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ABSTRACT
The study examined the relationship between exchange rate and economic growth in the Nigerian economy between 1986 and 2022. The research relied on the Autoregressive Distributed Lag (ARDL) and the Vector Autoregressive models as estimation techniques. Data were sourced from the Central Bank of Nigeria Statistical bulletin and the World Bank Development Indicator (WDI). The stationarity test were carried out so as to avoid spurious results. The co-integration test revealed that there was a along run relationship between exchange rate RGDP, which as the dependent variable and other independent variables. The result of long-run estimations shows that Exchange rate (EXR) was seen to have a positive and insignificant impact on economic growth in the long-run, Inflation rate (INF) showed a negative and significant impact on economic growth in the long-run, as inflation rate grows by one percent economic growth falls by eleven percent in the long-run, Foreign Direct investment showed a positive and significant impact on economic growth in the long-run, as one percent increase in Foreign Direct investment (FDI) results in more than one hundred and ninety three percent increase in Economic growth, also in the long-run Government expenditure (EXR) showed a negative and significant impact on economic growth, as one percent increase in government expenditure results in more than two hundred and sixty nine percent fall in economic growth in the long-run. A stable exchange rate will help investors make financial decisions about investment inflows from abroad hence thereby increasing economic growth. From the result, an increase in exchange rate appreciation of the domestic currency leads to a fall in economic growth. This study recommended that government should strive to have a stable currency. Also, it was recommended that an appropriate step should be taken s to ensure that the country’s currency is neither overvalued nor undervalued to help the economy grow.
