• Lawrence Olisaemeka UFOEZE Department of Banking and Finance, Chukwuemeka Odumegwu Ojukwu University, Anambra State, Nigeria
  • Camilus OKUMA, N. Department of Banking and Finance, Madonna University, Okija Campus, Anambra State, Nigeria
  • Clem NWAKOBY Department of Banking and Finance, Nnamdi Azikewe University, Anambra State, Nigeria
  • Udoka Bernard Alajekwu Department of Banking and Finance, Nnamdi Azikiwe University, Awka, Nigeria




Exchange rate fluctuation, Inflation, Money supply, Oil revenue, Gross Domestic Product.


This study investigated the effect of exchange rate fluctuations on Nigerian economy. The fixed and floating exchange eras were compared to know the exchange rate system in which the economy has fairly better. The time period covered was 1970 to 2012. The study employed the ordinary least square (OLS) multiple regression technique for the analysis. The coefficient of determination (R2), F-test, t-test, beta and Durbin-Watson were used in the interpretation of the results. The resulted revealed that about 85% of the changes in macroeconomic indicators are explained in the fixed exchange era. In the floating exchange era, 99% was explained while the whole periods has 73% explanatory power, hence the floating exchange era (1986 to date) is more effective in explaining economic trend in Nigeria. Also, exchange rate has significant positive effect on GDP during the fixed exchange rate era and negative effect the eras floating and all-time; inflation has insignificant negative effect on GDP during the fixed exchange era; significant effect in floating era and significant negative effect in the all-time period; money supply has insignificant negative effect GDP in fixed exchange era; and significant positive effect during the floating and all-time period; and oil revenue has significant positive effect on the GDP in all the exchange rate regimes (floating, fixed and all-time) in Nigeria.  The study thus conclude that exchange rate movement is a good indicator for monitoring Nigerian economic growth. So far exchange rate has always been a key economic indicator for Nigeria. The floating exchange period has outperformed the fixed exchange rate in terms of contribution inflation, money supply and oil revenue to economic growth. This indicate that the floating exchange rate has been a better economic regime for sustainable economic growth in Nigeria. From the findings, it is evident that oil revenue has positive effect in Nigeria and has remained the mainstay of the economy. It is thus recommended among other things that a positive exchange rate stock should be monitored regularly, so as not to allow those that find exchange rate as an avenue of investment like banks and public carry out their business, which is more devastating to the economy. 

Author Biographies

Lawrence Olisaemeka UFOEZE, Department of Banking and Finance, Chukwuemeka Odumegwu Ojukwu University, Anambra State, Nigeria

Department of Banking and Finance, Chukwuemeka Odumegwu Ojukwu University, Anambra State, Nigeria

Camilus OKUMA, N., Department of Banking and Finance, Madonna University, Okija Campus, Anambra State, Nigeria

Department of Banking and Finance, Madonna University, Okija Campus, Anambra State, Nigeria

Clem NWAKOBY, Department of Banking and Finance, Nnamdi Azikewe University, Anambra State, Nigeria

Department of Banking and Finance, Nnamdi Azikewe University, Anambra State, Nigeria

Udoka Bernard Alajekwu, Department of Banking and Finance, Nnamdi Azikiwe University, Awka, Nigeria

Nnamdi Azikiwe University


Adedayo, A. O. (2012). Exchange rate pass-through in Nigeria: A dynamic evidence. European Journal of Humanities and Social Sciences, 16(1), 785 – 801. Retrieved from www.journalsbank.com/ejhss_16_2.pdf.

Adubi, A. A. & Okumadewa, F. (1999). Price exchange rate volatility and Nigeria’s trade flows: A dynamic analysis, AERC Research paper No.87, African Economic Research Consortium, Nairobi, Kenya.

Alaba, O. (2003). Exchange rate uncertainty and foreign direct investment in Nigeria. A Paper Presented at the WIDER Conference on Sharing Global Prosperity, Helsinki, Finland, 6- 7, September.

Akpan I. P. (2008). Foreign exchange market and economic growth in an emerging petroleum based economy: Evidence from Nigeria (1970-2003). African Economic Business Review, 6(2), 46 – 58. Retrieved from www.theaebr.com/Vol6No2Fall2008Akpan.pdf‎.

Akpan, E. O. & Atan, J. A. (2012). Effects of exchange rate movements on economic growth in Nigeria. CBN Journal of Applied Statistics, 2(2), 1 – 14. Retrieved from www. cenbank.org/out/2012/ccd/cbn%20jas%20vol%202%20no%202_article%20one.pdf.

Akpokodje G. (2009). Exchange rate volatility and external trade: The experience of selected African countries. In. Adeola Adenikinju, Dipo Busari and Sam Olofin (ed.) Applied Econometrics and Macroeconomic Modelling in Nigeria. Ibadan University press.

Aliyu, S. U. (2009). Impact of oil price shock and exchange rate volatility on economic growth in Nigeria: An Empirical Investigation. Central Bank of Nigeria

Azeez, B.A. Kolapo, F. T. & Ajayi, L. B. (2012). Effect of exchange rate volatility on macroeconomic performance in Nigeria, Interdisciplinary Journal of Contemporary Research in Business, 4(1), 149 – 155.

Barro, R.J. & Gordon, D.B. (1983). Rules, discretion, and reputation in a model of monetary policy, Journal of Monetary Economics, 12, 101-20.

Berg, A., Borensztein, E. & Mauro, P. (2002).An Evaluation of monetary regime options for Latin America. The North American Journal of Economics and Finance, 13, 213-235.

Bobai, F. D., Ubangida, S. & Umar, Y. S. (2013). An assessment of exchange rate volatility and inflation in Nigeria. Journal of Emerging Issues in Economics, Finance and Banking (JEIEFB) 1(4), 321 – 340. Retrieved from www.globalbizresearch.com

Borensztein, E. & Lee, J-W. (2002). Financial crisis and credit crunch in korea: Evidence from Firm-level data. Journal of Monetary Economics, 49(4), 53-75

Calvo, G. (2003). Explaining Sudden stop, growth collapse and bop crisis: The case of discretionary output tax. The Mundell Fleming Lecture for the Third Annual IMF Research Conference, Washington, DC.

Calvo, G. & Reinhart, C. (2002). Fear of floating. Quarterly Journal of Economics, 117(2), 379-408.

Edwards, S. & Savastano, M. A. (2000). Exchange rates in emerging economies: What do we know? What do we need to know? In Economic Policy Reform: The Second Stage, ed. by Anne O. Krueger, pp. 453-510. Chicago: University of Chicago Press.

Eichengreen, B. & Irwin, D.A. (1995).Trade blocs, currency blocs and the reorientation of trade in the 1930s, Journal of International Economics, 38, 1- 24.

Egwaikhide, F. O. (1999). Determinants of imports in Nigeria: A dynamic specification. African Economic Research Consortium, (AERC) Research Paper, No. 91.

Ettah, B. E., Akpan, O. D. & Etim, R. S. (2011). Effects of price and exchange rate fluctuations on agricultural exports in Nigeria, International Journal of Economic Development Research and Investment, 2(1), 1 – 10. Retrieved from www.icidr.org/ijedri_vol2no1_april2011/Effects%20of%20Price%20and%20Exchange%20Rate%20Fluctuations%20on%20Agricultural%20Exports%20in%20Nigeria.pdf

Frankel, J., Fajnzylber, A. E., Schmukler, S. L. & Servén, L. (2001).Verifying exchange rate regimes. Journal of Development Economics 66(2), 351-86.

Frankel, J. (2003). Experience and lessons from exchange rate regimes in emerging economies, Monetary and Financial Cooperation in East Asia, Asian Development Bank, Macmillan, 2003.

Kandil, M. (2004). Exchange rate fluctuations and economic activity in developing countries: Theory and evidence. Journal of Economic Development, 29(1), 85 – 108.

Kandil, M. & Mirzaie, I. A. (2008). Comparative analysis of exchange rate appreciation and aggregate economic activity: Theory and evidence from Middle Eastern countries. Bulletin of Economic Research 60(1), 45-96.

Lin, J. Y. (2001). WTO accession and financial reform in China. Cato Journal, 21(1), 13-18.

McKinnon, R. (1963). Optimal currency areas. American Economic Review, 53, 717-724.

Mckinnon R & Schnabl G (2003). Synchronized business cycles in East Asia and fluctuations in the Yen/Dollar exchange rate. The world economy, 26(8), 1067-1088.

Montiel, P. J. (2003). Macroeconomics in Emerging Markets. Cambridge: Cambridge University Press.

Montiel, P. J. & Ostry, J. (1991). Macroeconomic implication of real exchange rate targeting in developing countries. IMF Working Paper 91/29.International Monetary Fund.

Mussa, M., Masson, P., Swoboda, A., Jadresic, E., Mauro, P. & Berg, A. (2000). Exchange Rate Regimes in an Increasingly Integrated World Economy. IMF Occasional Paper No.193, Washington, DC.

Mundell, R. (1961). A theory of optimal currency areas. American Economic Review 51(4), 657–65.

Obiora K.I. & Igue, N. N. (2006). Exchange rate volatility and U.S-Nigeria trade flows: An econometric appraisal of the evidence. Paper Presented at the 11th Annual Conference of the African Econometric Society. 5th -7th July. Dakar, Senegal

Ogunleye, E. K. (2008). Natural resource abundance in Nigeria: from dependence to development, resources policy. European Journal of Economics, Finance and Administrative Sciences, 55, 45 – 61.

Oladipupo, A. O. & Onotaniyohuwo, F. O. (2011). Impact of exchange rate on balance of payment in Nigeria. An International Multidisciplinary Journal, 5 (4), 73-88.

Olisadebe, E.U. (1991). An appraisal of recent exchange rate policy measure in Nigeria. CBN Economic and Financial Review, 29(2), 27 - 32.

Omojimite, B. U. & Akpokodje, G. (2010). The impact of exchange rate reforms on trade performances in Nigeria. Journal of Social Sciences, 23(1), 86 – 94.

Onwumere, J. U. J. (2009). Business and economic research method. Enugu: Vougasen Publishers.

Oyovwi, D. O. (2012). Exchange rate volatility and economic growth in Nigeria. Mediterranean Journal of Social Sciences, 3 (3), 399 – 407.

Polodoo, V., Seetanah, B. & Padachi, K. (2011). Exchange rate volatility and macroeconomic performance in small island developing states. A Paper Presented at the Uom-Wcp International Conference at Le Meridien, Mauritius on 22 December 2011. Retrieved from www.freit.org/WorkingPapers/Papers/.../FREIT457.pdf‎

Shehu, A. A. & Youtang, Z. (2012). Exchange rate volatility, trade flows and economic growth in a small open economy. International Review of Business Research Papers, 8(2), 118 – 131. Retrieved from www.bizresearchpapers.com/9.%20Abba.pdf‎

Taiwo, O. & Adesola, O. A. (2013). Exchange rate volatility and bank performance in Nigeria. Asian Economic and Financial Review, 3(2), 178-185. Retrieved from www.aessweb.com/download.php?id=1769.

Todaro P M. & Smith C. S. (2004) Economic development. Pearson Education Limited Delhi 110092 India.

Umaru, A., Sa’idu, B. M. & Musa, S. (2013). An empirical analysis of exchange rate volatility on export trade in a developing economy. Journal of Emerging Trends in Economics and Management Sciences, 4(1), 42-53.

Usman, O. A. & Adejare, A. T. (2012). The effects of foreign exchange regimes on industrial growth in Nigeria, Global Advanced Research Journal of Economics, Accounting and Finance, 1(1), 1-8.




How to Cite

UFOEZE, L. O., OKUMA, N., C., NWAKOBY, C., & Alajekwu, U. B. (2018). EFECT OF FOREIGN EXCHANGE RATE FLUCTUATIONS ON NIGERIAN ECONOMY. Annals of Spiru Haret University. Economic Series, 18(1), 105–122. https://doi.org/10.26458/1814