THE IMPACT OF EXCHANGE RATE ON ECONOMIC GROWTH IN NIGERIA (1980-2012)

Abstract

This paper examined the impact of Exchange Rate on Economic Growth in Nigeria, 1980 to 2012, which is a period of 32 years. The Theoretical frame work of the study is Balassa-samulson theory .The estimation technique employed was Ordinary Least Square (OLS) of multiple linear regression analysis and Unit root test. The dependent variable is the Economic Growth (GDP) while the independent variables are Exchange Rate, Balance of payment, Money supply and Inflation. Secondary data were used. The data was sourced from Central Bank of Nigeria, Statistical Bulletin, and National Bureau of Statistics (NBS). Augmented Dickey-fuller (ADF) test was used, the result shows that all variables were stationary at level, I(0). Johansen unrestricted co-integration test was also used, the result shows that there was a long run relationship between the variables. Findings revealed that Exchange Rate was interrelated in the long run and has a positive impact on Economic Rate (GDP) between the years studied. It has been recommended that Nigeria Government and policy makers should employ policies that would increase productivity in all sectors of the economy, through the creation of an enabling environment and provision of flexible exchange rate so that business can grow; this in turn would lead to economic boost on gross domestic product in Nigeria and its general populace.