Book

Description

This study investigated the impact of exchange rates on Nigeria's trade balance and economic growth over the period 1986-2016. The data was sourced from the CBN statistical bulletin volume 27, using annual time series data. The empirical findings revealed a significantly negative relationship between exchange rates and the trade balance in Nigeria, both in the short and long term. This suggests that devaluation does not benefit Nigeria's exports. Real exchange rates were used for the analysis, employing the Ordinary Least Square Model (OLS) for econometric analysis, the Augmented Dickey-Fuller test for unit root testing, and the error correction mechanism (ECM) to explore the connections among these variables. Co-integration testing confirmed a long-term relationship between economic growth, trade balances, and exchange rates. The study's results indicated that exchange rates had a negative influence on the trade balance but a positive association with GDP during the specified period. The study recommended that the promotion of manufacturing is crucial for technological development and should be supported not only for its contribution to GDP but also for its role in stimulating other productive sectors of the economy. Additionally, monetary authorities were advised to implement policies aimed at stabilizing exchange rates and controlling inflation to foster sustainable economic growth. This study sheds light on the intricate relationship between exchange rates, trade balances, and economic growth in Nigeria, offering valuable insights for policymakers and economists.