Impact Of Export Expansion Grants And Naira Devaluation On Nigerian Balance Of Payment: ARDL Approach

Abstract

The study examines the impact of Export Expansion Grants (EEGs) and Naira devaluation on Nigeria's Balance of Payments (BOP) using annual time series data from 1986 to 2024, employing the Autoregressive Distributed Lag (ARDL) model. The findings reveal significant BOP fluctuations due to inconsistent trade performance and volatile monetary conditions, with export expansion grants and currency devaluation exhibiting mixed long-run effects. While trade balance negatively impacts BOP, interest rates and exports contribute positively, and currency devaluation helps counter short-term depreciation concerns. The error correction term (-0.4325) confirms that deviations from equilibrium are corrected at a rate of 43% per year. Based on these findings, the study recommends that Nigeria implement policies promoting non-oil exports through targeted incentives, access to finance, and support for value-added production to enhance foreign exchange inflows; adopt measures to manage currency volatility, ensuring devaluation policies are complemented by interventions that prevent excessive short-term shocks while improving long-term competitiveness; invest in infrastructure, modernize ports, improve logistics, and support industrial capacity to reduce inefficiencies in trade and production; and align short-term interventions, such as export expansion grants, with broader monetary and fiscal policies to maximize effectiveness, reduce delays, and maintain long-term external sector stability.