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.Â
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. 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.Â
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. To validate this hypothesis data gotten from
secondary sources were estimated and analyzed among the Ordinary Least Square
Method (OLS) and Cochrane-Orcutt Method.Â
The independent variables used were balance of payment, Gross Domestic
Product, Interest Rate, External Reserve and Inflation, while the dependable
variable was exchange rate. 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. 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 “t†take, which means it forecast
well.
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