The document presents a study that investigates factors that determine foreign exchange rates in Nigeria over the period 1960-2011. Regression analysis was used to analyze the relationship between the foreign exchange rate and several independent macroeconomic variables including GDP, balance of payments, external reserves, inflation, deposit rates, and lending rates. The results of the regression showed no statistically significant relationship between the foreign exchange rate and any of the independent variables over the time period analyzed.
This study examined the effects of exchange rate fluctuation on the Industrial Output Growth in Nigeria using time series data sparring from the period 1986 to 2015. Johansen’s Co-Integration model was employed to explore the long-run relationship among the variables used, while the Vector Error Correction model (VECM) was used to evaluate the short and long-run dynamic among the variables and the Granger Causality used to measure contemporaneous relationship among the endogenous variables. The dynamic correlation of the variables was captured by the analyses of impulse response and variance decomposition. The results of the analysis indicate a unidirectional causality from Exchange rate to Industrial output. The response of industrial output to the shock from exchange rate was positive and significant; more specifically in the initial years, while response to shock from other variables was little in magnitude and not as significant as exchange rate. From the Forecast Error Variance Decomposition (FEVD), the study revealed that although the main source of variance in output are own shocks, innovation in the exchange rate accounted for a higher proportion in the variation of industrial output than that of other associated variables (Inflation, Interest rate and Net Export). The study concluded that exchange rate has potentials of causing significant changes in industrial output in Nigeria. Against this backdrop, the study recommended the need for more macroeconomic policy attention to the proper management of the exchange rate, and the need to strengthen the link between agriculture and the industrial sector to reduce the reliance of the sector on import of inputs to a reasonable level.
Extant literature revealed that international trade plays a key role to address the economic phenomena and can help to earn foreign exchange. Despite the accruable benefits from international trade and the countrys huge oil export that account for about 90 of its foreign exchange earnings, Nigerias trade balance and exchange rate remain unfavourable. The persistent rise in Nigerias exchange rate and unfavourable trade balance in recent time warrants an empirical probe. This study therefore examines the effect of exchange rate, domestic income, foreign income, consumption expenditure, money supply and interest rate on trade balance using a secondary time series data covering a period of thirty years from 1991 2020. The study employed a regression technique of the Ordinary Least Square OLS . All data used were secondary data obtained from the statistical bulletin of Central Bank of Nigeria CBN and National Bureau of Statistics NBS annual publications. After determining stationarity of the study variables using the ADF Statistic, it was discovered that the variables were all integrated at level, first and second difference, and found out to be stationary at their first difference. The study also using Johansen Cointegration Test, found that there is a long run relationship between the variables. Hence, the implication of this result is that there is a long run relationship between trade balance and other variables used in the model. From the result of the OLS, it is observed that exchange rate, domestic income, foreign income and money supply have a positive and significant impact on trade balance in Nigeria. The study recommends that the government should fixed or peg on the exchange rate through the central bank. This will enable the government to buy and sell its own currency against the currency to which it is pegged. The government should strive to reduce inflation to make exports more competitive. The government should also enhance supply side policies to increase long term competitiveness. Edokobi, Tonna David | Okpala, Ngozi Eugenia | Okoye, Nonso John "Exchange Rate and Trade Balance Nexus" Published in International Journal of Trend in Scientific Research and Development (ijtsrd), ISSN: 2456-6470, Volume-5 | Issue-5 , August 2021, URL: https://www.ijtsrd.com/papers/ijtsrd45079.pdf Paper URL: https://www.ijtsrd.com/management/public-sector-management/45079/exchange-rate-and-trade-balance-nexus/edokobi-tonna-david
This study examined the effects of exchange rate fluctuation on the Industrial Output Growth in Nigeria using time series data sparring from the period 1986 to 2015. Johansen’s Co-Integration model was employed to explore the long-run relationship among the variables used, while the Vector Error Correction model (VECM) was used to evaluate the short and long-run dynamic among the variables and the Granger Causality used to measure contemporaneous relationship among the endogenous variables. The dynamic correlation of the variables was captured by the analyses of impulse response and variance decomposition. The results of the analysis indicate a unidirectional causality from Exchange rate to Industrial output. The response of industrial output to the shock from exchange rate was positive and significant; more specifically in the initial years, while response to shock from other variables was little in magnitude and not as significant as exchange rate. From the Forecast Error Variance Decomposition (FEVD), the study revealed that although the main source of variance in output are own shocks, innovation in the exchange rate accounted for a higher proportion in the variation of industrial output than that of other associated variables (Inflation, Interest rate and Net Export). The study concluded that exchange rate has potentials of causing significant changes in industrial output in Nigeria. Against this backdrop, the study recommended the need for more macroeconomic policy attention to the proper management of the exchange rate, and the need to strengthen the link between agriculture and the industrial sector to reduce the reliance of the sector on import of inputs to a reasonable level.
Extant literature revealed that international trade plays a key role to address the economic phenomena and can help to earn foreign exchange. Despite the accruable benefits from international trade and the countrys huge oil export that account for about 90 of its foreign exchange earnings, Nigerias trade balance and exchange rate remain unfavourable. The persistent rise in Nigerias exchange rate and unfavourable trade balance in recent time warrants an empirical probe. This study therefore examines the effect of exchange rate, domestic income, foreign income, consumption expenditure, money supply and interest rate on trade balance using a secondary time series data covering a period of thirty years from 1991 2020. The study employed a regression technique of the Ordinary Least Square OLS . All data used were secondary data obtained from the statistical bulletin of Central Bank of Nigeria CBN and National Bureau of Statistics NBS annual publications. After determining stationarity of the study variables using the ADF Statistic, it was discovered that the variables were all integrated at level, first and second difference, and found out to be stationary at their first difference. The study also using Johansen Cointegration Test, found that there is a long run relationship between the variables. Hence, the implication of this result is that there is a long run relationship between trade balance and other variables used in the model. From the result of the OLS, it is observed that exchange rate, domestic income, foreign income and money supply have a positive and significant impact on trade balance in Nigeria. The study recommends that the government should fixed or peg on the exchange rate through the central bank. This will enable the government to buy and sell its own currency against the currency to which it is pegged. The government should strive to reduce inflation to make exports more competitive. The government should also enhance supply side policies to increase long term competitiveness. Edokobi, Tonna David | Okpala, Ngozi Eugenia | Okoye, Nonso John "Exchange Rate and Trade Balance Nexus" Published in International Journal of Trend in Scientific Research and Development (ijtsrd), ISSN: 2456-6470, Volume-5 | Issue-5 , August 2021, URL: https://www.ijtsrd.com/papers/ijtsrd45079.pdf Paper URL: https://www.ijtsrd.com/management/public-sector-management/45079/exchange-rate-and-trade-balance-nexus/edokobi-tonna-david
Exchange Rate Deregulation and Nigeria’s Industrial Output (1970-2015)AJHSSR Journal
The study examined the effect of exchange rate deregulation on the industrial output of Nigeria
over the period 1970 – 2015. Data for the study comprising Nigeria‟s Industrial Sector‟s Output, Exchange Rate,
Capacity Utilization and Inflation Rate were sourced from Central Bank of Nigeria (CBN) Statistical Bulletin
2015 edition. The data were analyzed using Error Correction Model and Ordinary Least Squares technique. The
result of the analysis revealed that exchange rate deregulation impacted positively and significantly on Industrial
output over the long run period. The dummy variable, which was introduced in the data to segment pre-SAP and
post-SAP periods also showed that exchange rate deregulation was beneficial to the industrial sector. In
conclusion, the study recommended that exchange rate should continue to be deregulated and closely monitored
to discourage rent-seekers and price arbitrage. Also, the government should support export-led growth,
particularly in provision of incentives and soft loans to aid in the export of locally produced industrial outputs.
In addition, government should create a favorable and enabling environment for production such as constant
supply of electricity and good road networks.
Analysis Influence Exchange Rates and Exports on Economic Growth in Indonesiaiosrjce
IOSR Journal of Economics and Finance (IOSR-JEF) discourages theoretical articles that are limited to axiomatics or that discuss minor variations of familiar models. Similarly, IOSR-JEF has little interest in empirical papers that do not explain the model's theoretical foundations or that exhausts themselves in applying a new or established technique (such as cointegration) to another data set without providing very good reasons why this research is important.
Monetary Policy Shocks and Agricultural Output Growth in Nigeriaiosrjce
This paper investigated the transmission channel of monetary policy shocks to agricultural output
growth over the period 1970 – 2012. Data were drawn from the Central Bank of Nigeria Statistical Bulletin,
2013. The study estimated a VAR model and showed that producers are able to effectively transfer increases in
cost of production to the final consumer through increased prices; and that though monetary policy shocks,
interest rate and consumer prices have dominant impacts on agricultural output growth in Nigeria, but that
monetary policy shocks transmitted through the interest rate channel are more effective. It was therefore
recommended that monetary policy efforts to revitalize the agricultural sector should focus more on the use of
differential interest rates amongst other policy tools.
THE IMPACT OF TRADE LIBERALIZATION ON ECONOMIC GROWTH; THE CASE OF SUB-SAHARA...AkashSharma618775
The main aim of this research is to explore the effect of trade liberalization on economic growth in subSaharan Africa by analyzing certain macro-economic indicators using Ordinary Least Squares approach to
estimate regression equations. Many developing countries have substantially liberalized their trade regime over the
past three decades, either unilaterally or as part of multilateral initiatives. Nevertheless, trade barriers remain
high in many developing countries. One of the concerns that attributes to the reluctance of many of these countries
to liberalize their trade regime is the possible worsening of the trade balance.
This research paper is meant to give a recommendation on which macro-economic indicators sub-Saharan African
countries should pay particular attention to, implementing the necessary policies to ensure its effectiveness thereby
ensuring a step-up in those aspects of the economy in order to promote development. It considers 46 different
countries with different economic policies in sub-Saharan Africa for a 14-year period. Most papers considering
sub-Saharan African region consider a selected few countries based on certain economic reasons of their choice,
and those who consider most countries in the region have different macroeconomic indicators they employ for their
modeling. This paper considers if not all, almost all sub-Saharan African countries regardless of their economic
status.
A Dynamic Analysis of the Impact of Capital Flight on Real Exchange Rate in N...iosrjce
This study examines the dynamic effect of capital flight on the real exchange rate of the naira.
Specifically this study seeks to investigate if a long-run relationship exists between real exchange rate and
capital flight in Nigeria. This will be done using quarterly time series data covering the period 1981 to 2009. In
this process the short-run dynamics of the interactions between the two variables will be analyzed.
Effect of Foreign Exchange Rate Volatility on Industrial Productivity in Nige...ijtsrd
Effect of exchange rate volatility on industrial productivity has been a controversial debate among academia and experts. This study examines effect of exchange rate volatility on industrial productivity, many studies have mixed results on the direction of exchange rate volatility and the scope of the thesis covers 35years 1981 2015 , the pre and post Structural Adjustment Programme while primary and secondary data gathered from the Nigeria industrial sector by questionnaire and time series obtained from the Central Bank of Nigeria statistical bulletin, 2014 2016 were used. The data were estimated using descriptive statistical methods chi square and mean scores and Phillip Perron and Augmented Dickey Fuller used to determine the unit roots and non stationarity among the variables. ARDL and Bound test was applied to determine short and long run co integration among independent and dependent variables. Diagnostic and Normality test applied to test for stability. The F statistics is 159.3 and the R squared is 99.7 shown that variables are jointly significant and model a good fit. The Durbin Watson of 3.04 showed no serial correlation. The results shown that foreign exchange rate has a positive relationship with industrial performance, however, the exchange rate volatility crumbled industrial production as machinery and raw materials are imported for the industry productions, while bank lending rates, FDT, Inflation and PCI have negative coefficient. The ADRL and Bound test revealed a long run relationship among the variables at 5 significance level. The government should pursue currency appreciation as exporter of mono product and encourages non oil exports and discourage Nigerian cosmopolitan pattern of consumptions. Olaleye John Olatunde | Ojomolade Dele Jacob ""Effect of Foreign Exchange Rate Volatility on Industrial Productivity in Nigeria, 1981- 2015"" Published in International Journal of Trend in Scientific Research and Development (ijtsrd), ISSN: 2456-6470, Volume-3 | Issue-3 , April 2019, URL: https://www.ijtsrd.com/papers/ijtsrd22910.pdf
Paper URL: https://www.ijtsrd.com/management/accounting-and-finance/22910/effect-of-foreign-exchange-rate-volatility-on-industrial-productivity-in-nigeria-1981--2015/olaleye-john-olatunde
This study investigated the relationship between premium exchange rate and output growth in
African oil producing countries between 1995 to 2018 using panel Vector Error Correction as estimation
technique Data for the study were sourced from World Bank Development indicator data base, IMF online data
base and Central Banks of the selected countries
Trade Liberalization and Trade Flows in Nigeria An Aggregated Analysisijtsrd
This study examines the impact of trade liberalization and trade flows in Nigeria using an econometric regression model of the Ordinary Least Square OLS . From the result of the OLS, it is observed that trade flows and export subsidies have a positive relationship with economic growth. This means that when trade flows and export subsidies are increasing, it will bring about more growth in Nigerian economy. On the other hand, import tariffs, import quotas and export taxes have a negative impact on economic growth in Nigeria. This means that if import tariffs, import quotas and export taxes are falling, there will be increase in economic growth. From the empirical work reviewed, some authors argued that trade liberalization and trade flows is positively related to economic growth while some authors argued that it is negatively related. The findings of the study also show that trade flows, import tariffs, import quotas and export taxes are statistically significant in explaining the Nigerian economy while export subsidy is statistically insignificant. The study therefore recommends that government should encourage import liberalization through reduction in tariff rates, gradual removal of Non-Tariff Barriers NTB , outright banning of certain goods which will ensure that our imports, following trade liberalization, is directed mainly on intermediate and capital goods. Imports of consumables would be brought to nil and therefore there would be a corresponding increase in the production of competitive import. Finally, the government should vigorously seek to improve the international stand of the economy with other economies of the world so as to enlarge the market for Nigerian exports. It should also re-orient its policy towards the external sector and ensure that the sector contribute optimally to output growth. Anionwu, Carol "Trade Liberalization and Trade Flows in Nigeria: An Aggregated Analysis" Published in International Journal of Trend in Scientific Research and Development (ijtsrd), ISSN: 2456-6470, Volume-2 | Issue-6 , October 2018, URL: http://www.ijtsrd.com/papers/ijtsrd18911.pdf
- In this study, the researcher provides a fresh attempt to investigate the link between the agricultural
export base and economic growth in Nigeria, using annualized data on selected variables that span through
1980 to 2017. The Johansen cointegration method was adopted and the corresponding VEC model specification
was estimated using the OLS technique
Impact of Visual Merchandising on Impulsive Buying Behavior of Sri Lankan Mod...YogeshIJTSRD
The focus of the research was to see how different visual marketing approaches affected the impulsive purchase behavior of Sri Lankan modern trade clients. Modern retailers utilize visual merchandising as one of their primary tactics for differentiating their offers and attracting and persuading customers to buy. In store marketing and visual merchandising have attracted a lot of attention recently, and the amount of money spent on visual merchandising has also skyrocketed. As a result, determining the efficiency of the money that is spent on these diverse visual merchandising strategies is critical for all supermarkets. A well structured questionnaire was used to obtain primary data for the study. A total of 392 Sri Lankan modern trade clients were chosen as the sample for the study. The sampling method was snowball sampling, and the data was analyzed using SPSS 25 software. The multiple regression analysis was used to analyze the data. Charts and graphs are used to display the research findings. The studys findings demonstrated that product display and promotional signs have a strong favorable impact on impulsive purchase behavior among Sri Lankan modern trade clients. Based on these findings, businesses may determine which visual merchandising methods are the most effective and devote time and resources to improving them, resulting in increased foot traffic and revenue. K. K. P. D. Kahaduwa | R. M. K. S. Rasanjalee "Impact of Visual Merchandising on Impulsive Buying Behavior of Sri Lankan Modern Trade Customers" Published in International Journal of Trend in Scientific Research and Development (ijtsrd), ISSN: 2456-6470, Volume-5 | Issue-5 , August 2021, URL: https://www.ijtsrd.com/papers/ijtsrd45046.pdf Paper URL: https://www.ijtsrd.com/management/consumer-behaviour/45046/impact-of-visual-merchandising-on-impulsive-buying-behavior-of-sri-lankan-modern-trade-customers/k-k-p-d-kahaduwa
This study investigates specifically the effect of Imports and Exports on Balance of Foreign Trade in Nigeria (GDP). Data were collected for period 2007 – 2016. Multiple Regressions Approach and Correlation Analysis was used, defining Imports, Exports and Openness as independent variables and Gross Domestic Product (GDP) as dependent variable. From the analysis, Imports, Exports and Openness contributes immensely to the Nigeria Gross Domestic Product (GDP). Contrary, Imports is positively and significant on Balance of Foreign Trade in Nigeria (GDP), Exports has positively and insignificant on Balance of Foreign Trade in Nigeria (GDP) and Openness has positively and insignificant on Balance of Foreign Trade in Nigeria (GDP). Also, there is a perfect positive association on gross domestic product between imports on the balance of foreign trade in Nigeria and it is significant, with a perfect positive association on gross domestic product and imports between exports on the balance of foreign trade in Nigeria and it is significant and there is a negative moderate association on gross domestic product, imports and exports between openness on the balance of foreign trade in Nigeria and it is insignificant. This study therefore recommends that Nigeria should enhance her Imports & Exports promotion strategies and expanding the Import sector for easy importation.
In Central Asian countries the macroeconomic situation characterized by low level of public
investment. Peculiarities of transition economies led to greater complexity of the investment processes and
strengthened the factors opposing to IFDI.
The study gauged the influence of exchange rate fluctuations on the Performance of the Nigerian Economy over the time from of 1986 to 2016, utilizing secondary data tracked from the statistical report of the Apex Nigerian bank, and utilizing techniques such as Unit root test, Generalized autoregressive conditional heteroscedasticity (GARCH), Impulse-Response Output and Variance-Decomposition Test to evaluate variables such as Interest rate, inflation rate, exchange rate against a sole indicator of Economic Performance I.e. Gross Domestic Product Growth rate (GDPGR), it was discovered that despite the short run influx of the spill over volatility of Interest rate and inflation rate, there exist no long run volatility influence of interest rate on Economic Performance in Nigeria. It was therefore recommended that the apex financial institution and relevant policy makers should ensure an interest rate system and status that could stimulate growth or production and the nation should endeavour to utilize her interest rate in controlling its output level as it motivates Economic Performance (GDPGR).
Abstract: The theoretical relationship of the long-run equilibrium between real exchange rates and interest rate differentials is essentially derived from the Purchasing Power Parity (PPP) and the uncovered interest parity. However, empirical evidence on this long-run relationship has rather been inconclusive. While several authors are able to establish the long-run relationship between real exchange rates and interest rate differentials other could not found this relationship. The reason for lack of relationship in some of the studies is as a result of omitted variables (Meese and Rogoff, 1988). Therefore, attempt is made in this study to evaluate this relationship between real exchange rate and interest rate differential for the case of Nigeria by controlling for foreign exchange reserves. The paper uses monthly data for the period 1993:1-2012:12 and applies Autoregressive Distributed Lags (ARDL) model. The estimates suggest the existence of long-run relationship between real exchange rate, interest rate differential and foreign exchange reserves. In the long run, the exchange rate coefficient has a positive effect on the foreign reserves. However, the effect of interest rate differential is negative and statistically significant. On the short run dynamics, the finding indicates a non-monotonic relationship between real exchange rate, interest rate differential and foreign exchange reserves. The out-of-sample forecast indicates a better forecast using ARMA model as all Theil coefficients are close zero for all the horizons used in the model.
Exchange Rate Deregulation and Nigeria’s Industrial Output (1970-2015)AJHSSR Journal
The study examined the effect of exchange rate deregulation on the industrial output of Nigeria
over the period 1970 – 2015. Data for the study comprising Nigeria‟s Industrial Sector‟s Output, Exchange Rate,
Capacity Utilization and Inflation Rate were sourced from Central Bank of Nigeria (CBN) Statistical Bulletin
2015 edition. The data were analyzed using Error Correction Model and Ordinary Least Squares technique. The
result of the analysis revealed that exchange rate deregulation impacted positively and significantly on Industrial
output over the long run period. The dummy variable, which was introduced in the data to segment pre-SAP and
post-SAP periods also showed that exchange rate deregulation was beneficial to the industrial sector. In
conclusion, the study recommended that exchange rate should continue to be deregulated and closely monitored
to discourage rent-seekers and price arbitrage. Also, the government should support export-led growth,
particularly in provision of incentives and soft loans to aid in the export of locally produced industrial outputs.
In addition, government should create a favorable and enabling environment for production such as constant
supply of electricity and good road networks.
Analysis Influence Exchange Rates and Exports on Economic Growth in Indonesiaiosrjce
IOSR Journal of Economics and Finance (IOSR-JEF) discourages theoretical articles that are limited to axiomatics or that discuss minor variations of familiar models. Similarly, IOSR-JEF has little interest in empirical papers that do not explain the model's theoretical foundations or that exhausts themselves in applying a new or established technique (such as cointegration) to another data set without providing very good reasons why this research is important.
Monetary Policy Shocks and Agricultural Output Growth in Nigeriaiosrjce
This paper investigated the transmission channel of monetary policy shocks to agricultural output
growth over the period 1970 – 2012. Data were drawn from the Central Bank of Nigeria Statistical Bulletin,
2013. The study estimated a VAR model and showed that producers are able to effectively transfer increases in
cost of production to the final consumer through increased prices; and that though monetary policy shocks,
interest rate and consumer prices have dominant impacts on agricultural output growth in Nigeria, but that
monetary policy shocks transmitted through the interest rate channel are more effective. It was therefore
recommended that monetary policy efforts to revitalize the agricultural sector should focus more on the use of
differential interest rates amongst other policy tools.
THE IMPACT OF TRADE LIBERALIZATION ON ECONOMIC GROWTH; THE CASE OF SUB-SAHARA...AkashSharma618775
The main aim of this research is to explore the effect of trade liberalization on economic growth in subSaharan Africa by analyzing certain macro-economic indicators using Ordinary Least Squares approach to
estimate regression equations. Many developing countries have substantially liberalized their trade regime over the
past three decades, either unilaterally or as part of multilateral initiatives. Nevertheless, trade barriers remain
high in many developing countries. One of the concerns that attributes to the reluctance of many of these countries
to liberalize their trade regime is the possible worsening of the trade balance.
This research paper is meant to give a recommendation on which macro-economic indicators sub-Saharan African
countries should pay particular attention to, implementing the necessary policies to ensure its effectiveness thereby
ensuring a step-up in those aspects of the economy in order to promote development. It considers 46 different
countries with different economic policies in sub-Saharan Africa for a 14-year period. Most papers considering
sub-Saharan African region consider a selected few countries based on certain economic reasons of their choice,
and those who consider most countries in the region have different macroeconomic indicators they employ for their
modeling. This paper considers if not all, almost all sub-Saharan African countries regardless of their economic
status.
A Dynamic Analysis of the Impact of Capital Flight on Real Exchange Rate in N...iosrjce
This study examines the dynamic effect of capital flight on the real exchange rate of the naira.
Specifically this study seeks to investigate if a long-run relationship exists between real exchange rate and
capital flight in Nigeria. This will be done using quarterly time series data covering the period 1981 to 2009. In
this process the short-run dynamics of the interactions between the two variables will be analyzed.
Effect of Foreign Exchange Rate Volatility on Industrial Productivity in Nige...ijtsrd
Effect of exchange rate volatility on industrial productivity has been a controversial debate among academia and experts. This study examines effect of exchange rate volatility on industrial productivity, many studies have mixed results on the direction of exchange rate volatility and the scope of the thesis covers 35years 1981 2015 , the pre and post Structural Adjustment Programme while primary and secondary data gathered from the Nigeria industrial sector by questionnaire and time series obtained from the Central Bank of Nigeria statistical bulletin, 2014 2016 were used. The data were estimated using descriptive statistical methods chi square and mean scores and Phillip Perron and Augmented Dickey Fuller used to determine the unit roots and non stationarity among the variables. ARDL and Bound test was applied to determine short and long run co integration among independent and dependent variables. Diagnostic and Normality test applied to test for stability. The F statistics is 159.3 and the R squared is 99.7 shown that variables are jointly significant and model a good fit. The Durbin Watson of 3.04 showed no serial correlation. The results shown that foreign exchange rate has a positive relationship with industrial performance, however, the exchange rate volatility crumbled industrial production as machinery and raw materials are imported for the industry productions, while bank lending rates, FDT, Inflation and PCI have negative coefficient. The ADRL and Bound test revealed a long run relationship among the variables at 5 significance level. The government should pursue currency appreciation as exporter of mono product and encourages non oil exports and discourage Nigerian cosmopolitan pattern of consumptions. Olaleye John Olatunde | Ojomolade Dele Jacob ""Effect of Foreign Exchange Rate Volatility on Industrial Productivity in Nigeria, 1981- 2015"" Published in International Journal of Trend in Scientific Research and Development (ijtsrd), ISSN: 2456-6470, Volume-3 | Issue-3 , April 2019, URL: https://www.ijtsrd.com/papers/ijtsrd22910.pdf
Paper URL: https://www.ijtsrd.com/management/accounting-and-finance/22910/effect-of-foreign-exchange-rate-volatility-on-industrial-productivity-in-nigeria-1981--2015/olaleye-john-olatunde
This study investigated the relationship between premium exchange rate and output growth in
African oil producing countries between 1995 to 2018 using panel Vector Error Correction as estimation
technique Data for the study were sourced from World Bank Development indicator data base, IMF online data
base and Central Banks of the selected countries
Trade Liberalization and Trade Flows in Nigeria An Aggregated Analysisijtsrd
This study examines the impact of trade liberalization and trade flows in Nigeria using an econometric regression model of the Ordinary Least Square OLS . From the result of the OLS, it is observed that trade flows and export subsidies have a positive relationship with economic growth. This means that when trade flows and export subsidies are increasing, it will bring about more growth in Nigerian economy. On the other hand, import tariffs, import quotas and export taxes have a negative impact on economic growth in Nigeria. This means that if import tariffs, import quotas and export taxes are falling, there will be increase in economic growth. From the empirical work reviewed, some authors argued that trade liberalization and trade flows is positively related to economic growth while some authors argued that it is negatively related. The findings of the study also show that trade flows, import tariffs, import quotas and export taxes are statistically significant in explaining the Nigerian economy while export subsidy is statistically insignificant. The study therefore recommends that government should encourage import liberalization through reduction in tariff rates, gradual removal of Non-Tariff Barriers NTB , outright banning of certain goods which will ensure that our imports, following trade liberalization, is directed mainly on intermediate and capital goods. Imports of consumables would be brought to nil and therefore there would be a corresponding increase in the production of competitive import. Finally, the government should vigorously seek to improve the international stand of the economy with other economies of the world so as to enlarge the market for Nigerian exports. It should also re-orient its policy towards the external sector and ensure that the sector contribute optimally to output growth. Anionwu, Carol "Trade Liberalization and Trade Flows in Nigeria: An Aggregated Analysis" Published in International Journal of Trend in Scientific Research and Development (ijtsrd), ISSN: 2456-6470, Volume-2 | Issue-6 , October 2018, URL: http://www.ijtsrd.com/papers/ijtsrd18911.pdf
- In this study, the researcher provides a fresh attempt to investigate the link between the agricultural
export base and economic growth in Nigeria, using annualized data on selected variables that span through
1980 to 2017. The Johansen cointegration method was adopted and the corresponding VEC model specification
was estimated using the OLS technique
Impact of Visual Merchandising on Impulsive Buying Behavior of Sri Lankan Mod...YogeshIJTSRD
The focus of the research was to see how different visual marketing approaches affected the impulsive purchase behavior of Sri Lankan modern trade clients. Modern retailers utilize visual merchandising as one of their primary tactics for differentiating their offers and attracting and persuading customers to buy. In store marketing and visual merchandising have attracted a lot of attention recently, and the amount of money spent on visual merchandising has also skyrocketed. As a result, determining the efficiency of the money that is spent on these diverse visual merchandising strategies is critical for all supermarkets. A well structured questionnaire was used to obtain primary data for the study. A total of 392 Sri Lankan modern trade clients were chosen as the sample for the study. The sampling method was snowball sampling, and the data was analyzed using SPSS 25 software. The multiple regression analysis was used to analyze the data. Charts and graphs are used to display the research findings. The studys findings demonstrated that product display and promotional signs have a strong favorable impact on impulsive purchase behavior among Sri Lankan modern trade clients. Based on these findings, businesses may determine which visual merchandising methods are the most effective and devote time and resources to improving them, resulting in increased foot traffic and revenue. K. K. P. D. Kahaduwa | R. M. K. S. Rasanjalee "Impact of Visual Merchandising on Impulsive Buying Behavior of Sri Lankan Modern Trade Customers" Published in International Journal of Trend in Scientific Research and Development (ijtsrd), ISSN: 2456-6470, Volume-5 | Issue-5 , August 2021, URL: https://www.ijtsrd.com/papers/ijtsrd45046.pdf Paper URL: https://www.ijtsrd.com/management/consumer-behaviour/45046/impact-of-visual-merchandising-on-impulsive-buying-behavior-of-sri-lankan-modern-trade-customers/k-k-p-d-kahaduwa
This study investigates specifically the effect of Imports and Exports on Balance of Foreign Trade in Nigeria (GDP). Data were collected for period 2007 – 2016. Multiple Regressions Approach and Correlation Analysis was used, defining Imports, Exports and Openness as independent variables and Gross Domestic Product (GDP) as dependent variable. From the analysis, Imports, Exports and Openness contributes immensely to the Nigeria Gross Domestic Product (GDP). Contrary, Imports is positively and significant on Balance of Foreign Trade in Nigeria (GDP), Exports has positively and insignificant on Balance of Foreign Trade in Nigeria (GDP) and Openness has positively and insignificant on Balance of Foreign Trade in Nigeria (GDP). Also, there is a perfect positive association on gross domestic product between imports on the balance of foreign trade in Nigeria and it is significant, with a perfect positive association on gross domestic product and imports between exports on the balance of foreign trade in Nigeria and it is significant and there is a negative moderate association on gross domestic product, imports and exports between openness on the balance of foreign trade in Nigeria and it is insignificant. This study therefore recommends that Nigeria should enhance her Imports & Exports promotion strategies and expanding the Import sector for easy importation.
In Central Asian countries the macroeconomic situation characterized by low level of public
investment. Peculiarities of transition economies led to greater complexity of the investment processes and
strengthened the factors opposing to IFDI.
The study gauged the influence of exchange rate fluctuations on the Performance of the Nigerian Economy over the time from of 1986 to 2016, utilizing secondary data tracked from the statistical report of the Apex Nigerian bank, and utilizing techniques such as Unit root test, Generalized autoregressive conditional heteroscedasticity (GARCH), Impulse-Response Output and Variance-Decomposition Test to evaluate variables such as Interest rate, inflation rate, exchange rate against a sole indicator of Economic Performance I.e. Gross Domestic Product Growth rate (GDPGR), it was discovered that despite the short run influx of the spill over volatility of Interest rate and inflation rate, there exist no long run volatility influence of interest rate on Economic Performance in Nigeria. It was therefore recommended that the apex financial institution and relevant policy makers should ensure an interest rate system and status that could stimulate growth or production and the nation should endeavour to utilize her interest rate in controlling its output level as it motivates Economic Performance (GDPGR).
Abstract: The theoretical relationship of the long-run equilibrium between real exchange rates and interest rate differentials is essentially derived from the Purchasing Power Parity (PPP) and the uncovered interest parity. However, empirical evidence on this long-run relationship has rather been inconclusive. While several authors are able to establish the long-run relationship between real exchange rates and interest rate differentials other could not found this relationship. The reason for lack of relationship in some of the studies is as a result of omitted variables (Meese and Rogoff, 1988). Therefore, attempt is made in this study to evaluate this relationship between real exchange rate and interest rate differential for the case of Nigeria by controlling for foreign exchange reserves. The paper uses monthly data for the period 1993:1-2012:12 and applies Autoregressive Distributed Lags (ARDL) model. The estimates suggest the existence of long-run relationship between real exchange rate, interest rate differential and foreign exchange reserves. In the long run, the exchange rate coefficient has a positive effect on the foreign reserves. However, the effect of interest rate differential is negative and statistically significant. On the short run dynamics, the finding indicates a non-monotonic relationship between real exchange rate, interest rate differential and foreign exchange reserves. The out-of-sample forecast indicates a better forecast using ARMA model as all Theil coefficients are close zero for all the horizons used in the model.
The theoretical relationship of the long-run equilibrium between real exchange rates and interest rate differentials is essentially derived from the Purchasing Power Parity (PPP) and the uncovered interest parity. However, empirical evidence on this long-run relationship has rather been inconclusive. While several authors are able to establish the long-run relationship between real exchange rates and interest rate differentials other could not found this relationship. The reason for lack of relationship in some of the studies is as a result of omitted variables (Meese and Rogoff, 1988). Therefore, attempt is made in this study to evaluate this relationship between real exchange rate and interest rate differential for the case of Nigeria by controlling for foreign exchange reserves. The paper uses monthly data for the period 1993:1-2012:12 and applies Autoregressive Distributed Lags (ARDL) model. The estimates suggest the existence of long-run relationship between real exchange rate, interest rate differential and foreign exchange reserves. In the long run, the exchange rate coefficient has a positive effect on the foreign reserves. However, the effect of interest rate differential is negative and statistically significant. On the short run dynamics, the finding indicates a non-monotonic relationship between real exchange rate, interest rate differential and foreign exchange reserves. The out-of-sample forecast indicates a better forecast using ARMA model as all Theil coefficients are close zero for all the horizons used in the model.
Asymmetric Analysis of Exchange Rates Volatility: Evidence from Emerging EconomyIOSRJBM
The primary objective of this study is to empirically establish the level of volatility persistence and ascertain the presence of asymmetric effect on the three segment of the Nigerian foreign exchange market (Inter-bank Foreign Exchange Market (IFEM), bureau de change (BDC) and Wholesale Dutch Auction System (WDAS)). Asymmetric Threshold Generalized Authoregressive Conditional Heteroscadasticity (TGARCH) approach was adopted in the research methodology for the empirical analysis to capture the simultaneous estimation of the mean and the conditional variance in 1,262 sample observations. Generally, this study produced some interesting findings: first, it reveals that naira to US dollar nominal exchange rate volatilities were found to be persistent in all the market segments. Second, the exchange rate volatility in the interbank is persistent and explosive; while the volatilities in the BDC and WDAS market are high and moderate, respectively. This means that the BDC segment of the Nigerian foreign exchange market is less volatile than the interbank market segment even when the interbank segment of the market is more funded with foreign exchange from autonomous and official sources. Additionally, it is evident that interbank segment reacts more to past shocks of the foreign exchange market. Finally, the study also confirms the existence of asymmetric effect in the Nigerian foreign exchange market. The practical implication of these findings is that it raises a policy concerns for the regulators of interbank foreign exchange transaction because the finding of this study signals liquidity squeeze in the market and it is a disincentive to international investors and market players. This is not unconnected to trend seeking and round tripping behavior.
Long Run Impact of Exchange Rate on Nigeria’s Industrial Outputiosrjce
While many scholars have carried out a lot of research on the impact of exchange rate volatility and
price shocks on economic growth, this study departs from previous studies and seeks to provide suggestions for
Nigerian policy makers on the attainment of an ideal exchange rate necessary to boost industrialization and
industrial output. The economies of all the countries of the world are linked directly or indirectly through asset
and goods markets. This linkage is made possible through trade and foreign exchange. The price of foreign
currencies in terms of a local currency (i.e. foreign exchange) is therefore important to the understanding of the
growth trajectory of all countries of the world. The consequences of substantial misalignments of exchange rates
can lead to output contraction and extensive economic hardship. These therefore, bring up the issue of an ideal
exchange rate necessary for the achievement of a set of diverse objectives - economic growth, containment of
inflation and maintenance of external competiveness. This study employed the use of the ordinary least square
technique to examine the impact of exchange rate stability on industry output in Nigeria using annual time
series data from 1980 to 2013. The result of the study showed that domestic capital, foreign direct investment,
population growth rate, and real exchange rate were significant determinants of industrial output. The changes
in external balance and inflation were of little or no consequences to industrial output. Based on the findings,
the researcher recommended that conscious efforts should be made by government to fine-tune the various
macroeconomic variables in order to provide an enabling environment that stimulates industrial output and
eventual economic growth.
MEASURING FOREIGN EXCHANGE PRESSURE: A TEXT MINNING APPROACHAJHSSR Journal
ABSTRACT : This study investigates the effectiveness of sentiment analysis, using text-mining approach within
the context of big-data analytics, in measuring foreign exchange pressure in Nigeria. It begins with the construction
of two sentiment-based index of foreign exchange pressure; the first, labelled EMP, constructed by text-mining
public sentiments about foreign exchange management in Nigeria, within the platform of twitter, while the second,
labelled EMP_Trend, constructed from Google Trend as an index of sampled search of related words around foreign
management in Nigeria. Thereafter, the study tested the effectiveness of both indices in signaling movement in
exchange rate (IEW) in Nigeria relative to existing traditional measures of foreign exchange pressure in Nigeria.
The Predictive Regression Model (PRM) and Clark and West (2007) frameworks were employed. Findings from
the study suggest that foreign exchange market pressure index using Sentiment Analysis may hold sufficient
information in predicting and signaling movement in exchange rate (IEW) in Nigeria. Specifically, EMP_Trend
and EMP were found to improve the forecast of IEW, as their estimated Clark and West coefficients were both
positive and statistically significant at 5 per cent. The study recommends that monetary authorities leverage
sentiment analysis to monitor future direction in exchange rate, with a view to implementing policies that would
moderate the prevailing instability in the foreign exchange market in the Nigeria.
KEYWORDS: Foreign Exchange Pressure, Sentiment Analysis, Text-mining, leading indicator, predictive
regression model.
Impact of Exchange rate volatility on FDI in PakistanIOSR Journals
The main objective of our study is to determine the relationship of FDI with exchange rate volatility exchange rate and inflation. There are large numbers of FDI determinants but exchange rate is one of reflective determinant. Exchange rate extremely volatile due to its frailty to adopt the changes in international and domestic investment. In our study, we use time series data for FDI, exchange rate volatility, exchange rate, government consumption and domestic credit from 1980 to 2011 for Pakistan. Different time series econometrics techniques (volatility analysis, normality test, PP, unit root test) have been used for analysis. Results demonstrate that exchange rate volatility and inflation deter FDI while exchange rate has positive relationship with it.
Currency fluctuations and inflation are the natural norm for most major economies. Numerous factors influence economic growth, including a country’s exchange rate system performance, the outlook for inflation, and interest rate differentials. These are the most significant factors that hinder the economic growth of every nation. As a result, this analysis investigates the impact of exchange rate and inflation on Nigeria’s growth performance from 1986 to 2021. Impulse response and variance decomposition were estimated. The real gross domestic product (RGDP) was used as a proxy for growth performance, while the inflation rate (IFNR), real exchange rate (REXR), and interest rate (INTR) were also used as proxies. The results of impulse response and variance decomposition estimates in the short-run (third quarter) and long-run (tenth quarter) show that real exchange rate D(REXR), INTR, and IFNR all have a positive impact on RGDP variation, with values of 13.38%, 31.88%, and 22.40%, respectively, in the third quarter. In the long run (the 10th quarter), REXR contributed approximately 28.76% of the variation in RGDP. The interest rate contributed 24.14%, while the IFNR has contributed about 28.27% of the variation in RGDP in the long run. Therefore, summing the contributions of REXR, INTR, and INFR to RGDP, these variables contributed about 81.17% of the variation in RGDP in the long run. Hence, the research concluded that REXR, INTR, and IFNR have a positive effect on growth performance as proxied by RGDP in Nigeria within the period of the research. The research recommended that the government should provide a policy that will reduce the excess growth of aggregate demand (AD) in the economy, which will reduce inflationary pressure, in order to achieve the sustainable development goals (SDGs) of 2030 in Nigeria, which include restoring economic growth and macroeconomic stability through macroeconomic variables such as the exchange rate, inflation, and other significant variables.
Foreign capital flows depends on the prevailing monetary forces as supported by capital flows
theory and the mechanism linking these two variables is that contraction of net domestic assets through an
open market sale of bonds will place upward pressure on domestic interest rates. Higher interest rates attract
foreign funds, generating a capital inflow which relieves the pressure on domestic interest rates. Has this
actually happened? It is against this backdrop that the present study investigated the impact of monetary policy
on international capital inflows in Nigeria for a period of 22 years (1994-2015) using time series data. The
autoregressive distributed lag technique revealed that the short-run and long-run significant determinants of
foreign capital inflows are largely from broad money supply, nominal exchange rate, inflation rate and interest
rates spread except inflation rate that is insignificant in the long-run. This outcome upholds theoretical
prediction. Long-run equilibrium relationship was found between the dependent variable and the regressors.
Further examination of the short run dynamics of the model showed that the speed of adjustment coefficients
ECM (-1) to restore equilibrium have a negative sign and statistically significant at 1% level, ensuring that
long-run equilibrium can be attained and about 89% of the short-run deviation from the equilibrium (long-run)
position is corrected annually to maintain the equilibrium. Since the empirical evidence revealed that monetary
aggregates such as broad money supply, nominal exchange rate, inflation rate and interest rates spread
influence foreign capital inflows, it is therefore recommended that government should continue to pursue
expansionary monetary policy and foreign exchange policies that would ensure competitiveness of the
economy in order to attract the much needed foreign capital inflows that would engender economic growth.
The study tried to examine the effect of environmental forces on foreign exchange market in Nigeria. The PEST- Political variables such as change in government (CIG) and democratic rule (DMR); Economical variables such as interest rate spread (IRS) and inflation in consumer prices (ICP); Social variable like population growth (PGR); and Technological variables such as fuel exports in merchandise (FEM) and technology export (TEX) were used to evaluate the impact these environmental factors have on foreign exchange market (official exchange rate). This study employed a time series data with the time frame 1973-2015. A multiple regression model was developed and analyzed using the ordinary least square method (OLS) with the help of E-views, a statistical package. The result showed that in isolation, IRS, FEM and DMR significantly influenced dealing rates in the Nigerian foreign exchange market while ICP, CIG, PGR, and TEX did not show any significant influence on foreign exchange market in Nigeria. However, the overall result showed a significant positive relationship between the environmental forces and the foreign exchange market in Nigeria with a p -value of 0.000000. We therefore concluded that environmental factors have significant influence on the Nigerian Foreign Exchange market. Hence, we recommended that relevant stake holders should pay proper attention to those environmental factors with significant impact on our Foreign Exchange Market in Nigeria.
A survey of foreign exchange rate determinants in nigeria
1. European Journal of Business and Management www.iiste.org
ISSN 2222-1905 (Paper) ISSN 2222-2839 (Online)
Vol 4, No.13, 2012
A SURVEY OF FOREIGN EXCHANGE RATE DETERMINANTS IN NIGERIA
E. Chuke Nwude
Department of Banking and Finance, Faculty of Business Administration
University of Nigeria Nsukka, Enugu Campus. e-mail:chukwunekenwude@yahoo.com
Abstract
This study investigates the factors that are assumed to be determinants of foreign exchange rate movement in Nigeria using
a 52 years annualized data from 1960-2011. The factors investigated are economic growth as proxied by Gross Domestic
Product (GDP), Balance of Payment (BOP), external reserves, Composite Consumer Price Index (Inflation rate), deposit
rate and lending rate were adopted as the independent variables while foreign exchange movement is the dependent
variable. For this purpose, a model was specified. The model was regressed using the least square method. The data set for
the study was extracted mainly from the CBN Annual Reports and Accounts, and Statistical Bulletins. The results of the
regression show that there is no statistically significant relationship between the dependent and the independent variables.
Keywords: foreign exchange rate movement, Gross Domestic Product (GDP), Balance of Payment (BOP), external
reserves, Composite Consumer Price Index (Inflation rate), deposit rate and lending rate
1. Introduction
Exchange rate is a key variable in the context of general economic policy making as its appreciation or depreciation affects
the performance of other macroeconomic variables in any economy. In the light of its importance, every country pays so
much attention to the appropriateness of her foreign exchange policy. The determination of appropriate and sustainable
exchange rate in Nigeria has not been an easy task. Prior to introduction of SAP in 1986, Nigerian currency was said to be
overvalued and that was why it was opened to market forces in 1986 to determine its actual value. Till date after the
devaluation that followed the Naira has not found its appropriate value. That is, Nigeria’s exchange rate policies have not
been appropriate or able to achieve desired objectives. It would be recalled that after experimenting with flexible exchange
rate policies since 1986 through Second-tier foreign exchange market (SFEM), Dutch Auction System(DAS), Modified
Dutch Auction System(MDAS), Weighted Dutch Auction System(WDAS),etc punctuated by fixed exchange
rate(1994-1998), the monetary authorities found it necessary to revert to fixed rate policy in 2008. It soon jettisoned that and
opted for currency redenomination that was rejected. The return to DAS, albeit some modifications, and the continuous
price inelasticity of demand for foreign exchange seems to confirm the fact that the Nigerian monetary authorities have not
got the foreign exchange policies right.
The above scenario gives rise to some questions such as: what are the factors that propel the exchange rate in Nigerian
economy? Does Gross Domestic Product (GDP), Balance of Payment (BOP), external reserves, Composite Consumer Price
Index (Inflation rate), deposit rate and lending rate drive the exchange rate? Therefore, the main objective of this study is to
find out how some macroeconomic variables impact on exchange rate in Nigeria using US dollar as a benchmark currency.
In order to achieve the research objectives it was assumed that there is no significant positive relationship between exchange
rate and any of Gross Domestic Product (GDP), Balance of Payment (BOP), external reserves, Composite Consumer Price
Index (Inflation rate), deposit rate and lending rate. With respect to period, this work focuses on a 52-year period
1960-2011. The choice of the length of time was informed by the fact that Nigeria had her independence in 1960 and started
with fixed exchange rate , introduced SAP in 1986 which signalled a departure from a fully regulated economy to a market
driven one. With respect to breadth, which refers to the number of variables, the objectives of foreign exchange
management are to achieve internal and external balances. Internal balance encompasses sustainable GDP growth consistent
with low inflation rate while external balance is achieved when there is a stable and sustainable low foreign exchange rate,
increasing consistent flows to external reserves, absence of disquieting and persistent BOP deficit, a high level of foreign
exchange reserve consistent with a nation’s internal trading needs and potentials, low inflation and interest rates. These
variables form the focus of the research. The findings from this research will benefit the policy makers in confirming the
appropriateness of these factors in formulating foreign exchange policy for the economy.
2. Literature Review
One can extract the specific variables or factors that determine or influence foreign exchange rate in the past from previous
studies carried out by researchers. According to Allsopp and Zurbruegg(2003) and Abdullah (2008) purchasing power
parity(PPP) is the oldest popular and important theory of exchange rate determination though its root is from no particular
theoretical platform. The idea of PPP is based on the law of one price, which denotes that the prices of every good across
countries will be equalised when expressed in terms of a common currency. Obaseki(1997,1998) and Ugbebor and
Olubusoye(2002) presented two variants of PPP as absolute form and relative form but most investigation of exchange rate
determination across countries whether the absolute or restrictive versions have yielded mix results. As it is, Allsopp and
Zurbruegg(2003) say it still serves at least three useful purposes or policy implications viz: it serves (i)as an indicator of
impending currency crises or prelude to currency crises, (ii)for the purpose of monetary union or currency pegs and (iii)as a
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Vol 4, No.13, 2012
measure of income inequality. At the empirical level, specific causal variables were investigated using various inputs and
models. For instance Dipo and Kolawole(1999) used capital flow model, test foreign direct investment, credit rating, debt
servicing ratio, foreign/domestic interest rate differential and real income proxied by real GDP. Komolafe(1996) examined
such variables as export(non-oil), ratio of the relative price of export, credit to the non-oil sector of the economy. Agu(2002)
focused on the role of exchange rate on BOP position in Nigeria. Others also investigated the role of exchange rate on
several other macroeconomic variables and vice versa. These include Nwafor(2006) who investigated the determination of
foreign exchange from monetary perspective. Omotor(2008) investigated exchange rate reforms and its inflationary
consequences. Odusola and Akinlo(2001) investigated the relationship of output, inflation and exchange rate in developing
country, using Nigeria as case study. Gali and Monacelli(2004) investigated monetary policy and exchange rate volatility in
small open economies, focussing on Africa, Latin America and Asia. Drine and Rault(2003) suggest that terms of trade,
tariff, foreign assets, capital flow, public spending, among others influence exchange rates. Aron et al(1997) focusing on
South Africa, Kearns and Munners(2006) on Australia(using event study method), Leitemo et al(2002) on Norway,
Zaidi(2006) on Pakistan, Vegrune(2007) on the Franc zone countries, among others who have investigated the determinants
of foreign exchange rate report that such variables as BOP, governance, interest rate, interest rate parity, technology,
openness and other factors influence exchange rate and sometimes vice versa.
While all of the research works return differing opinions, results and findings about the effects of these variables on
exchange rate, there is a consensus that all these factors contribute to the determination of exchange rate though with
differing degrees and in different situations. In Nigeria, Mustapha and Fabumi(1990:251-253), Adetifa(2003),
Esasobor(2004), Agene(1991) and Levi(1990) who are field operators in foreign exhange identified specific factors that
influence exchange rate in the short and long run as (i)interest rate differentials (ii)speculation (iii)central bank intervention
(iv)hot money (v)hedging (vi)demand and supply (vii)exchange controls and regulation and (viii)political and general
economic climates. As no one policy is best for all nations or for one country at all times, to be on a sustainable path of
exchange rate policy, a country needs to identify the macroeconomic variables and policy that fits its economic
developmental goals.
What has become clear from the above review is that exchange rate as important as it is in economic development cannot be
determined in isolation of other macroeconomic variables. It therefore becomes necessary to review the relationship of some
of these macroeconomic variables and the foreign exchange rate.
3. Methodology
The research used ordinary least square regression technique to estimate the parameters and examine the joint effects of
these independent variables. In this study, foreign exchange rate is the dependent variable while Gross Domestic Product
(GDP), Balance of Payment (BOP), external reserves, Composite Consumer Price Index (Inflation rate), deposit rate and
lending rate are the independent variables. Since the rate of change in casual variable(s) is exogenously induced, their
impact on the response variables can better be isolated by the rate of change they elicit rather than their absolute values.
Moreover, several researches such as Aron et al (1997), Bianco (2006), Gali and Monacelli (2004) used the growth rate or
percentage change approach to analyse the impact of policy variable like foreign exchange rate, interest rate, etc on
macroeconomic response variables. The growth rates were determined by dividing the year on year in the absolute values of
each item by the beginning year value multiply by 100, in line with Aron et al (1997) and Bianco (2008). Walsh and
Sodhestorom cited in Leitemo and Torvik (2005) opine that targeting change in output (GDP) rather than nominal values is
superior especially when considering the inertia in monetary policy of which foreign exchange management is an integral
part.
Inflation targeting is one major objective of foreign exchange management hence studies focusing on the impact of it on
domestic price stability (inflation) abound as in the works of Nashashibi and Bazzoni (1994), Patel and Srivestava (1997),
Valesco (2000), Rajan (2004) and Zaidi (2006) who used annualized inflation rates. The regression coefficient can be more
easily recognized as response effects if the effect elicited by a policy action can be compared with the percentage change in
the causal variable that caused the change.
To determine the extent to which GDP, BOP, External Reserves, Inflation and interest rates impact on exchange rate, a
multiple regression analysis was conducted. The model is,
FXGR = β0 +β1GDPGR +β2BOPGR +β3ERGR +β4IGR + β5DRGR + β6LRGR + e
FXGR = foreign exchange rate growth rate, β0 = a constant, while β1, β2, β3, β4, β5, β6 + e are the respective coefficients
or slope of the independent variables, GDPGR = Gross Domestic Product growth rate, BOPGR= Balance of Payment
growth rate, ERGR = External Reserves growth rate, IGR = Inflation rate growth rate, DRGR = Deposit rate growth rate,
LRGR = Lending rate growth rate, and e is the error term of the regression.
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47 2006 128.6516 18564594.7 -2406340.0 42,298.11 8.2 9.75 18.70
48 2007 125.8331 20657317.7 -1,811,849.38 51,333.15 5.4 10.29 18.36
49 2008 118.5669 24296329. 3 -2,458,305.37 53,000.36 11.6 11.95 18.70
50 2009 148.9017 24794238.7 -3,920,547.14 42,382.49 12.5 13.30 22.90
51 2010 150.2980 33984754.1 -2,298,564.44 32,339.25 13.7 6.52 22.51
52 2011 153.8600 37543654.7 -505,385.29 32,339.25 10.8 5.71 22.39
Source: CBN statistical Bulletins 2002- 2010(various issues) and CBN Annual Reports and Accounts 2011 Table 57
The Autonomous Foreign Exchange(AFEM) commenced in 1995 and the initial buying and selling rates were
N81.1800/US$1.00 and N182.0000/US$1.00 respectively. The Dutch Auction System(DAS) was re-introduced on July 22,
2002 while the Wholesale Dutch Auction System(WDAS) commenced on February 20, 2006. GDP@current basic
prices(N’millions) were stated in the table above. The BOP figures were arrived at by adding figures from Current Account,
Capital Account, Net Errors and Omissions, and Exceptional Financing. The minus(-) sign in BOP indicates
addition/increase in reserves while plus(+) sign indicates subtraction/decrease in reserves.
Although the foreign exchange management for the period did not result in Naira appreciation or exchange rate stability, the
substitution effect of local goods for imported goods due to high exchange rate improved the BOP. On a year on year 12
months Moving Average the inflation rate in Nigeria reached its maximum in the period 1994 to 1997 when the exchange
rate was fixed at N21.8861 to a US dollar. This observation buttressed the empirical and theoretical opinions that fixed
exchange rate expands foreign goods consumption, which gives impetus to imported inflation. However, the flows to
external reserves may not be exchange rate-induced but Ajayi (2006) and Ayanwale (2007) acknowledged that Nigeria has
received the highest FDI inflows in Sub-Saharan Africa in the last 20 years.
Under the floating exchange rate period, inflation targeting was successful but the objective of a single digit inflation rate
was not achieved, though except in years 1986, 1990, 1998-2000, and 2006-2007. This confirms that inflation targeting
under the fixed exchange rate regime is almost as difficult as under the floating exchange rate regime, as noted by Valesco
(2000), Vegrune (2007), Edward (1989), Bird (1998) among others. The changing positive and negative growths that seem
to nil out each other almost as quickly as they occur in external reserves, as well as the highs and lows of it make it difficult
to discern a pattern that can be associated with foreign exchange growth. It appears that such other factors like political and
social stability, speculation and hot money phenomenon were at play as also identified by Ajayi (2006) and Ayanwale
(2007). The effects of experimental political transition, which engendered expectations of democracy and slight
improvement in Foreign exchange rate, may be responsible for the fair growth in external reserves. The decrease in external
reserves in 1992/1993 may be due to the political impasse resulting from the annulment of the June 12, 1993 elections. It is
true Nigeria return to civil democracy in 1999 but electoral disputes and controversies that trailed the polity can be the cause
of the decline in external reserves flow in 1999.
Table 4.2: Growth Rates of the Variables(%)
s/n Year FXGR GDPGR BOPGR ERGR IGR DRGR LRGR
1 1960
2 1961 0.00 5.74 -47.83 -2.42 0.00 -25.00 0.00
3 1962 0.00 10.01 -162.50 1.16 0.00 0.00 0.00
4 1963 0.00 6.09 -66.67 -16.03 0.00 16.67 0.00
5 1964 0.00 5.03 1960.00 20.19 0.00 0.00 0.00
6 1965 0.00 7.45 -79.61 6.60 0.00 0.00 0.00
7 1966 0.00 8.51 9.52 -13.74 0.00 0.00 0.00
8 1967 0.00 -18.44 -1100.00 -49.54 0.00 -14.29 0.00
9 1968 0.00 -3.50 -32.61 -4.93 0.00 0.00 0.00
10 1969 0.00 33.62 54.19 28.91 0.00 0.00 0.00
11 1970 0.00 48.79 -2.51 27.18 100.00 0.00 0.00
12 1971 -2.63 25.94 151.93 79.70 15.94 0.00 25.00
13 1972 -5.41 8.07 -54.43 -13.43 -80.00 0.00 0.00
14 1973 0.00 20.08 269.16 55.18 68.75 0.00 0.00
15 1974 -4.26 118.10 1470.73 813.36 148.15 0.00 0.00
16 1975 -2.22 14.09 -94.92 3.81 152.99 0.00 -10.00
17 1976 1.72 24.12 -315.24 -8.30 -37.46 0.00 11.11
18 1977 3.21 18.25 55.52 -14.36 -27.36 16.67 -40.00
19 1978 -6.28 9.58 145.37 -53.85 7.79 35.71 83.33
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20 1979 -1.70 21.52 -244.47 135.57 -28.92 0.00 0.00
21 1980 -8.28 18.24 28.54 78.51 -16.10 21.05 -13.64
22 1981 11.64 -4.06 -225.75 -55.30 111.11 -4.35 5.26
23 1982 10.31 3.04 -53.71 -57.27 -63.16 31.82 17.50
24 1983 7.61 8.23 -78.45 -78.49 201.30 0.00 -2.13
25 1984 5.63 12.27 -217.79 216.44 70.69 34.48 13.04
26 1985 16.85 13.90 -198.37 133.47 -86.11 -5.13 -9.62
27 1986 126.07 1.82 1074.19 71.10 -1.82 0.00 2.13
28 1987 98.85 52.17 338.26 164.56 88.89 61.08 60.00
29 1988 12.91 32.18 15.75 -30.32 275.49 -10.07 -8.33
30 1989 62.93 55.87 10.57 -41.72 6.79 41.04 39.77
31 1990 8.74 23.41 229.50 49.02 -81.66 3.70 12.60
32 1991 23.29 16.67 37.53 -8.63 73.33 -19.85 -24.91
33 1992 74.56 70.63 93.41 -62.53 242.31 32.40 50.00
34 1993 27.47 28.40 -10.86 -8.04 28.54 13.46 -41.28
35 1994 -0.75 31.58 -76.27 530.19 -0.35 -36.44 14.63
36 1995 0.00 114.83 358.00 -82.12 27.72 -9.20 -1.00
37 1996 0.00 39.80 -72.77 111.28 -59.75 -4.99 0.34
38 1997 0.00 3.67 -102.02 112.17 -70.99 -45.60 11.79
39 1998 0.00 -3.34 -20604.67 -1.59 17.65 44.89 -8.49
40 1999 323.48 17.93 48.02 -23.68 -34.00 24.31 27.41
41 2000 10.17 43.46 -196.17 73.03 4.55 -16.40 -20.74
42 2001 9.64 3.12 -92.13 9.39 173.91 -3.77 -0.97
43 2002 8.06 46.29 -2378.55 -25.19 -31.75 59.90 41.47
44 2003 6.93 22.78 -71.20 -2.78 8.53 -12.26 -24.21
45 2004 3.20 34.45 -792.65 127.04 7.14 -4.33 -9.00
46 2005 -1.01 27.70 -113.12 66.79 19.33 -23.08 -6.39
47 2006 -2.65 27.40 1531.01 49.57 -54.19 -7.41 -4.05
48 2007 -2.19 11.27 -24.71 21.36 -34.15 5.54 -1.82
49 2008 -5.77 15.42 35.68 3.25 114.81 16.13 1.85
50 2009 25.58 20.03 59.48 -20.03 7.76 11.30 22.46
51 2010 0.94 37.07 -41.37 -23.70 9.60 -50.98 -1.70
52 2011 2.37 10.47 -78.01 0.00 -21.17 -12.42 -0.53
Source: Derived from Table 4.1 above
Between 2000 and 2011, foreign exchange rate policy was consistent and the effect was a steady and continuous
improvement in the Naira exchange rate to a US dollar. Following the near stability situation of the Naira exchange rate to a
US dollar, a relatively stable and more consistent growth rate was observed in GDP. The BOP was worsening throughout
the period and this may be attributable to the inelasticity in foreign goods consumption, which expended export revenue on
imports.
Regression results
The result obtained upon running the regression is presented below
FXGR = 14.754 +0.022GDPGR + 0.002BOPGR - 0.022ERGR – 0.011IGR + 0.505DRGR + 0.392LRGR
SE = (9.989), (0.331), (0.003), (0.055), (0.092), (0.397), (0.388)
t = 1.477 0.068 0. 790 -0.404 - 0.118 1.272 1.012
R = 0.355 R2 = 0.126 Adjusted R2 = 0.007 F = 1.061 DW = 1.675
In the result above 14.754 gives the estimate of the parameter β0. This figure represents the autonomous foreign exchange
rate, that is, the value of the foreign exchange rate when all the independent variables are zero. The β0 accounts for the
portion of the foreign exchange rate that is not affected by changes in the independent variables. The coefficients β1, β2, β3,
β4, β5, β6 which give the slope are 0.022, 0.002, -.022, – 0.011, 0.505, 0.392 respectively. This means that if GDP, BOP,
External Reserves, Inflation rate, deposit rate and lending rate go up by one unit (a percentage point), ceteris paribus, Naira
exchange rate to a US$ will increase by 0.022, 0.002, -.022, – 0.011, 0.505, 0.392 percentage points as a result of the effects
of the growth rate in GDP, BOP, External Reserves, Inflation, deposit rate and lending rate respectively. The R2 is the
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coefficient of determination which measures the percentage of variation in the dependent variable that can be explained by
the regression model. The adjusted R2 is also a coefficient of determination but it is a better value as it accounts for the
degree of freedom and as such, will be adopted for the purpose of interpretation. The R2 value of 0.126, shows that there is a
12.6% degree of relationship between Naira exchange rate to a US$ and the independent variables. Even though relationship
of 12.6% is positive, it is not significant enough. The adjusted R2 even shows it better with the positive but very low
percentage of 0.7%. This means that a variation or change in the independent variables would lead to a positive change in
the dependent variable to the tune of 0.7%. It could be implied as well not to have a relationship since it is very low and so
close to zero. The Durbin-Watson statistic of 1.675, which is a test for serial or autocorrelation shows that there is no
spurious correlation as the value exceeds that of R2.
The observed F-statistic of 1.061which is less than the tabular F-statistic at 5% level of significance shows that there is no
significant relationship between the Naira exchange rate to a US$ and the changes in the Nigerian GDP, BOP, External
Reserves, Inflation, deposit rate and lending rate respectively. Even with t-statistic all the independent variable coefficients
are not statistically significant hence any relationship whatsoever between the dependent and independent variables may be
by chance.
5. Conclusions and Recommendations
A sample of 52 years(1960-2011) macroeconomic data was taken to ascertain the relationship between Naira exchange rate
to one unit of United States of America Dollar and the changes in Nigerian Gross Domestic Product at current basic prices,
Balance of Payment, External reserves, Inflation rate, Deposit rate, and Lending rate. For this purpose, a model was
specified. The model was regressed using the least square method. The data set for the study extracted mainly from the
CBN Annual Reports and Accounts, and Statistical Bulletins for the years 1960-2011 are represented in Table1. The Naira
exchange rate to one unit of United States of America Dollar was used as the dependent variable while the changes in
Nigerian Gross Domestic Product at current basic prices, Balance of Payment, External reserves, Inflation rate, Deposit rate,
and Lending rate were used as independent variables. The results of the regression show that there is no statistically
significant relationship between the dependent and the independent variables.
The question now is that if Nigerian exchange rate to one US$ cannot be determined based on these macroeconomic
variables then what drives the Exchange rate movement in Nigeria? The answer is not far-fetched. It is possible that foreign
currency speculators are responsible for benchmarking the Naira against the US$. Based on this suspicion the Nigerian
Government should try and set in motion a platform for gauging the power of her domestic currency against the US$. One
of these options is to increase the deposit interest rate to encourage the citizens to keep their money in Nigeria through
investments instead of spending such amount abroad. With this, enough savings can be mobilized for onward lending to the
deficit productive units through the intermediatory roles of Nigerian bank. This will in turn produce enough exportable
products, which can generate some foreign currency that will beef up the supply side of foreign exchange market. Nigerian
Politicians make matters worse in foreign exchange management because they store their money in foreign currency
especially in US$ even when they do not need such foreign currency. Majority of them take their looted funds abroad to
avoid being detected by the long arm of the law. It may look absurd but my recommendation on politicians’ attitude is that
they should be monitored on how they spend their incomes including allowances. Exporters should be encouraged to
declare promptly and properly their export proceeds in order to improve the supply side of foreign exchange market. With
the influence of the market forces, as supply exceeds demand, the exchange rate would stabilise to a reasonable level.
Finally, foreign exchange movement should be linked to these tested macroeconomic variables for ease of its determination
and management.
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