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This study evaluates the effect of exchange rate volatility on economic growth in Nigeria from 1986 to 2014. It determines the extent and manner to which economic growth responds to exchange rate volatility in Nigeria. The empirical analysis of this study is to determine the degree of volatility of real effective exchange rate using the Generalised Autoregressive Heteroskedasticity (GARCH) model and the Generalized Method of Moments is used to determine the effect of real exchange rate volatility on economic growth. The study finds that there is high volatility of real effective exchange rate. It also reveals that real effective exchange rate is negatively and significantly related to economic growth. This finding suggests that exchange rate volatility is harmful to the growth of the Nigerian economy. This study recommends that government should constantly seek to maintain a stable exchange rate, increase its expenditure, particularly capital expenditure and implement sustainable reforms to increase the depth of the financial sector.

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This paper examines the Nigerian economy and the tendency for its growth in the face of several socio-political challenges facing the country, which have hampered the rate of economic development in spite of the tremendous human and material resources inherent. The paper identifies the socio-political challenges to include corruption, poverty, unemployment, insecurity, politics and governance, among others. The central argument of the paper is that steady economic growth can be achieved and financial crisis mitigated in Nigeria, if the effects of socio-political challenges, which are the key factors that have contributed to the high poverty, unemployment and economic instability in the country, are minimised. To ensure economic growth and move the country forward politically and economically, government must be more accountable in managing the nation’s resources in order to avoid wastage, poverty and unemployment. Close attention should be given to those socio-political challenges in the formulation of policies that aimed at maintaining economic growth at a level commensurate with the country’s growth rate. This study put forward that government must be proactive in all issues relating to the socio-political challenges to prevent resource mismanagement, poverty, unemployment, insecurity and slow economic growth in future.