The Effect of Exchange Rate on Gross Domestic Product (GDP) on the Nigerian Economy using ARDL-ECM approach

Abstract

 M.H. Ramat, Y. Zakari*, M. Usman, I. Muhammad, J.Y. Falgore and H. G. Dikko

This paper investigates the effect of the exchange rate on the gross domestic product (GDP) on the Nigerian economy from 1981-2021. The data was obtained from the CBN annual statistical bulletin. The application of the ARDL-ECM procedure for the analysis indicated that GDP in Nigeria is not responsive to exchange rate movement on the long run. A short run relationship was found to exist between GDP and exchange rate which is statistically significant. The Error correction mechanism (ECM) was found to have a short run dis-equilibrium adjustment of about 68.75% for correcting any deviation from the long run equilibrium. The model did not have a serial correlation but was found to be stable, which indicated that the result maybe appropriate for policy stipulation. Findings from the data obtained confirmed that policy makers should not completely rely on exchange rate manipulation as an instrument to boost the economy but should consider other economic variables to strengthen the GDP of the economy.