ISSUES IN EXCHANGE RATE VARIATIONS AND BALANCE OF PAYMENTS IN NIGERIA

Abstract

This study examined the relationship between exchange rate variations on the balance of payments in Nigeria from 1980 to 2020. The study made use of Granger causality and ordinary least square. Data for the study were secondarily sourced, and the results showed that exchange rate movement has not significantly contributed on balance of payments under the years of the study. Although, the ganger result conforms with the Marshell-Linear short and long run prepositions that exchange rate devaluation enhances balance of payments, however, the OLS regression analysis in the long-run, exchange rate on semi-log functional form and exchange rate variation did not record significant effect on balance of payments. The lagged of exchange rate recorded a positive and significant influence on the balance of payments. From the result, the study recommended that efforts should be made by the authorities to provide enabling environment for production of goods and services in order to take advantage of steady devaluation of Nigeria's currency, and when this is done, Nigeria's balance of payment would improve. Consequently, Nigeria's export promotion policies should be fully implemented, as this is believed, would improve the country's gross domestic product.