A REVISIT OF EXCHANGE RATE VOLATILITY AND TRADE FLOW IN NIGERIA
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Date
2022
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Journal of Studies in Social Sciences and Humanities
Abstract
Since the advent of floating exchange rate in Nigeria, exchange rate has been highly volatile.
Excessive volatility has severe implications for international trade. This study revisits the long-
standing debates on the link between exchange rate volatility and trade flow for the Nigerian
economy, 1980-2020. We employ the Granger causality tests based on VECM\VAR model.
The results show evidence for a bi-directional causality from trade to exchange rate volatility
and vice versa. Since the Nigeria seeks export promotion, there is need to undertake measures
that will check excessive fluctuations beyond fundamentals needed for the. Hence, we suggest
that monetary authority should continue its periodic exchange rate intervention to curtail
excessive swings. This should be carefully done to maintain policy rate that will not be counter-
productive.