Effect of Foreign Exchange Rate on Economic Growth in Nigeria: An Empirical Analysis

Abstract

The Nigerian monetary authorities have implemented several foreign exchange policies with the aim of achieving faster economic growth but without desired success. This study was conducted to examine the effect of foreign exchange rate 
on economic growth in Nigeria between1985 and 2019. Multiple regression techniques were employed on time series data covering the period under investigation. It was found that while nominal foreign exchange rate and foreign exchange reserves have positive effect on gross domestic product, real foreign exchange rate has negative effect on gross domestic product in Nigeria. Therefore, it was recommended that Government of Nigeria should adopt policies that will lead to rise in foreign exchange value of naira. To this end, frantic efforts should be directed at creating enabling environment that would encourage foreign investors to come and invest in the economy and/or Producing manufactured goods for foreigners to come and buy. This will lead to rise in the demand and nominal value 
for Nigerian currency and hence economic growth in the country.