International Journal of Science and Research (IJSR)

International Journal of Science and Research (IJSR)
Call for Papers | Fully Refereed | Open Access | Double Blind Peer Reviewed

ISSN: 2319-7064

Downloads: 129 | Views: 152

Research Paper | Economics | Nigeria | Volume 8 Issue 8, August 2019

Impact Analysis of Trade Liberalization and the Naira Exchange Rate

Nnamdi Chinwendu Nwaeze | Uche Emmanuel

Abstract: The stability or otherwise of the naira exchange rate mirrors as well as predicts economic growth and the overall macroeconomic wellbeing of the Nigerian economy. This objective primarily motivated this investigation, which was to decompose the impact trade liberalization has on the naira exchange rate and what it portends to the Nigerian economy. Secondary time series data on exchange rate of naira to the US Dollar, foreign direct investment, degree of trade openness, rate of inflation and exchange rate were collated from the World Bank country reports, the CBN and NBS, for our estimation and analysis. The result of the Augmented Dickey Fuller unit root test, confirmed that all our variables were integrated of order zero I (0) and I (1). The study also deployed the ARDL bounds tests for the cointegration analysis, which the result confirmed long-run relationships among the variables. Chiefly, our investigation found degree of openness to have a negative and significant effect on naira exchange rate. Thus, degree of openness depreciates the exchange value of the naira. Inflation rate was also found to have negative and significant impact on the naira exchange rate. On the contrary, both FDI and interest rate were positive and significant. Given the peculiar nature of the Nigerian economy as an import based economy, the study concludes that degree of openness or trade liberalization causes exchange instability and is harmful to the economy. Depreciation of the local currency of an import based economy isn’t beneficial as prices of imported goods and services are being determined by the cost of purchasing foreign exchange used for the payment of the imports. This introduces inflation and macroeconomic instability to the economy. The monetary authority is, therefore advice against full deregulation of the exchange market or policies that could depreciate the naira further.

Keywords: exchange rate, degree of openness, ARDL and depreciation

Edition: Volume 8 Issue 8, August 2019,

Pages: 1460 - 1467

How to Download this Article?

Type Your Email Address below to Download the Article PDF

Text copied to Clipboard!
Nnamdi Chinwendu Nwaeze, Uche Emmanuel, "Impact Analysis of Trade Liberalization and the Naira Exchange Rate", International Journal of Science and Research (IJSR), Volume 8 Issue 8, August 2019, pp. 1460-1467,

Similar Articles with Keyword 'exchange rate'

Downloads: 0

Masters Thesis, Economics, Kenya, Volume 12 Issue 6, June 2023

Pages: 615 - 623

Impact of GDP and Exchange Rates on Foreign Direct Investment in East African Community

Wambua Mwalya | Njuru Stephen Gitahi

Share this Article

Downloads: 45

Research Paper, Economics, China, Volume 5 Issue 12, December 2016

Pages: 863 - 867

An Empirical Analysis of a Settlement Currency in the Silk Road Economic Belt

Xiaobing Jiang [2] | Ya'nan Li

Share this Article