Exchange Rate Volatility and Export Performance in Nigeria: A Generalized Autoregressive Conditional Heteroskedasticity (GARCH) Analysis

Prior to the Structural Adjustment programme (SAP) in 1986, the Federal Government subsidized the exchange rate. To that extent, the Nigerian exchange rate was relatively stable to other major currencies of the world. However, after the floating exchange rate regime post SAP, Nigeria has witnessed fluctuating exchange rate and this has caused volatility which has hampered the export performances. Bearing in mind the Sustainable Development Goal eight of economic growth, the purpose of this paper was to investigate the level of exchange rate volatility on Nigeria’s export performance. The dependent variable was agricultural export volume and the independent variables were exchange rate volatility, inflation, with gross domestic product per capita. The secondary dataset was from 1986 till 2020 and was culled from CBN statistical bulletin. Econometric analysis used included the augmented dickey-fuller estimation, the generalized autoregressive conditional heteroskedasticity (GARCH), Johansen Co-integration, and granger causality. Findings from the unit root showed that all the variables were stationary at first difference. The ARCH/GARCH result revealed that the previous year’s export information (that is ARCH) could influence current year’s exchange rate volatility. Also, the GARCH displayed that past export would affect the present exchange rate volatility. Furthermore, the Johansen cointegration showed that all the independent variables had a longrun effect on export, and finally, there existed a causal relationship between exchange rates volatility and exports. Finally, it was recommended that there should be diversification of the Nigeria’s exports base from crude oil to agricultural and service exports.