Exchange Rate Dynamics and Nigeria’s Export Competitiveness in the Global Market

Abstract

This study on Exchange Rate Dynamics and Nigeria’s Export Competitiveness in the Global Market was conducted to analyze the impact of exchange rate volatility on Nigeria’s exports, contributing to the ongoing debate on the interplay between exchange rate dynamics and trade performance. Annual time series data covering the period under review were collected on each of the variables employed in the model (EXP, EXR, INF and INT) from the Central Bank of Nigeria (CBN) Statistical Bulletin, 2023. EXR, INT and INF represented the exchange rate, interest rate and inflation rate were used as the independent variables while EXP, representing export was used as the dependent variable. The study conducted pre-estimation tests such as descriptive analysis and unit root test while post-estimation analysis included serial autocorrelation, heterokedasticity test, and CUSUM test. The study analyzed the data using the ECM ARDL regression model. It was found that exchange rate, inflation, and interest rate, have negative but significant relationship with EXP. The study concludes that exchange rate dynamics remain a critical determinant of Nigeria's competitiveness in the global market. It is recommended that the fiscal policies bothering on interest rate, inflation rate be amended to accommodate small scale manufacturers, giving them the opportunity to export more of their products.