ABSTRACT

The broad objective of this research was to examine the effect of inflation and exchange rate on economic growth in Nigeria (2000-20 16). Variables relating to inflation rate, economic growth (Gross Domestic Product), exchange rate, import and exports was solicited from the Central Bank of Nigeria (CBN) bulletin within the period of 2000 — 2016. The study posits that there was negative relationship between inflation and economic growth in Nigerian economy in the period of study. This means that an increase in the general price level (inflation rate) by 1% results in a decrease of GDP by 5 7.9%. Inflation and exchange rate were found to be positively linked; thus reducing one entails the reduction of the other. Hence, it could be inferred that inflation influence exchange rate. On the other hand, exchange rate have negative and significant impact on Nigeria's Gross Domestic Product (GDP). The coefficient of determination which measures the goodness of fit of the model as revealed by r-square (r2) indicates that 77.7% of the variations observed in the dependent variable (economic) were explained by variations in the independent variable (exchange rate). The multiple regression showing the factors influencing economic growth in Nigeria from 2000 to 2016 gave an R2(multiple determination) value of 0.9341; which implies that the model explained about 93.41% variations between the dependent (economic growth) and independent variables (imports, exports, inflation rate, exchange rate and interest rate). The major factors influencing economic growth of Nigeria are exportations, inflation rate, exchange rate and interest rate. It is recommended that monetary policies aimed at exchange rate moderation should be strengthened through effective supervision and regulatory framework of financial system by the monetary authorities. There is need for further management of interest rate in Nigeria, because the more interest rate management, the more the level of economic growth in Nigeria.