Foreign Exchange Market and the Nigerian Economy

Abstract

The paper examined the contributions of the Foreign Exchange market to the economic growth of Nigeria through empirical investigation. The variables used for the foreign exchange indices were the official exchange rate and the parallel exchange rate while the variable for the economic growth of Nigeria is the Gross Domestic product (GDP).Secondly data were extracted from the CBN’S Annual reports and Statements of Account spanning ten (10) years (1996-2005). The analytical tools used to analyze the data are the regression and correlation analyses and the F- ratio techniques. It was discovered that there is a very high positive correlation between the official exchange rate and the GDP, also between the parallel exchange rate and the GDP. The two rates jointly determined the movement of the GDP. Therefore, the researcher is of the view that proper management of the foreign exchange should be put in place, being a necessary stimulant for economic growth of Nigeria and can be effectively and efficiently managed if conducive environment is created for more investment to thrive and other related problems are given appropriate and deserving solutions.

Keywords: Exchange Rate, Economic Growth, Foreign Exchange, Foreign Exchange Market