This study examined the long-run and short-run impacts of real exchange rate volatility and the level of economic growth on international trade in Nigeria using a vector error correction model on time series annual data from 1971 to 2012. The results revealed that in both short-run and long-run, exports and imports were chiefly influenced by real exchange rate, real exchange rate volatility, foreign income, gross domestic product, terms of trade and changes in exchange rate policies. The findings further revealed that exchange rate volatility depressed exports and imports in the long-run. The result from pair wise Granger causality test revealed unidirectional causality running from export to exchange rate volatility and from exchange rate volatility to import and a unidirectional causality flow from RGDP to imports and exports. This is an indication of poor performance of the export sector and the over dependence of the country on imported goods. The statistical significance of both real foreign income and real gross domestic product were indications that tariff measures would be ineffective and as a result the study believed that effective import substitution industrialization would significantly reduce pressure on the external sector and will actually increase economic activities and hence economic growth The study recommends the use of supportive fiscal and monetary policies that will provide a set of incentives aimed at removing anti-export bias barriers so as to promote exports, particularly non-oil exports and discourage import of consumer goods to stabilize the foreign exchange rate.
This study investigated the impact of exchange rate volatility and stock market performance on the inflow of foreign direct investment to Nigeria using time series data from 1980 to 2013. It employed the ordinary least square technique and error correction mechanism in its estimations. The result revealed that exchange rate volatility has negative and significant effect on the inflow of foreign direct investment to Nigeria both in the long run and in the short run. It further revealed that market capitalization, proxy for stock market performance was positively signed and statistically significant. Apparently, a stable and well developed capital market will definitely attract direct foreign investment to Nigeria. The study recommends the pursuance of sound exchange rate management system and policies that will lead to increase in domestic production of export commodities. The study further recommends deepening of the capital market to provide the needed funds for investment and avoidance of dollarization of the economy to reduce the stress on foreign exchange earnings. Sound foreign reserve management practices are imperative for Nigeria as measures of maintaining the value of the naira and reduce the impact of international capital shocks.
This study is designed to investigate the effects of exchange rate changes (volatility or variability) and other macroeconomic variables such as real exchange rates, real foreign and domestic income, terms of trade and lagged exports and imports on trade flows in Nigeria. The study examined the long-run macroeconomic factors of exports and imports in Nigeria using Johansen cointegration tests and analysis for the period 1971 to 2011 studied. The time series properties of the data were first analyzed using the Augmented Dickey -Fuller (ADF) tests to execute unit root tests for the relevant trade indicators. The study found a long-run cointegration relationship between trade flows and their determinants. It further discovered that exports and imports exhibit varied sensitivity to exchange rate risks (i.e volatility or variability). Thus, a stable exchange rate is recommended for expansion of trade and stable growth of the national economy as persistence in exchange rate volatility would snowball into a depression if not arrested on time via application of a managed floating exchange rate regime by the central bank of Nigeria. More-so, there are other viable policy options that should be adopted by the government to stop this sliding trend like restructuring the domestic economy from consumption to production using agricultural and industrial sectors diversification. In particular, the policy of a guided deregulation of foreign exchange market is strongly recommended instead of allowing the market forces to determine the value of the domestic currency vis-à-vis other key currencies of the world. This is because foreign currency is scare and sources of its inflow is few as at present.
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