Exchange rate fluctuations and Nigeria's economy

This research empirically evaluates how fluctuations in exchange rates affect growth in Nigeria’s economy for the period of 1992 to 2023. The study is based on the Balance of Payment (BOP) Theory. To achieve the study’s objectives exchange rate of Naira to Pounds, exchange rate of Naira to Dollars and exchange rate of Naira to Euros were used to proxy the study’s independent variable (exchange rate). Also, gross domestic product growth rate (GDPGR) was used as proxy for Nigeria’s economy which is the study’s dependent variable. Secondary timeseries data sourced from Central Bank of Nigeria (CBN) statistical bulletin within the study period were employed. Stationarity test was done, and the data were stationary at levels (order 0) thereby necessitating the utilization of Ordinary Least Square (OLS) test. The multiple regression Ordinary Least Square (OLS) GARCH approach was used for data analysis with the aid of E-views 12 statistical package. From the obtained result it was found that there is positive and insignificant relationship between exchange rate of Naira to Pounds and GDPGR, negative and significant relationship between exchange rate of Naira to Dollars and GDPGR as well as positive and insignificant relationship between exchange rate of Naira to Euros and GDPGR. The results were discussed, and conclusion was made that exchange rate fluctuations negatively affects Nigeria’s economic growth. Lastly, among others, the following recommendations were made:(i) More of Nigeria’s exports should be channeled to the United States and Eurozone respectively as a weak Naira would make such exports cheap in terms of the Dollars and Euro thereby increasing their demand and foster economic growth, (ii) Nigerian producers should step-up their game in making quality products that would compete favourably with foreign goods while consumers in Nigeria should do away with their apathy for domestically produced goods and bias for foreign goods as this would ultimately reduce the demand for foreign currency and the price of foreign exchange.