The Impact of Exchange Rate Fluctuations on Nigeria's Export Performance

This paper analyzes the impact of exchange rate fluctuations on Nigeria’s export performance between 2012 and 2024. Annual time series data on exchange rates were obtained from the Central Bank of Nigeria (CBN), while data on exports were sourced from the National Bureau of Statistics. To test both short-run and long-run relationships between the variables, the study employed the Vector Error Correction Model (VECM). Evidence from the analysis shows that exchange rate fluctuations have mixed effects on exports in the short run and are statistically insignificant. However, in the long run, there is a negative and statistically significant relationship between the two variables (0.0020 & 0.039 < 0.05) with p-values of the error correction term and cointegrating equation coefficient both being less than 0.05. The model showed an R² of 0.269, with post-estimation diagnostics indicating no presence of heteroskedasticity or serial autocorrelation. The study concludes that persistent fluctuations in the exchange rate can have severe implications for the Nigerian economy, given the significantly negative impact on exports in the long run. In light of these findings, the research recommends that the Nigerian government intensify efforts aimed at diversifying the economy to boost non-oil exports and adopt long-term policies to stabilize the exchange rate. These interventions are critical for achieving exchange rate stability and growth in the country’s export sector.