Impact Of Exchange Rate Volatility And Inflation And Economic Growth In Nigeria

Abstract

This study investigates the impact of exchange rate volatility and inflation on economic growth in Nigeria over the period 1986 to 2023. Annual time series data were obtained from the World Bank Development Indicators (WDI). The study employed the Autoregressive Distributed Lag (ARDL) bounds testing approach to cointegration, alongside short-run and long-run estimations. The findings reveal evidence of a long-run relationship among the variables. In the short run, inflation exerts a negative and statistically significant effect on economic growth, while exchange rate volatility also shows an adverse impact, though largely insignificant in the long run. Foreign direct investment (FDI) exhibits mixed effects, being negative in the current period but positive at lagged levels, whereas interest rate demonstrates an insignificant influence. the study recommends that policymakers adopt coordinated monetary and exchange rate management strategies to curb inflationary pressures, stabilize exchange rate fluctuations, and create a more conducive environment for sustainable growth and investment inflows.