Currency Devaluation and Economic Growth in Nigeria

Abstract:

This study examined currency devaluation and economic growth in Nigeria. Specifically, the study economic growth, balance and external debt on currency devaluation in Nigeria and tracked the direction of causality between currency devaluation and real economic variables in Nigeria. The study adopted the qualitative and quantitative research design. Secondary time series data covering 1990 to 2020 were obtained in the study. Estimation methods used in the study’s analysis includes descriptive statistics, correlation analysis, ARDL Co-integration analysis, parsimonious error correction model, granger causality test and other post estimation tests. Findings from the study revealed that gross domestic product exert positive significant impact on currency devaluation captured with currency devaluation both in the short and long run; balance of trade exert positive significant impact on Nigeria currency devaluation both in the short run and insignificant positive impact in the long run; external debt exerts negative significant impact on Nigeria currency devaluation in the short run; and positive significant impact in the long run; and a unidirectional relationship exists between external debt and currency devaluation, balance of trade and currency devaluation, external debt and balance of trade respectively. Premised on these findings, the study advocated that government in collaboration with monetary agencies should seek sound measures to reduce import and encourage exports towards maintaining positive trade balance and improve economic growth; government should create and introduce economic reforms or macroeconomic policies targeted at causing friendly business environment, boost economic output and improving the performance of the economy and government and the Central Bank of Nigeria should ensure debts contracted are deployed towards encouraging investment in exportable goods and services.