AN EMPIRICAL ANALYSIS OF THE DETERMINANTS OF EXCHANGE RATE IN NIGERIA (1983-2007)

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ABSTRACT

This research work is on the empirical analysis of the determinants of exchange rate in Nigeria. (1983-2007). The main objectives of carrying out this research is to find out the profile that exists between inflation, consumer price index and exchange rate determinant in Nigeria.

To do this successfully, two hypothesis was formulated thus: Ho: inflation has no significant impact on exchange rate in Nigeria. Ho: consumer price index has no significant impact on exchange rate determination in Nigeria. During the research annual time series data for the period (1983-2007) was used. Linear regression method with the application of OLS was used to estimated the parameter, t-test was used for the test statistics, from the analysis, the following were the findings:- the influencing power of inflation and consumer prices index to exchange rate is high and significant. Inflation and consumer price index has a vital position in exchange rate determination in Nigeria. The following are recommended. Federal government to ensure sanity in the management of the foreign exchange market. Need for a continued stimulation of the real and productive sectors.

TABLE OF CONTENTS

Title page i

Approval page ii

Dedication iii

Acknowledgment iv

Abstract v

Table of contents vi

CHAPTER ONE

INTRODUCTION

1.1 Background of the study 1

1.2 Statement of the problem 12

1.3 Objectives of the study 16

1.4 Hypothesis of the study 17

1.5 Significance of the study 18

1.6 Scope/limitation of the study 20

1.7 Organization of the study 21

CHAPTER TWO

LITERATURE REVIEW.

2.1 Theoretical literature 23

2.2 Empirical literature 34

2.3 foreign exchange management during SAP 40

2.4 Dual exchange rate 45

2.5 Limitation of the previous studies 46

References 48

CHAPTER THREE

RESEARCH DESIGN AND METHODOLOGY

3.0 Methodology 50

3.1 Model specification 51

3.2 Method of evaluation 52

3.3 Decision rule 53

3.4 Data required and sources 55

CHAPTER FOUR

4.0 PRESENTATION AND ANALYSIS OF RESULTS

4.1 The empirical results 56

4.2 Statistical test of significance 59

4.3 Evaluation of the working hypothesis 60

4.4 Second order tests 61

4.5 Examination of the algebraic sign of

the parameter estimated 62

4.6 Implication of the results 64

CHAPTER FIVE

5.0 SUMMARY, CONCLUSION AND RECOMMENDATIONS

5.1 Summary of the findings 66

5.3 Recommendations 69

Bibliography 71

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AN EMPIRICAL ANALYSIS OF THE DETERMINANTS OF EXCHANGE RATE IN NIGERIA (1983-2007)

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