Exchange Rate, Inflation and the Nigerian Balance of Payment

Abstract

This study examined the relationship between exchange rate, inflation and balance of payment in Nigeria using yearly time series data spanning from 1986 to 2015. The researchers adopted Ordinary Least Squares (OLS) multiple regression technique for analysis. The study revealed among other that the core variables (exchange rate and inflation) of this study have statistically significant negative impacts on balance of payment (the dependent variable) during the investigated period. In addition, the result showed that domestic credit, money supply and Rgdp are statistically significant drivers of balance of payment in Nigeria. Sequel to the findings, the Nigerian government, economic planners and policymakers are advised to (as a matter of urgency) make policies that will boost productivity and enhance/promote more exports of goods and services. Efforts should also be made to check the rising rate of inflation so as to restore stability to the Nigeria economy.

Keywords: Exchange Rate, Inflation rate and Balance of Payment