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Trade Balance, Exchange Rate and Money Supply in Nigeria: Growth Implications and Lesson for African Countries

Author

Listed:
  • Kunle Bankole Osinusi

    (Tai Solarin University of Education, Ogun State (Nigeria))

  • Nurudeen Abiodun Lawal

    (Tai Solarin University of Education, Ogun State (Nigeria))

  • Sodiq Olaide Bisiriyu

    (Tai Solarin University of Education, Ogun State (Nigeria))

Abstract

The significance of trade in the development of nations made this study examine the impact of trade balance, exchange rate, and money supply on economic growth with reference to Nigeria's economy and serve as a lesson for other African countries. The study relies on the Mundell-Fleming BOP model for its framework with the use of secondary time-series data extracted from the statistical bulletin of the Central Bank of Nigeria from 1981 to 2020. The ARDL cointegration of the least square was adopted and the result showed a long-term relationship among trade balance, exchange rate, broad money supply, interest rate, inflation rate, and economic growth in Nigeria. Our study thus concludes that the oil trade balance is the fundamental driver of Nigeria's economic growth and appropriately, we suggested that to ensure economic growth in Nigeria and other African countries; the government should strategize on policies to develop trade in the non-oil sector; also the monetary authorities should design frameworks towards making money supply growth enhancer, and stabilization of the exchange rate for domestic countries to gain more from trade by intensifying the flux of credit to the real and exporting sector towards setting the economies on the track of expansion.

Suggested Citation

  • Kunle Bankole Osinusi & Nurudeen Abiodun Lawal & Sodiq Olaide Bisiriyu, 2022. "Trade Balance, Exchange Rate and Money Supply in Nigeria: Growth Implications and Lesson for African Countries," Management & Economics Research Journal, Faculty of Economics, Commercial and Management Sciences, Ziane Achour University of Djelfa, vol. 4(2), pages 25-44, September.
    • Handle: RePEc:alv:journl:v:4:y:2022:i:2:id:213
    DOI: 10.48100/merj.2022.213
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    References listed on IDEAS

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    More about this item

    Keywords

    Trade Balance; Exchange Rate; Money Supply; Economic Growth; Autoregressive Distributed Lag (ARDL); Mundell-Fleming Model;
    All these keywords.

    JEL classification:

    • C19 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Other
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies

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