THE IMPACT OF EXCHANGE RATES FLUCTUATION ON NIGERIA’S CURRENT ACCOUNT BALANCE

ABSTRACT

This research paper presented a concise analytical look at the impact of exchange rate fluctuations on Nieria’s current account balance over the period of 1981 – 2019, to this effect, an empirical analysis was carried out in an attempt to identify factors which affect current account balance both directly and indirectly in Nigeria with the use of the Fully Modified Ordinary Least Squares (FMOLS). Results obtained suggested that money supply and government expenditure play significant roles in determining the current account balance of Nigeria. The CUSUM stability test also showed that a long run stable relationship exist between the variables studied.

For continuous growth and stability of the current account balance to be encouraged and sustained the government through the use of fiscal and monetary policies should ensure that the productive capacities are improved upon to encourage more export and reduce import thereby diversifying the economy and reducing foreign dependence.