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Exchange Rate Volatility and Imports in Nigeria

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  • O. Dickson Oyovwi

Abstract

This paper offers empirical evidence on the impact of real exchange rate volatility on Nigeria’s imports. A review of the literature reveals that exchange rate volatility can have either positive or negative effects on imports. The empirical analysis began with testing for stationarity of the variables by applying the Augmented Dickey-Fuller (ADF). This was followed by co-integration test of the model. Parsimonious ECM model was estimated with the Schwarz criterion and Akaike information criterion as lag length selection criterion. The result indicates that real exchange rate volatility has no significant effect on Nigeria’s imports. This is an indication that domestic consumption is skewed towards imported goods which indicates further, that Nigerian export has a high import content. Also, the study found that devaluation as a policy instrument to reduce trade imbalance has not discouraged massive importation. Since exchange rate volatility did not significantly explain imports, it is thus recommended that more stringent measures like outright ban and quantitative restrictions be adopted to reduce pressure on the external sector.

Suggested Citation

  • O. Dickson Oyovwi, 2012. "Exchange Rate Volatility and Imports in Nigeria," Academic Journal of Interdisciplinary Studies, Richtmann Publishing Ltd, vol. 1, November.
    • Handle: RePEc:bjz:ajisjr:12
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    References listed on IDEAS

    as
    1. Peter B. Clark, 1973. "Uncertainty, Exchange Risk, And The Level Of International Trade," Economic Inquiry, Western Economic Association International, vol. 11(3), pages 302-313, September.
    2. Aliyu, Shehu Usman Rano, 2009. "Impact of Oil Price Shock and Exchange Rate Volatility on Economic Growth in Nigeria: An Empirical Investigation," MPRA Paper 16319, University Library of Munich, Germany, revised 10 Jun 2009.
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