Effect of Foreign Exchange Management on Economic Growth in Nigeria (1987-2017)
Publication Date: 06/05/2019
Author(s): Obisesan Oluwaseun Grace, Ogunsanwo Odunayo Femi, Akosile Mary Oluwayemisi.
Volume/Issue: Volume 2 , Issue 1 (2019)
Abstract:
The study investigated the effect of foreign exchange management on economic growth in Nigeria for the period of 1987 to 2017. Real exchange rate, inflation, degree of openness and foreign direct investment were used to determine the influence of foreign exchange management on economic growth proxied as real gross domestic product in Nigeria. The study employed unit root test was used to test the stationarity of the variables, the Auto Regressive Distribution Lag (ARDL) test to test for the presence of long run relationship among the variables, Error Correction model to show the rate at which short-run inconsistencies are being corrected and incorporated into the long-run equilibrium relationship. The result of the study found that real exchange rate has positive and significant effect on economic growth; inflation rate revealed a negative and insignificant effect on economic growth; degree of openness indicated positive and insignificant effect on economic growth and lastly foreign direct investment displayed positive and statistically insignificant effect on economic growth in Nigeria. It was concluded that foreign exchange management has positive and insignificant effect on economic growth under study review in Nigeria. The study recommended that investors should consider fluctuations in other macroeconomic variables rather than fluctuation in the exchange rate market to guide their decisions in order to ascertain where to direct investments for profit maximization. The study further suggested that government and the monetary authorities should design policies and programs that will curtail the rising inflation rate thereby encouraging investors to invest in Nigeria.
