Abstract
In Nigeria today, constant fluctuations of exchange rate or volatility is of great importance in one way or the other to the general public because its fluctuation has an effect on the economy. The objectives of the paper were to investigate the recent changes in the naira currency and other world currencies if there appear to be any relationship. Data was obtained from daily exchange rate of different countries’ currencies from 12/10/2005 and 2/11/2018 with 3,190 observations obtainable from the Data and statistics publication of the Central Bank of Nigeria. The study investigates the past recent changes in the naira and four foreign currencies of the world (Pounds, Yen, Cfa and Swiss Franc) and their relationship plotted as signal using MATLAB 2016a. The four currencies were randomly selected from the list of world currencies. Multiple Linear Regression was used to perform the analysis. The analysis of 3,190 observation resulted in a prediction model that has 97% prediction accuracy, which suggests that under ideal circumstances and baring any natural disaster, total collapse of the economy or major crisis like recession. The results from the model of this study suggest that fluctuation in currency exchange rate of other currencies has significance on the Nigerian exchange rate and as such should be considered when designing exchange rate policies.
Highlights
The Exchange rate reflects the ratio at which a countries currency can be exchanged with another currency, that is the ratio of currency prices
The objectives of the paper are hypotheses in their null form such as (i) exchange rate fluctuation in any other country currency exchange rate does not have any significant impact on the naira exchange rate; (ii) In designing exchange rate policies, fluctuation in other countries currency exchange rate does not have any significant impact on the naira exchange rate as such should not be considered
This paper has examined the insights provided by examining the existing relationship of foreign exchange rates using multiple linear regression
Summary
The Exchange rate reflects the ratio at which a countries currency can be exchanged with another currency, that is the ratio of currency prices. It is the value of a foreign nation’s currency in terms of the home nation’s currency. It shows how much one currency is valued in terms of the other. Exchange rate is a significant important macroeconomic policy instrument. An appropriate exchange rate has been suggested as one of the most important factors for economic growth in the economies of some of the developed countries [2]
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