AN EMPIRICAL ANALYSIS OF THE IMPACT OF MACROECONOMICS VARIABLES ON EXCHANGE RATE FLUCTUATION IN NIGERIA

Abstract

ABSTRACT

The study empirically X-rays the influence of macroeconomic variables on exchange rate volatility in Nigeria between 1990 and 2023. Exchange rate serves as the dependent variable with inflation rate, lending interest rate, crude oil price, money supply and level of import serving as macroeconomic variables/regressors. Ex post facto research design was adopted by the study due to its ability to explore the cause –and- effect relationship between dependent variables and explanatory variables. The study carried out its empirically data analysis using the fully modified ordinary least square (FM-OLS). The result revealed, while money supply and lending interest rate have positive significant effect on exchange rate volatility, the level of import have negative significant impact on  exchange rate. The result also affirmed inflation rate and crude oil price to be positive and insignificant to exchange rate fluctuation. The study concludes that macroeconomic fundamental or variables have significant influence on exchange rate volatility in Nigerian within the sampled period. Based on the findings, the study recommends that monetary authority should implement policy that will enhance effective management of money supply and interest rate in order to stabilize the exchange rate and promote economic growth.