Real Exchange Rate Determinants in Nigeria (1971-2000)

Udousung, I. J.; John, D. E.; Umoh
October 2012
Global Journal of Management & Business Research;2012, Vol. 12 Issue 20, p21
Academic Journal
Nigeria possesses most of the prerequisites for building a strong and vital economy. However, all this potentials cannot automatically transform the country into prosperous nation. Conscious efforts and policies are required to encourage and attract domestic and foreign investors to improve the competitiveness of a nation. Conscious efforts and policies are required to encourage and attract domestic and foreign investors to improve the competitiveness of a nation's economic base. The study was set to analyze the Exchange Rate determinates in Nigeria (1971 - 2000). Six (6) variables were used in the exchange rate model namely: balance of payment, fiscal deficit, import tax, openness of the economy, trends and exports tax. Data on these variables were obtained largely from Central of Nigeria's publication and empirically analyzed using econometric technique. The result reveals that the coefficient of multiple determination, R2 became 0.95 percent with Durbin-Watson of 2.00. The result further reveals that import tax, trend, openness of economy and export tax had positive coefficients, implying a direct positive relationship between these variables and the real exchange rate. Hence, measures to improve the competitiveness of the economy should revolve around these four variables. However, openness of the economy, fiscal deficit and import tax were significant at 1 per cent probability level.


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