POLICY INTERVENTIONS FOR MANAGING EXCHANGE RATE VARIATIONS AND PROMOTING SUSTAINABLE ECONOMIC GROWTH IN NIGERIA

Abstract

This study evaluates policy interventions for managing exchange rate variations and promoting sustainable economic growth in Nigeria from 2012 – 2022. The specific objectives of the study are to examine the effect of the exchange rate on the gross domestic product of Nigeria, to determine the effect of the inflation rate on the gross domestic product of Nigeria and to assess the effect of interest rate on the gross domestic product of Nigeria. This study made use of secondary source of data collection. The research data were extracted from the CBN Statistical bulletin. It employs ordinary least square regression analysis to evaluate the effect of exchange rate, inflation rate and interest rate on GDP which is the dependent variable. The first hypothesis delves into the impact of exchange rates on GDP. The empirical findings strongly support this hypothesis, indicating a significant and positive influence of exchange rates on GDP. Exchange rate fluctuations have a notable effect on the economic performance of Nigeria. The second hypothesis investigates the effect of inflation rates on GDP. The results revealed that inflation rates exerted a significant and negative effect on GDP. High inflation rates are associated with decreased economic growth, emphasizing the importance of price stability for sustained economic development. The third hypothesis explores the effect of interest rates on GDP. The findings highlighted that interest rate have a significant and positive effect on GDP. This suggests that interest rate policies can be leveraged to stimulate economic growth. Therefore, the study provides empirical evidence of the intricate connections between exchange rates, inflation rates, interest rates, and GDP in Nigeria. These findings hold valuable implications for policymakers, emphasizing the need for a balanced and well-coordinated monetary policy framework that considers the interplay of these factors to foster sustainable economic growth.