FOREIGN EXCHANGE RATE INSTABILITY AND ECONOMIC GROWTH IN NIGERIA (2000-2023)

Abstract

This study investigated the effect of exchange rate instability on the Nigerian economy from 2000 to 2023, employing an ex-post-facto research design that analyzes existing data from reputable sources such as the Central Bank of Nigeria (CBN) and the World Bank. The research addressed the critical macroeconomic variables influencing Nigeria's Gross Domestic Product (GDP) and utilizes a judgmental sampling technique to compile data over a 24-year period. The study utilized descriptive statistics, unit root tests, and Least Squares regression to analyze the data. Diagnostic checks, including the Breusch-Godfrey and Breusch-Pagan-Godfrey tests, were conducted to ensure the model's validity and robustness. The study found that monetary policy rate (MPR) instability has a significant positive effect on GDP in Nigeria, while interest and inflation rate instabilities have no statistically significant impact. This highlights MPR instability as the primary monetary variable influencing economic growth. Consequently, the study suggested that the Nigerian government should enforce policies to stabilize the exchange rate, utilizing interventions in the foreign exchange market and maintaining adequate foreign reserves. The Central Bank of Nigeria should adapt its monetary policy framework to respond effectively to exchange rate fluctuations.