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VOLUME 04 ISSUE 10 OCTOBER 2021

Effect of Exchange Rate Fluctuation and Foreign Reserves on Macroeconomic Performance in Nigeria
1Nkire Nneamaka Loretta, 2Atayi Abraham Vincent, 3Ibukun Felix Olusegun (PhD),4Ogunbiyi Ayoola Olayinka(PhD)
1,2Department of Economics, Afe Babalola University, Ado Ekiti, Nigeria
3,4Department of Banking and Finance, Afe Babalola University, Ado Ekiti
DOI : https://doi.org/10.47191/ijmra/v4-i10-03

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ABSTRACT:

This study examines the effect of Exchange Rate Fluctuation and Foreign Reserves on Macroeconomics Performance in Nigeria from 1980-2019. The variables of interest include External Debt, Reserves, Exchange Rate, External Debt Servicing and Government Expenditure were analyzed using co-integration, auto-redistribution lag model (ARDL) and Granger Causality test to understand the long and short run relationship between the variables. Result revealed that there is a unidirectional relationship between foreign reserves and the exchange rate. Exchange rate Granger causes foreign reserves in Nigeria, while foreign reserves do not granger cause exchange rate Granger. This means that as the exchange rate depreciates or appreciates, it always has an impact on Nigeria's foreign reserves. The study recommends among other thing that the government should ensure that the country's foreign reserves are used and managed efficiently. This is because it has been established that foreign reserves have a beneficial impact on macroeconomic performance and stimulate economic growth both of which help to enhance the Nigerian economy.

Keywords

Exchange Rate, Foreign Reserves, Granger Causality and Nigeria.

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VOLUME 04 ISSUE 10 OCTOBER 2021

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