Impact of Exchange Rate Volatility on Economic Growth in Nigeria: 1986 -2019

Abstract

This study examines the impact of exchange rate volatility on economic growth in Nigeria. The study covers the period of 1986 to 2019. Using time series data, the methodology adopted is the Vector Error Correction Mechanism to explore the impact of exchange rate volatility on the selected macroeconomic variables. The result indicated that exchange rate volatility has a significant impact on economic growth; specifically it has a positive impact on inflation, unemployment and balance of trade. On the other hand, it has a negative impact on economic growth and investment. The recommendations made include; those relevant authorities should try to avoid systematic currency devaluations in order to maintain exchange rate volatility at a rate
that allows adjustment of the balance of payments.