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ABSTRACT
The project work makes an effort to investigate the nature of the exchange rate's influence on Nigeria's macroeconomic stabilization. To make the empirical results reliable and robust, a sequence of econometric techniques is used to analyze the project work effectively. The techniques used for these work include the preliminary unit root test of stationary using the Augmented Dickey Fuller test, cointegration, and error-correction techniques. The annual series of data used in this study span the years 1981 through 2020. The result showed that the independent variables are non-stationary at levels while the cointegration test shows that the 95% critical ADF value of -2.957 is exceeded by the ADF test statistic result of (-5.713) and this demonstrates the residuals' stationary nature of exchange rates, external trade, and macroeconomic stabilization do indeed cointegrate (measured by growth rate of the economy). The relationship between macroeconomic stabilization and choose explanatory variables in Nigeria thus exhibits a long-term equilibrium. The growth rate of real GDP Error Correction Model's shows strong diagnostic statistics. The model's goodness of fit is comparatively good. The corrected R-squared value of 0.93 shows that the explanatory factors and the ECM term account for more than 93 of the significant variations in the growth of the Nigerian economy. The F-statistic value of 21.6 passes the significance test at the 1% level of significance. Therefore, we cannot rule out the possibility of a short-term, substantial linear relationship between the growth rate of real GDP (GRGDP) and all of the independent variables. The value of the error correction term of -0.71 indicates that the long-term adjustment to equilibrium is relatively quick and the apparent lack of autocorrelation in the model is demonstrated by the DW statistic value of 1.71, which is very near to two. This has the implication that the model short-run estimations are accurate for analysis of structures and guiding policy decisions. In conclusion, the results show that macroeconomic stabilization is significantly impacted by exchange rate stability, interest rates and inflation. The following recommendation was given in light of the findings: Nigeria should implement sound counter - cyclical measures to prevent the cyclical variation in monetary aggregate and other macroeconomic aggregates. It is imperative to push forward with the implementation of outward-looking international economic policy and maintain a steady pace of rapid economic growth.
