FORECAST OF EXCHANGE RATE DETERMINANTS IN NIGERIA
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FORECAST OF
EXCHANGE RATE DETERMINANTS IN NIGERIA
ABSTRACT
It has been
noted that the Nigeria economy has gone through series of transformation since
independence. Her exchange rate
determination has taken various shapes from administratively deformed rate to a
market determined rate. These have also
be associated with deficient problems.Â
As a result of these problems, the government through the help of the
CBN (Central Bank of Nigeria) tries to regulate the exchange rate system. The adoption of Structural Adjustment
Programme (SAP), where main element was Second-tier Foreign Exchange Market.
The
hypotheses of this study indicate that there is a significant positive
relationship between Exchange Rate, Interest Rate, External Reserve and
Inflation and there is a negative relationship between exchange rate, Gross
Domestic Product and Balance of Payment.Â
To validate this hypothesis data gotten from secondary sources were
estimated and analyzed among the Ordinary Least Square Method (OLS) and
Cochrane-Orcutt Method. The independent
variables used were balance of payment, Gross Domestic Product, Interest Rate,
External Reserve and Inflation, while the dependable variable was exchange
rate. Â There was also a drive towards
forecasting exchange rate.
The
empirical analysis showed that about 87% of the mean value of the exchange rate
is explained by the explanatory variables.Â
This shows that the estimated model regression line is a good fit and
the result of the null hypothesis for the forecast was less than the figure of
the take, which means it forecast well.
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