Exchange Rates Fluctuations and International Trade in a Mono-product Economy: Nigeria’s Experience, 1986-2018

Abstract

This study sought to examine the effects of Exchange Rate on the International Trade in a Mono-Product Economy: Nigeria’s experience 1986–2018 Nigeria has a large population and as a nation, she imports virtually everything including toilet tissues and toothpicks. In fact, in some quarters, the consumption of imported goods has become a status symbol. With few functional manufacturing firms, her major foreign Exchange earner being Crude Oil accounting for over 70% of her foreign exchange earnings has suffered consistent price decreases and even showing no signs of recovery. Holding to her inability to process sufficient quantities of the Crude for local consumption, a large chunk of the foreign Exchange earned is spent in importing processed Petroleum Products from other Countries. Furthermore, the Citizens’ uncontrollable and insatiable appetite for imported goods(ranging from food to fodder, to electronics, Ceramics and all sorts of building materials including raw materials, to automobiles and worst of it all Medical Tourism) including so many ostentatious items has put further strain on her foreign exchange and by implication the Exchange Rate of the Naira. Ex post facto method was adopted In order to test the hypothesis, the researcher adopted Augmented Dickey Fuller, Vector Error Correction Model and co-integration tests. Adopting a VECM and Co-integration framework with particular focus on the Nigerian economy, the following findings were made: Nigerian Economy shared a long run co-integrating relationship with the studied international trade related variables, Nigerian economy adjusts at 81% to the shocks and dynamics of the exchange rate and its correlates and a causal relationship exists between export and exchange rate and all the studied variables in the block exogeneity form. It was recommended that: CBN should continue with the reduced Exchange Rate on Agriculture and other Manufacturing activities as this is capable of increasing Investment which will result in increased Foreign Exchange earnings through export of Agricultural products and even other made –in-Nigeria products, Firms should be licensed to build refineries for processing of Our Crude Oil, this will make refined petroleum Products available, and affordable thereby eliminating the endemic fraud embedded in subsidy payments. Provision of adequate infrastructure in the Country especially in the areas of Power and Medicare; this will go a long way in assisting manufacturing firms as well as reduce the cost of Medical Tourism.

Exchange Rate Fluctuations and Firm’s Survival: Evidence Manufacturing Contribution to the Nigerian Economic Growth

“…As a result, some companies not really doing very well while some are closing down and not very many are coming up. Several school of thought have aligned differently as to the effect of exchange rate fluctuations on business survival; Akinmulegun & Falana (2018); Orji, Ogbuabor, Okeke & Anthony-Orji (2018) are of the view that exchange rate fluctuations has a positive and significant effect on manufacturing and industrial output while; Emmanuel, Enock & Opoku (2019); Kalu & Anyanwaokoro (2020), Nwobia, Ogbonnaya-Udo & John (2020 in their submissions noted that exchange rate fluctuations has negative and significant effect on manufacturing companies performance in Nigeria. Opaluwa et al (2010), Musa and Sanusi (2013).…”

“…The study recommended that Government should uphold the restriction policy on the importation of similar products manufactured in Nigeria so as to create and open more markets for the locally manufactured goods to thrive. Kalu & Anyanwaokoro (2020); investigated the effect of Exchange Rates Fluctuations on International Trade in a Mono-product Economy: Nigeria's Experience, 1986-2018. Ex post facto method was adopted.…”