Exchange Rate Effect on Import Volume in Nigeria (1981 – 2019)

International Journal of Economics and Management Studies

© 2021 by SSRG - IJEMS Journal

Volume 8 Issue 2

Year of Publication : 2021

Authors : Nora Inyang, Ubong Effiong

10.14445/23939125/IJEMS-V8I2P105

How to Cite?

Nora Inyang, Ubong Effiong, "Exchange Rate Effect on Import Volume in Nigeria (1981 – 2019)," SSRG International Journal of Economics and Management Studies, vol. 8,  no. 2, pp. 30-40, 2021. Crossref, https://doi.org/10.14445/23939125/IJEMS-V8I2P105

Abstract:

In our study, we examined the effect of the exchange rate on demand for imports in Nigeria. The study is conducted over the period 1981 – 2019 and is done using the autoregressive distributed lag (ARDL) approach. The data for the study was obtained from the World Bank, Central Bank of Nigeria, and United Nations Conference on Trade and Development. The data were subjected to unit root test, Bounds test for cointegration, and error correction mechanism. The unit root test revealed that the variables were integrated in mixed order, while the Bounds test for cointegration and error correction mechanism supported the existence of a long-run equilibrium relationship between import demand and the explanatory variables. It was further discovered that the exchange rate had a negative and insignificant effect on import demand in the short run but a negative and significant effect in the long run. The real income exerted a negative and insignificant effect on the demand for imports in the short run, while in the long run, import demand is influenced by real income in a positive and significant manner. Though the import price index exerted a negative and insignificant short-run effect on the demand for imports, its effects became significant in the long run. The paper recommended that domestic production of most of the imported goods should be stimulated so as to ameliorate the dangers associated with over importation of even basic items.

Keywords:

exchange rate, import price index, consumption, real income, Nigeria, ARDL

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