ADSU International Journal of Applied Economics, Finance and Management

An Analysis Of The Impact Of Trade And Exchange Rate On Economic Growth: Evidence From Nigeria

Abstract

Trade and Exchange Rate have impact on Economic Growth in Nigeria. To investigate the relationship between the variable, secondary data from Central Bank of Nigeria statistical bulletin and World Development Indicators were used. The study utilizes Autoregressive Distributed Lag (ARDL) model to analyses the relationships between key economic variables, specifically focusing on exports, imports, and economic growth. The findings indicate a significant long-run relationship among those variables, suggesting that changes in exports and imports have substantial implications for economic growth. The ARDL bounds testing confirms the existence of cointegration, which implies that despite short-run fluctuations, these economic indicators move together over the long run, indicating the importance of trade in influencing economic performance. Additionally, the diagnostic tests conducted, including the Breusch-Pagan-Godfrey test for heteroskedasticity and the Breusch-Godfrey Serial Correlation LM test, support the robustness of the model. The absence of heteroskedasticity and serial correlation in the residuals indicates that the assumptions underlying the regression analysis are met, enhancing the reliability of the estimated coefficients. This allows for greater confidence in the short-run and longrun results derived from the ARDL model, providing a solid foundation for policymakers to consider trade-related strategies for economic growth. The study recommends that the government should invest in infrastructure that supports export activities, such as transportation networks, logistics facilities, and ports. Improving these infrastructures can reduce costs and increase the competitiveness of local products in international markets.