Modelling intervention of Columbian peso to Nigerian naira exchange rates due to 2016 & 2020 Nigerian economic recessions

Abstract

The modelling and forecasting of exchange rates yield valuable outcomes that contribute to informed financial decision-making. This study aims to analyze the impact of the intervention of the Columbian PESO on the exchange rates of the Nigerian Naira during the economic recessions of 2016 and 2020. By examining the fluctuations in the exchange rate, this research seeks to gain a deeper understanding of the bilateral commercial relationship between the two nations. The data pertaining to the daily exchange rates between the Nigerian Naira and the Columbian Peso for the periods spanning from 1 January to 31 August 2016 and from 1 September to 31 December 2020, were obtained from the official websites of the Central Bank of Nigeria. Based on the acquired results, it was noted that the exchange rates of COP/NGN together with their pre-intervention series, exhibited a linear trend, indicating their nonstationary nature. The exchange rates attained stationarity through the process of differencing of order one, and the fitted intervention model was deemed appropriate.