ABSTRACT

This research examined the impact of exchange rate fluctuations on Real Gross Domestic Product (RGDP) in Nigeria (1981Q1 - 2016 Q4). The data used were quarterly data sourced from Central Bank of Nigeria Statistical Bulletin of various issues. The analytical method employed was Econometric Techniques of ARDL (Autoregressive Distributive Lag) approach, the ECM (Error Correction Model) and the GARCH model was also used to determine the presence of volatility in the exchange rate. The variables used for this research are Inflation, Trade openness, Broad money supply, Total Gross Capital formation, exchange rate and RGDP. From the result, exchange rate was found to have an inverse relationship on economic growth in the short run and it is statistically significant indicating that it has a great impact on economic growth in the short run. The co-efficient of EXTVT in the short run is -0.0043 which indicates that increase in exchange rate volatility is likely to reduce economic growth by 0.0043 in the short run.-Furthermore, the paper establishes a negative long —run relationship between exchange rate volatility and economic growth with -0.1292 as its coefficient. Although it had negative relationship on economic growth in the long run, the impact is statistic1ly insignificant due to the p-value 0.1792 is greater than 0.05. This means that exchange rate volatility did not have a significant on economic growth in Nigeria in the long run. While the control variables LTGCF (Log of Total Gross Capital Formation), BMSY (Broad money supply) had a positive relationship with economic growth in Nigeria. This paper recommends managed float exchanged rate regime with a band beyond which the government will be forced to intervene in the foreign exchange market.