Effects of Exchange Rates on Disaggregated Components of Balance of Payment in Nigeria

Yahaya Umar Isah, Abdullahi Isah Usman and Risqot, Mohammed, Kabir

MPRA Paper from University Library of Munich, Germany

Abstract: This study examined the impact of exchange rate on disaggregated components of balance of payment in Nigeria for the period 2005-2020, using quarterly time series data generated from Central Bank of Nigeria Statistical bulletin, 2020. The Autoregressive distributed lag (ARDL) approach to co-integration and its corresponding error correction mechanism (ECM) were used as the method of analysis. The results indicated that exchange rate has a significant positive impact on individual components of balance of payment in Nigeria. However, inflationary pressures reduce the effectiveness of exchange rate in impacting positively on current account and capital and financial account components of balance of payment in Nigeria. Informed by these findings, the study suggested among other things that authorities in Nigeria should invest more attention in closing the gap between the official exchange rate and the real market exchange rate.

Keywords: Current account; capital and financial account; exchange rate; interest rate (search for similar items in EconPapers)
JEL-codes: E52 F00 G00 O10 (search for similar items in EconPapers)
Date: 2022, Revised 2022
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Published in Journal of Economics and Finance 2.6(2022): pp. 87-94

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