Nigeria’s economy has suffered from decades of declining economic performance, leading to its increasing poverty rate. This is largely attributed to the poor economic outcomes resulting from ineffective policies and poor performance of macroeconomic indicators. This study examines the causal relationships among selected macroeconomic variables in Nigeria, focusing on GDP, interest rate, inflation, unemployment rate, and exchange rate. Data were obtained from the Central Bank of Nigeria (CBN) and the National Bureau of Statistics (NBS), spanning from 1980 to 2023. The study utilises the Augmented Dickey-Fuller unit root test, Johansen Cointegration analysis, and Pairwise Granger Causality/Block Exogeneity Wald Tests. The ADF test was used to check for the presence of unit roots in the time series data, which helps to determine the stationarity of the series. The results reveal that while GDP does not significantly Granger-cause other variables. However, the interest rate exhibits a causal relationship with both inflation and the exchange rate. Additionally, the exchange rate Granger causes inflation significantly, largely due to Nigeria's dependence on imports and low domestic productivity. The result of the cointegration evidence supports the existence of interdependencies among the macroeconomic variables, which is crucial for economic modelling and policy analysis. The establishment of cointegration equations indicates that these variables share a long-term equilibrium relationship, meaning they move together over time despite short-term deviation, as shown in the result. The findings highlight the critical need for policymakers to consider the interconnectedness of these variables when designing economic policies.
Auwal et al. (Tue,) studied this question.