Foreign Exchange Management and Trade Openness in Nigeria (1980 - 2018)

Abstract

This study examined the effect of foreign exchange management on trade openness in Nigeria between 1980 and 2018. The study employed an ex-post facto research design. The data were sourced from the Central bank of Nigeria statistical bulletin of 2018. Data were analyzed using descriptive statistics, unit root test, bound testing and Auto regressive distributed lag model. Inferences were drawn at 5% significance level. The findings of the study showed that Exchange rate is positive and statistically significant to export in Nigeria at 5% level [β = 1.702; P – value = 0.000]. Similarly, the results revealed that the Foreign direct investment is positive and statistically significant to export at 5% level [β = 1.229; P – value = 0.043]. Also, the results revealed that the Exchange rate is positively and statistically significant to import at 5% level [β = 1.353; P – value = 0.000] during the year is observed. Equally, the results revealed that Foreign direct investment is positive and statistically significant to import at 5% level [β = 0.383; P – value = 0.037]. The study concluded that exchange rate and foreign direct investments affect export and import in Nigeria. The study recommended that there should be increase in the supply of foreign exchange to solve the problem of instability in exchange rate. This increase in the supply of foreign exchange will meet local demand for foreign exchange. This involves serious adoption of measures to boost export and reduce import other than tempering with exchange rate via monetary policies by the state. Putting more attention on export than on import should also be a good priority to the state so as to improve its external reserves position for effectiveness of trade openness in Nigeria.