A SURVEY OF FOREIGN EXCHANGE RATE DETERMINANTS IN NIGERIA

Abstract

This study investigates the factors that are assumed to be determinants of foreign exchange rate movement in Nigeria using a 52 years annualized data from 1960-2011. The factors investigated are economic growth as proxied by Gross Domestic Product (GDP), Balance of Payment (BOP), external reserves, Composite Consumer Price Index (Inflation rate), deposit rate and lending rate were adopted as the independent variables while foreign exchange movement is the dependent variable. For this purpose, a model was specified. The model was regressed using the least square method. The data set for the study was extracted mainly from the CBN Annual Reports and Accounts, and Statistical Bulletins. The results of the regression show that there is no statistically significant relationship between the dependent and the independent variables.

Keywords: foreign exchange rate movement, Gross Domestic Product (GDP), Balance of Payment (BOP), external reserves, Composite Consumer Price Index (Inflation rate), deposit rate and lending rate