based on quarterly series for the period 1986 to 2010, the paper examines the possible direct and indirect relationship between exchange rates and gdp growth. Exchange rate vs usd 5 years of economic forecasts for more than 30 economic indicators. Focuseconomics consensus forecast panelists expect the naira to trade at 291 per usd at the end of 2016.
A good performance of an economy in terms of per capita growth may therefore be attributed to the rate of inflation in the country. The nigerian stock exchange was estab lished in 1960 as the lagos stock exchange. Exchange rate fluctuations, delivery of foreign exchange. Effects of exchange rate movements and economic growth in nigeria. This study investigated the effect of exchange rate fluctuations on nigerian economy. While data on gross domestic product gdp, external debt stock and external debt service payment were obtained from world bank international debt statistics, exchange rate data were collected from central bank of nigeria statistical bulletin, 20. Excessive volatility in exchange rate creates challenges of exchange rate volatility in economic management in nigeria by charles n. Effects of exchange rate movements on economic growth in nigeria pdf logo. Research reports have shown that foreign direct investment impacts on the growth and economic development of especially the developing countries like nigeria.
The nature of nigeria economy has made it to be unbearable for the people existing in the country over the years, nigeria economy is having unbalance of payment that could be easily financed for domestic product and hence. Tanzanias economic growth has shown an erratic trend as it recorded an average gdp growth rate of about 3% between 1991 and 2000, the gdp growth rate in 1992 was only 0. To examine the effect of inflation rate on the economic growth of nigeria. The impact of exchange rate fluctuations on private domestic investment performance in nigeria jonathan o.
This growing capacity is said to base on advancing technology. Based on the findings, from the granger causality investigation procedure at 5% critical value are exr, intr, infr, impt and expt among other variables affects economic growth. Real exchange rate misalignment and economic growth in. The impact of exchange rate fluctuation on the nigeria economic growth 1980 2010 abstract this research work is centred on the impact of exchange rate fluctuation on the nigeria s economic growth with special emphasis on purchasing power of the average nigeria and the level of international trade transaction.
Quantitative analysis of the impact of exchange rate policies. Nigeria gdp annual growth rate 19822019 data 20202022. From his findings, exchange rate of naira to dollar has negative correlation with the gdp. But to aid the completion of the study, the researcher intends to achieve the following specific objectives. The first ease of the nigerian exchange rate policy began in 1959 with the establishment of the central bank of nigeria cbn. The empirical analysis starts by analyzing the time series properties. The paper is therefore, out to examine the impact of the foreign exchange market on the economic growth of nigeria between 1996 to 2005 by considering the rate at which the nigeria gross domestic product gdp moves in relation to the exchange rate of naira to dollar both at official and parallel rates. Effect of exchange rate fluctuations on the nigeria economy. This a quantitative increase in the monetary value of a country gross domestic product over time usually measured within the fiscal year. Pdf analysis of the impact of inflation, interest rate. In addition to the global price of crude oil falling to a year low in january 2016 figure 1.
Specific content for the schematic asset price model of the exchange rate is provided in sec. This study has kept its focus on the economic growth of a set of developing countries during the years 19742006. Exchange rate fluctuation and the nigeria economic growth. The impact of exchange rate regime s on economic growth. Pdf this study focused on the nexus between exchange rates and economic growth in nigeria over the period of 1978 to 2014. Pdf the impact of exchange rate fluctuation on the nigerian. Effects of exchange rate movements on economic growth in.
Impact of exchange rate fluctuation on nigerias economic growth 19812015, full project materials. In nigeria up to the time of structural adjusted programme sap, it appeared that nigerians exchange rate policy tended to encourage overvaluation of the naira, because in 1981, it was 0. Foreign exchange is said to be an important element in the economic growth and development of a developing nation. Nzotta 2004 defines exchange rates as the price of one currency in terms of another. Mordi acting director of research and statistics, central bank of nigeria.
In this paper, the relationship between exchange rate fluctuations,delivery of foreign exchange services and economic growth in nigeria was examined. The study employed simultaneous equations model sem and generalised methods of moments gmm techniques for data analysis. It is the required amount of units of a currency that can buy another amount of units of another currency. But the discourse issue lies in the type of impact negative or positive. For 2017, the panel foresees the ngn trading at 306 per usd. Exchange rate and the economic growth in nigeria ideasrepec. Effect of naira rate on economic growth in nigeria godfrey okoye. Impact of exchange rate on the nigeria economic growth. The need to critically analyze the efficiency of capital market on the nigerian economy for the period between 1979 and 2008 as a reference point for developing economies is the bedrock of this work.
Impact of exchange rate fluctuation on the nigeria. The evolution of the nigerian foreign exchange market was influenced by. This research study examined the impact of exchange rate on economic growth from 1986 to 20. Fdi and economic growth ayanwale 2007 and asiedu 2001 reported that the relationship between fdi and economic growth may be country and period specific.
Impact of exchange rate on agriculture and manufacturing. Using a structural vector auto regression svar model, the paper explores the relationships between the monetary policy rate interest rate, growth rate of money supply, inflation, exchange rate growth and growth rate of output. The results also revealed that inflation possessed a positive impact on economic growth through encouraging productivity and output level and on evolution of total factor productivity. Fluctuations, whether positive or negative, increases risk and discourages trade hence is not desirable for the economy. Exchange rate fluctuation on nigeria economic growth is an important economy metric as it reflects underlying strength and competitiveness with world economies asinya and takon, 2014. Oil price volatility continues to influence nigerias growth performance. The extraordinary rise of real interest rates in the mid 1980s stimulated considerable research on their determinants blanchard and summers, 1984, and barro and sala. The impact of exchange rate regimes on economic growth. Quantitative analysis of the impact of exchange rate. Pdf exchange rate policy and nigerias economic growth. Munich personal repec archive real exchange rate and economic growth in ghana mwinlaaru, peter yeltulme and ofori, isaac kwesi department of economics, university of cape coast 3 november 2017 online at mpra paper no.
The main type of data used in this study is secondary. Real exchange rate volatility, economic growth and international trade in an emerging market economy. Effects of exchange rate on agricultural export in nigeria. From 1986 being the year the monetary authority shifted from fixed exchange rate regime to flexible exchange rate regime to 20. Impact of oil price shock and exchange rate volatility on. Pdf exchange rate and the economic growth in nigeria. Impact of public external debt on exchange rate in nigeria. Akpan and atan 2010 investigated the effect of exchange rate movements on gdp growth in nigeria for the period 1986 to 2010. The conducted chow test showed that the relationship between exchange rate and economic growth performance in nigeria have not undergone any significant structural changes. This page provides nigeria gdp annual growth rate actual values, historical data, forecast, chart, statistics, economic.
Following the oil price collapse in 20142016, combined with negative production shocks, the gross domestic product gdp growth rate dropped to 2. Atan2 this study investigates the effect of exchange rate movements on real output growth in nigeria. The recession was driven by a large contraction in the oil sector. The economic growth rate was hence forth negative with exchange rate dropping by half between the years 1985 to 1988 beac, 1989. The analysis of exchange rate fluctuation on nigerias. This study examined the impact of exchange rates on the performance of the nigerian manufacturing sector using the independent variables of exchange rates, inflation rates, capacity utilization rate, the. The fixed and floating exchange eras were compared to know the exchange rate system in which the economy has fairly better. The empirical study is based on time series data over the period of 19702009 applying time series econometrics methodology. The empirical analysis starts by analyzing the time series properties of the data which is followed by examining the nature of causality among the variables.