ABSTRACT
This study evaluates the relationship between exchange rate fluctuations and its impact
on the Nigerian economic growth. This study made use of secondary annual data from
the Central Bank of Nigeria (CBN)’s statistical bulletin & publications from the National
Bureau of statistics (NBS). This study adopted the classical least regression model and
ordinary least square method (OLS) to analyze the data. This study has been able to
demonstrate that exchange rate fluctuations is pivotal to the economic growth of Nigeria,
other economic variables used in this study ((EXR) exchange rate, (INT) interest rate,
(INF) inflation rate and (TB) trade) may result in a direct impact on the Nigerian
economic growth. The study concludes that Since exchange rate fluctuation has a direct
impact on the economy. There is need to develop an effective exchange rate regime. An
efficient exchange rate would help to curtail inflation, improve Nigeria’s balance of
trade, and boost Nigeria’s production capacity which are key indicators of positive
economic growth.
TABLE OF CONTENT
Title page - - - - - - - - - - - - - - - i
Declaration - - - - - - - - - - - - - - ii
Approval page - - - - - - - - - - - - - - iii
Dedication - - - - - - - - - - - - - - . - iv
Acknowledgement - - - - - - - - - - - - . - v
Abstract - - - - - - - - - - - - - - - .vi
Table of content - - - - - - - - - - - - - vii
List of figures - - - - - - - - - - - - - - .ix
List of tables - - - - - - - - - - - - - - .x
CHAPTER ONE: INTRODUCTION
1.1 Background of the study - - - - - - - - - - - .1
1.2 Statement of the problem - - - - - - - - - - - 10
1.3 Objective of the study - - - - - - - - - - - - .11
1.4 Formulation of research hypothesis - - - - - - - - - - .12
1.5 Significance of the study - - - - - - - - - - - 12
1.6 Limitations of the Study - - - - - - - - - - - . - 13
1.7 The scope of the study - - - - - - - - - - - - 13
CHAPTER TWO: REVIEW OF RELEVANT LITERATURE
2.1 Conceptual Framework - - - - - - - - - - - . - 14
2.2 Theories of Exchange rate - - - - - - - - - - - .17
2.2.1 Optimum currency area theory (OCA) - - - - - - - - - 17
2.2.2 Mint parity Theory - - - - - - - - - - - . - 19
2.2.3 Purchasing power parity - - - - - - - - - - - .20
2.2.4 Balance of payment/modern theory - - - - - - - - - 24
2.2.5 The Elasticity approach - - - - - - - - - - - - 28
2.3 Empirical literature - - - - - - - - - - - - 30
2.4 Limitations of previous studies - - - - - - - - - . - 40
2.5 Definition of terms - - - - - - - - - - - - 43
CHAPTER THREE: RESEARCH METHODOLOGY
3.1 Model specification - - - - - - - - - - - - - 48
3.2 Method of evaluation - - - - - - - - - - - - 50
3.3 Statistical test (first order) - - - - - - - - - - - 52
3.4 Economic second order test - - - - - - - - - - - 52
3.5 Nature and source of data - - - - - - - - - - - - 53
CHAPTER FOUR: ANALYSIS, RESULTS AND DISCUSSION
4.1 Presentation & interpretation of result - - - - - - - - - 54
4.1.1 Results of Granger-Causality Test - - - - - - - - - - 55
4.1.2 Results of Augmented Dicky Fuller Test (ADF) - - - - - - .57
4.1.3 Result of Cointegration analysis - - - - - - - - - .59
CHAPTER FIVE: SUMMARY, CONCLUSION AND RECOMMENDATIONS
5.1 Summary of findings - - - - - - - - - - - - - 61
5.2 Conclusion - - - - - - - - - - - - - - 62
5.3 Policy recommendation - - - - - - - - - - - - .62
REFERENCES - - - - - - - - - - - - . - - .64
APPENDIX - - - - - - - - - - - - - - - - - 67
LIST OF FIGURES
Figure 1: Patterns of exchange rate, showing the different rate regimes - - - - 3
Figure 2: movement of exchange rate, supply of money and gross domestic product - .6
Figure 3: movement of exchange rate & external reserve - - - - - - .7
Figure 4: Trend of exchange rate & selected macroeconomic indicators in Nigeria (1980
– 2010)
- - - - - - - - - - - - - - - - - - .9
LIST OF TABLES
Table 1.1: Descriptive statistics results - - - - - - - - - - .54
Table 1.2: Results of Granger-Causality
test - - - - - - - - - .55
Table 1.3a: Results of ADF – Unit Root
test - - - - - - - - - .57
Table 1.3b: Results of ADF – Unit Root
test - - - - - - - - - .58
Table 1.3c: Results Cointegration
analysis - - - - - - - . - - - 58
