The Dynamics Of Output Growth And Investments In Nigeria: Do Exchange Rate Movements/Fluctuation Matter?
Author: ANTHONY D. OLADIPO,TEMITOPE S. AKINTUNDE, and OLUWATOSIN, M. ADERAJO
Published in IJED, Vol. 13 No. 1
This study examined the effect of exchange rate movements/fluctuations on output growth and investments in Nigeria between 1980 and 2016 using time series monthly data. The Non-Linear Autoregressive Distributed Lag Modelling approach to Cointegration was employed to capture the interactions and effects between the variables. The analysis revealed the stationarity of the variables at the levels, first difference and established the existence of long run relationships among the variables. The findings of the asymmetric and symmetric effects revealed the significance of exchange rate movements/fluctuations for exports and investments in the Nigerian economy. Thus, the results showed that exchange rate movement has a negative significant effect with gross domestic product, traded export, import and investments, while trade balance, interest rate and inflation all have positive and significant effects on exchange rate fluctuations. The outcomes of the result imply that government and monetary authorities should adopt appropriate policy in appreciating the value of the naira, reduce borrowing and lending charges to attract foreign investors and boost the performance of domestic and foreign investments opportunities and even promote economy diversification so as to increase growth in investment industries, total export and national output in the country.
Keywords: Exchange Rate Movements, Exports, Investments, Time Series, NARDL bounds test, and Error Correction Model.