THE IMPACT OF EXCHANGE RATE FLUCTUATION ON THE NIGERIA ECONOMIC GROWTH 1980 - 2010

 

ABSTRACT 

This research work is centred on the impact of exchange rate 

fluctuation on the Nigeria’s economic growth with special emphasis 

on purchasing power of the average Nigeria and the level of 

international trade transaction. Without exchange rate the exchange 

of goods and services among trading partners will be faced with a lot 

of problems, which may virtually narrow it down to trade by barter. 

This exchange also is used to determine the level of output growth of 

the country. Hence, the rate at which exchange fluctuates calls for a 

lot of attention. However, with already existing exchange rate 

policies, a constant exchange rate has not been attained. The rate by 

which exchange rate fluctuates brings about uncertainty in the trade 

transaction, and also the rate of naira has been unleashed and 

continues to depreciate. This has resulted to declines in standard of 

living of the population increase in costs of production (this is 

because most of the raw materials needed by industries are usually 

imported), which resulted in cost-push inflation. We made use of 

many tests, like the t-statistics table, f-statistic table and the chi-

square etc. When we found out real exchange rate has a positive 

effect on the GDP. 

 

TABLE OF CONTENTS 

Title Page - - - - - - - - - - -i 

Approval page - - - - - - - - - -ii 

Dedication - - - -- - - - - - -iii 

Acknowledgement - - - - - - - - -iv 

Abstract - - - - - - - - - - -vi 

Table of content - - - - - - - - -vii 

1.0 Chapter one: Introduction  

1.1 Background of the study - - - - - - -1 

1.2 Statement of the problem  - - - - - - -5 

1.3 Objective of the study  - - - - - - -6 

1.4 Formulation of the research hypothesis - - - - -8 

 

1.5 Significance of the study   - - - - - - -8 

1.6 Limitations of the study   - - -  - - -9 

1.7 Scope of the study   - - - -- - - - -10 

CHAPTER TWO: LITERATURE REVIEW 

2.1 The Purchasing Power Parity theory  - - - - -11 

2.2 Theoretical issues   - - - - - - - -14 

2.3 The traditional flow model   - - - - - - -17 

2.4 The elasticity approach   - - - - - - -18 

2.5 The monetary approach - - - - - - -21 

2.6 The portfolio balance model    - - - - - -24 

2.7 Empirical literature   - - - - - - - -30 

2.8 Limitations of the previous studies -   - - - - -43 

 

2.9 Definition of the terms   - - - - - - -46 

CHAPTER THREE: Research Methodology 

3.1 Theoretical framework -- - - - - - - -50 

3.2 Model specification   - - - - - - - -51 

3.3 Method of evaluation   - - - - - - -54 

3.4 Estimation procedure   - - - - - - - -56 

3.4.1 Economic A Priori test-  - - - - - - -57 

3.4.2 Statistical test (first-order)    - - - - - -58 

3.4.3 Econometric (second order) test   - - - - -60 

3.5 Nature and sources of data  - - - - - - -62 

CHAPTER FOUR: Presentation And Analysis Of Result 

4.1 Presentation and interpretation of result   - - - -63 

 

4.2 Economic a priori criteria -   - - - - - - -64 

4.3 Statistical criteria (first-order test)   - - - - - -66 

4.3.1 Coefficient of multiple determination (R

2

)   - - - -66 

4.3.2 The student’s T-test   - - - - - - - -67 

4.3.3 F-statistics -    - - - - - - - - -69 

4.4 Econometrics criteria    - - - - - - - -71 

4.4.1 Test for Auto-correlation   - - - - - - -71 

4.4.2 Normality test for Residual   - - - - - -73 

4.4.3 Test for heteroscedasticity    - - - - - -74 

4.4.4 Test for multicollinearity    - - - - - - -77 

5.0 CHAPTER FIVE: SUMMARY OF FINDINGS,  

CONCLUSIONS AND POLICY RECOMMENDATIONS 

5.1 Summary of Findings   -- - - - - - - 79 

 

5.2 Conclusions   - - - - - - - - -80 

5.3 Policy Recommendation    - - - - - - -81 

5.4 Bibliography    - - - - - - - - -84