AN EMPIRICAL ANALYSIS OF THE RELATIONSHIP BETWEEN EXCHANGE RATE FLUCTUATIONS AND ECONOMIC GROWTH IN NIGERIA (1994 – 2023)

ABSTRACT

This study, titled "An Empirical Analysis of the Relationship between Exchange Rate Fluctuations and Economic Growth in Nigeria (1994 – 2023)," investigates how exchange rate volatility impacts Nigeria's economic performance. Despite various policy measures, Nigeria's currency remains volatile, posing challenges for economic planning and development. The study aims to analyze the effects of exchange rate fluctuations on Real GDP, examining trends, patterns, and policy effectiveness. Using a multivariate regression model with data from the Central Bank of Nigeria, the World Bank, the IMF, and the National Bureau of Statistics, the research incorporates key economic theories such as Purchasing Power Parity, Keynesian economics, Monetarist theory, and the Balance of Payments theory. Results show a significant negative relationship between exchange rate fluctuations and Real GDP growth, with a coefficient of -30.680. Despite this, the study identifies a positive time trend in Real GDP growth, suggesting underlying factors contributing to economic stability. Hypothesis testing confirms that exchange rate fluctuations significantly affect Real GDP, leading to the rejection of the null hypothesis. The findings highlight Nigeria's economic resilience and the need for stabilizing the exchange rate. Recommendations include implementing policies to stabilize the exchange rate, promoting economic diversification, enhancing monetary policy frameworks, investing in infrastructure and human capital, and maintaining fiscal discipline to support sustained economic growth.

Keywords: Exchange Rate Fluctuations, Economic Growth, Real GDP, Nigeria