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Financial Development, Exchange Rate Stability and Trade in Nigeria

Author

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  • Ahmad Ahmad

    (Central Bank of Nigeria)

Abstract

This study examines the impact of financial development, exchange rate stability, economic progress, FDI, and population on trade in Nigeria using the ARDL approach of estimation from the period 1980 to 2022. The outcome of the unit root test indicates that all the variables are stationary at one percent level of significance. Similarly, the bound test also confirms the long-run association among the model variables. The result of the short-run estimates reveals that financial development; exchange rate stability, economic progress and FDI increased the level of trade in Nigeria. However, population is not a determinant factor of trade in the nation. The long-run result shows that financial development, exchange rate stability, economic progress, FDI, and population significantly increase the level of trade performance in the country. Hence, the study suggests financial development policy reform through monetary policy instruments that will enhance the level of credit allocation and maintain the stability of exchange for effective trade and economic growth in the country. Nonetheless, the limitation of the study may consist of the incorporation of other important variables like energy use, industrial growth, and pollution. Accordingly, future studies should consider these factors to improve the policy analysis and recommendations.

Suggested Citation

  • Ahmad Ahmad, 2023. "Financial Development, Exchange Rate Stability and Trade in Nigeria," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 7(11), pages 1552-1557, November.
    • Handle: RePEc:bcp:journl:v:7:y:2023:i:11:p:1552-1557
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    References listed on IDEAS

    as
    1. Yushi Jiang & Muhammad Irfan Khan & Syed Imran Zaman & Athar Iqbal, 2021. "Financial development and trade in services: Perspective from emerging markets of Asia, South and Central America and Africa," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(3), pages 3306-3320, July.
    2. Muhammad Tariq Majeed, 2016. "Economic growth, inequality and trade in developing countries," International Journal of Development Issues, Emerald Group Publishing Limited, vol. 15(3), pages 240-253, September.
    3. Jong Woo Kang & Suzette Dagli, 2018. "International trade and exchange rates," Journal of Applied Economics, Taylor & Francis Journals, vol. 21(1), pages 84-105, January.
    4. Bahmani-Oskooee, Mohsen & Gelan, Abera, 2018. "Exchange-rate volatility and international trade performance: Evidence from 12 African countries," Economic Analysis and Policy, Elsevier, vol. 58(C), pages 14-21.
    5. Rebelo, Sergio, 1991. "Long-Run Policy Analysis and Long-Run Growth," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 500-521, June.
    6. Nisar Ahmad & Mian Sajid Nazir & Bilal Nafees, 2018. "Impact of financial development and credit information sharing on the use of trade credit: Empirical evidence from Pakistan," Cogent Economics & Finance, Taylor & Francis Journals, vol. 6(1), pages 1483466-148, January.
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