Exchange Rate Volatility and Export Competitiveness in Nigeria

Abstract This study investigated the effect of exchange rate volatility on export competitiveness in Nigeria for the period 1985-2024. Unit root test was conducted using the Augmented Dickey-Fuller (ADF) and the result revealed a mixed order of I(0) and I(1) variables. The Autoregressive Distributed Lag (ARDL) bound test was employed to test for co-integration among the variables. It was found from the bound that there was no significant long-run relationship between the real effective exchange rate, exchange rate volatility, GDP, inflation rate, lending rate, and non-oil exports in Nigeria within the period under study. The Autoregressive Distributed Lag (ARDL) was used to estimate the short-run parameters in the model. Short-run analysis shows that inflation and GDP are significant predictors of non-oil exports, although the practical impact of GDP is near- zero. However, exchange rate volatility and lending interest rates had negative and insignificant effects on non-oil exports in Nigeria. Based on the findings, the study concludes that in the short run, price levels and domestic production are engines of export performance in Nigeria. It is recommended that monetary authorities closely monitor the foreign exchange market and implement policies to mitigate Naira fluctuations, while fiscal policies should focus on enhancing national GDP through infrastructure development and industrial incentives to broaden the export base.