RELATIONSHIP BETWEEN EXCHANGE RATE AND NIGERIA'S EXTERNAL TRADE: A GRANGER CAUSALITY ANALYSIS

The study examines the relationship between exchange rate fluctuations and Nigeria’s external trade balance during a 43-year period from 1981 to 2023. Trade balance, exchange rate, inflation rate, RGDP, and money supply were sourced from various yearly published statistics of the Central Bank of Nigeria and the World Bank data repository. The collected data were analyzed using the Granger causality model. The exchange rate was established to influence trade balance despite its fluctuation and persistent uncertainty. Money supply and trade balance also influenced each other. In line with the finding of the study, Nigeria should implement timely monetary policy intervention to track exchange rate movements and mitigate adverse balance of trade effects. The government should also promote policies that improve trade logistics to enhance a strong trade balance without necessarily devaluing the Naira.