Exchange Rate Effect on Import Volume in Nigeria (1981 – 2019)

Inyang, Nora Francis; Effiong, Ubong Edem

doi:10.14445/23939125/ijems-v8i2p105

Cited by 2 publications

(2 citation statements)

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“…This insignificant effect from exchange rate is of reality since irrespective of the exchange rate if a the demand for import will still be positive. The insignificant effect of exchange rate on import demand conflicts with earlier findings reported by Inyang and Effiong (2021) where it was observed that the long-run effect of exchange rate on import demand is negative and significant. The findings offer a robust theoretical forecasts concerning the bearing of income, import prices and foreign exchange reserves on imports demand, as it pertains to Nigeria.…”

Section: Long-run Dynamicscontrasting

confidence: 97%

“…The import price elasticity estimate of -0.0014 is in tandem with the negative coefficient reported by Sinha (1997); Arize and Osang (2007) and Arize and Malindretos (2012) but the difference is that the absolute value of our estimated elasticity coefficient is far less than theirs. Meanwhile, it elasticity coefficient is similar to the findings of Inyang and Effiong (2021) where they obtained an elasticity coefficient of -0.0020 for Nigeria. For foreign exchange reserves, the estimated coefficient of 0.1237 is also less than 0.3 in the study conducted by Arize and Osang (2007) where all the countries considered, except Colombia with 0.65, had the elasticity coefficient of foreign exchange reserves to be less than 0.3.…”

Section: Long-run Dynamicssupporting

confidence: 85%

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Foreign Exchange Reserves and Import Demand in a Developing Economy: New Evidence from Nigeria

Effiong¹

2022

2641-5313

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The attempt in this study has been to detect the influence of foreign exchange reserves on import demand in Nigeria. With data spanning from 2000 to 2020, we estimated the long-run and short-run import demand function using ‘fully modified ordinary least squares’ and ‘error correction model’ respectively after we established that our variables were integrated of the first order and that cointegration exists. The long-run import demand function pointed out that the effect of foreign exchange reserves on import demand is positive but insignificant but such effect turned negative and significant in the short-run. Import price was also noted to put forth a negative sway on import demand with its effect being significant. Income was observed to wield a positive long-run influence on import demand while the effect of exchange rate was positive and significant in the long-run but became negative and significant in the short-run. By the elasticity coefficients, income elasticity put forth a greater influence on import demand compared to every other variable with the coefficient being greater than unity. It therefore becomes pertinent for actions toward reducing the income coefficient to less than or equal to one to be instituted. It is critical that import demand management be regarded as an aspect of an inclusive stabilization strategy. Imports should be targeted as part of this effort to compensate for shortfalls in domestic production. Furthermore, strategies that reduce government spending or raise taxes (contractionary fiscal policy) could reduce income growth which is a chief driver of import demand.

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Section: Long-run Dynamicscontrasting

confidence: 97%