Analysis of the Impact of Exchange Rate on Price Level in Nigeria

Abstract

The study focus on Analysis of the Impact of Exchange Rate on Price Level in Nigeria from 1988 to 2016 with variables as Inflation, exchange rate, tariff rate, import and interest rate. The research employed the Dynamic Ordinary Least Square (DOLS) regression method with the pre-test of Augmented Dickey Fuller (ADF) unit root test. The regression result showed a negative and insignificant relationship between exchange rate and inflation, tariff rate was negative and significant in relationship with inflation, while import was positively and insignificantly related to inflation, interest rate was having a positive but not significant relationship with inflation. We recommend that moderate or realistic tariff rate be negotiated among trading partners. Also local production of goods for export that will counter the negative impact of import to avoid imported inflation and strict monitoring of the activity of CBN and commercial banks in exchange rate dealing to avoid unnecessary and unproductive use of dollars.