Impact of Exchange Rate Volatility on Export in Nigeria: 2008 – 2021

Abstract

This study examined the impact of exchange rate volatility on export in Nigeria. The specific objectives of the study were to evaluate the individual impacts of parallel market-, interbank, real and nominal-exchange rate volatilities on Nigeria’s export. The study employed the ARDL-Error Correction Model and Bound Test using secondary data sourced from the Statistics Database of the Central Bank of Nigeria. Bounds test results for each of the four models, showed long-run relationship among the variables. The results showed that in the long-run, all the exchange rate volatility measures showed negative sign as expected but only the real effective exchange rate volatility was statistically significant in the long run. In the short-run, the average impact of exchange rate volatility was negative in all the four models as expected. However, volatility in real effective exchange rate and nominal effective exchange rate were statistically significant. Finally, if the Nigeria’s export deviates from its long-run path due to short-run perturbations, the tendency for it to return to long-run equilibrium from the four models lied between 25% and 39%. Based on these results, this study recommended that efforts to improve Nigeria’s trade with other countries should consider stabilizing the Naira exchange rate. The Central Bank of Nigeria should shore up reserve accretion as well as diversify the country’s export basket and source for new export destinations.