Determinants of exchange rate in Nigeria, 1970-2007: an empirical analysis.AbstractThe paper investigates the determinants of exchange rate in Nigeria, by employing co-integration and error-correction techniques. The results indicate that improvement in productivity, investment-GDP ratio, and high inflation leads to exchange rate appreciation. On the other hand, higher degree of openness, increases in foreign exchange reserves, and interest rate differentials result in exchange rate depreciation. Overall, the findings confirm the Balassa-Samuelson hypothesis, which states that high productivity differentials lead to exchange rate appreciation. Thus, we propose policies that would encourage and facilitate improvement in productivity in all sectors of the economy, raise investment and foreign exchange reserves, reduce inflation, stabilize and further liberalize interest rate, and increase the openness of the economy. Keywords: exchange rate, stationarity test, co-integration, error correction, Nigeria I. INTRODUCTION The role of exchange rate and its effects on macroeconomic performance has continued to generate interest among economists. Many economists argue that exchange rate stability facilitates production activities and economic growth. They are also of the view that misalignment in real exchange rate could distort production activities and consequently hinders exports growth and generate macroeconomic instability (Mamta Chowdhury, 1999). Exchange rate policy guides investors on the best way they can strike a balance between their trading partners, and investing at home or abroad (Balogun, 2007). Mordi (2006) argued that the exchange rate movements have effects on inflation, prices incentives, fiscal viability, competitiveness of exports, efficiency in resource allocation, international confidence and balance of payments equilibrium. Exchange rate refers to the rate at which one currency exchanges for another (Jhingan, 2003). Exchange rate is said to depreciate if the amount of domestic currency require to buy a foreign currency increases, while the exchange rate appreciates if the amount of domestic currency require to buy a foreign currency reduces. An appreciation in the real exchange rate may create current account problems because it leads to overvaluation. Overvaluation in turn makes imports artificially cheaper while exports relatively expensive, thus reducing the international competitiveness of a country (Takaendesa, 2006). Exchange rate volatility refers to the swings or fluctuations in the exchange rates over a period of time or the deviations from a benchmark or equilibrium exchange rate (Mordi, 2006). The existence of many parallel markets side-by-side the officially recognized foreign exchange market gives rise to exchange rate misalignment (Mordi, 2006). Instability and/or fluctuations in exchange rate hurt producers and investors alike because it affects their projected (planned) revenue and costs, including profits margin. For instance, businesses (base on the exchange rate) set out the amount of money to be committed into acquiring raw materials and equipments/machines from abroad. In the same manner, they estimate their future stream of incomes. Instability in the exchange rate may distort the realization of such estimates. For example, exchange rate depreciation results in high cost of importing raw materials and capital goods. This in turn raises the cost of production and reduces the profits of the firms importing these items. In order to cushion the effects of high cost of production, they (firms) would pass it on to the consumers in form of higher prices. Besides, production will decline and unemployment will rise. Couple with these, are the reduction in exports, accumulation of trade deficits and deterioration of balance of payments, as well as decline in the welfare of the people. Prior to the year 1986, Nigeria practiced a fixed exchange rate, when the Naira was pegged against the British pound and later on the American dollar. However, with the collapse of the Bretton wood institutions, a flexible exchange rate policy was adopted, and the Nigerian exchange rate was allowed to float and its value relative to the American dollar determined by market forces of demand and supply. Some of the policies employed to ensure exchange rate stability included among others: Second-Tier Foreign Exchange Market (SFEM), Autonomous Foreign Exchange Market (AFEM), Inter-bank Foreign Exchange Market (IFEM), the enlarged Foreign Exchange Market (FEM), and the Dutch Auction System (DAS). It is pertinent to mention here that the inability and failure of individual policy to achieve stability in the exchange rate led to the adoption of another. Despite various efforts by government to maintain exchange rate stability (as well as avoiding its fluctuations and misalignment) in the last two decades, the Naira continued to depreciate against the American dollar. For example, the Naira appreciated against the American dollar from N0.7143 in 1970 to N0.6159 in 1975 and further to N0.5464 in 1980 (see appendix 1). However, the exchange rate depreciated throughout the 1980s. For instance, the naira depreciated from N0.6100 in 1981 to N2.0206 in 1986 and further to N8.0378 in 1990. Although the exchange rate became relatively stable in the mid-1990s, it depreciated further to N102.1052, N120.9702, and N133.5004 in 2002, 2002, 2004; respectively. Thereafter, the exchange rate appreciated to N132.147, N128.6516, and N117.968 in 2005, 2006, and 2007; respectively (see appendix 1). In early 2009, the Naira depreciated to N170 against the American dollar. Some have attributed the recent depreciation to the decline in the nation's foreign exchange reserves. Others argue that the activities of some market operators (speculators) and banks are responsible for the recent decline in the value of the naira. It has also been argued that the quest for higher profits in the face of the global economic meltdown is forcing some banks to engage in 'round-tripping', a situation in which banks buy foreign exchange from the Central Bank of Nigeria (CBN) and sell to parallel market operators at prices other than the official prices. These practices lead to exchange rate fluctuations and misalignment. The exchange rate is approximately N150 against the American dollar. In his own view, Obadan, (2006) argued that some of the factors that led to the depreciation of the Nigerian exchange rate include weak production base, import-dependent production structure, fragile export base and weak non-oil export earnings, expansionary monetary and fiscal policies, inadequate foreign capital inflow, excess demand for foreign exchange relative to supply, fluctuations in crude oil earnings, unguided trade liberalization policy, speculative activities and sharp practices (round-tripping) of authorized dealers, over-reliance on imperfect foreign exchange market, heavy debt burden, weak balance of payments position, and capital flight. From the foregoing discussion, the questions that are raised include: (i) what are the determinants of the Nigerian exchange rate movement? (ii) what policy options can be drawn from any empirical study on the determinants of the Nigerian exchange rate? This study is very important because the Nigerian exchange rate has continued to depreciate against the American dollar since the 1980s, particularly following the deregulation of the foreign exchange market. Besides, instability in the exchange rate has far reaching implications such as high rates of inflation and unemployment, declining investment, low production and low competitiveness of exports, balance of payments disequilibrium, inefficiency in resource allocation, and low standard of living, to mention just few. Thus, examining factors that determine exchange rate movement becomes very important. The paper is organized as follows. Section one is the introduction while section two consists of literature review and theoretical framework. Section three contains methodology and model estimation, while section four is for discussion of results. Section five contains recommendations and conclusion. II. EMPIRICAL LITERATURE AND THEORETICAL FRAMEWORK This section reviews past empirical and theoretical literature on the determinants of exchange rate. Empirical Literature Many scholars have conducted empirical research in order to examine factors that influence the movement of the exchange rate. For instance, Yu Hsing (2006) empirically examined the determinants of short-term real exchange rates for Venezuela. The author confirmed that government deficit has positive effect on exchange rate, while broad money supply, world interest rate, county risk, and the expected rate of inflation have negative impact on exchange rate. The author suggested that, authorities should avoid fiscal indiscipline in order to prevent the exchange rate from real appreciation since it will check the country's exports from declining. Annsofie Petersson (2005) investigated the variables that affect exchange rate movements in Sweden, the United Kingdom and Japan against the US dollar for the period 1995 to 2004. The results indicate that interest rate differential is statistically significant in explaining changes in exchange rate in the three countries. In addition, interest rate has negative effect on exchange rate in Sweden and the United Kingdom. However, the influence of money supply, industrial production, and inflation differential on exchange rate varies between the countries. Odedokun (1997) studied a group of 38 African countries, by examining the impact of macroeconomic policies, devaluation and fundamentals on real exchange rate movement. The author found that public sector fiscal deficits, growth of domestic credit, domestic absorption-GDP ratio, government consumption-GDP ratio, private consumption-GDP ratio, improvement in terms of trade, income per capita and black market exchange rate premium lead to real exchange rate appreciation. On the contrary, devaluation, investment-GDP ratio, consumer-wholesale price ratio in trading-partner countries, and economic growth in industrial countries result in real exchange rate depreciation. Studies by Hsieh (1982), Marston (1987), and Edison and Klovland (1987) indicated that productivity differentials lead to exchange rate appreciation, thus confirming the Balassa-Samuelson effect. Imed Drine and Christophe Rault (2003) analyzed the main determinants of the real exchange rate in the Middle East and North Africa (MENA) countries. The authors' findings illustrate that output per capita, government consumption, real interest rate differentials, and the degree of openness of the economy influence the real exchange rate. In Zambia, Beatrice (2001) employed a co-integration technique to investigate the long-run determinants of the real exchange rates for imports and exports, and of the internal real exchange rate. The results showed that real exchange rate for imports is affected by terms of trade, government consumption, and investment share. Moreover, terms of trade, central bank reserves and trade taxes have long-run impact on the real exchange rate for exports. It was also found that terms of trade, investment share, and the rate of growth of real GDP have long-run effect on the internal real exchange rate. Lastly, foreign aid and openness have short-run influence on the real exchange rate indices. David Faulkner and Konstantin Makrelor (2008) used the single Engel Granger techniques to examine the drivers of the manufacturing equilibrium exchange rate over the period 1995 to 2006 in South Africa. The authors results showed that unit labour cost, productivity, government expenditure, and openness are the main drivers of the manufacturing exchange rate. In his paper, Mamta Chowdhury (1999) observed that nominal devaluation plays an important role in the real exchange rate determination. The author also reported that net capital inflow, foreign aid, trade restrictions and macroeconomic policies lead to real exchange rate appreciation in Papua Guinea. However, the author did not confirm any significant influence of the improvement in external terms of trade on trade-weighted real exchange rate. MacDonald and Ricci (2003) found that terms of trade, real interest rate differential, net foreign assets, and GDP per capita have positive influence on real exchange rate in South Africa. On the other hand, the degree of openness and overall fiscal balance have negative impact on real exchange rate. Speller (2006) investigated the exchange rate determinants in the industrialized commodity currency economies. The results illustrate that the price of the commodity exports was an important determinant of the real exchange in the group of countries studied. Frankel (2007) revealed that real exchange rate is positively related to terms of trade, real interest differential and lagged real exchange rate. However, capital account liberalization, risk premium and per capita income have negative effect on real exchange rate. Patel and Srivastava (1997) discovered that investment-GDP ratio, overall fiscal deficit and nominal exchange rate were the principal determinants of real exchange rate in India. In Angola, Takaendesa (2006) confirmed that terms of trade, real interest rate differential, domestic credit, openness and technological progress have long-run impact on real exchange rate. Overall, terms of trade, domestic credit and openness have significant influence on real exchange rate in the short-run, while terms of trade and domestic credit have both short-run and long-run effect on real exchange rate. In the same vein, Enrique Gelbard and Jun Nagayasu (2004) examined the determinants of Angola's real exchange rate. They found that the most important determinants of real exchange rate are oil prices and foreign interest rate. However, their results did not support the argument that monetary growth influences exchange rate. Thus, they advised that a flexible exchange rate is more appropriate than a fixed exchange rate regime. The econometric results of Aron et al. (1997) are indeed revealing. Firstly, they showed that capital flows lead to exchange rate appreciation. Secondly, trade openness, government expenditure, non-gold terms of trade and real price of gold have both short-run and long-run effects on real exchange rate. That is, more openness, worsening terms of trade and reduced capital flows lead to real depreciation. However, unsustained government expenditure results in exchange rate overvaluation. Moreover, nominal devaluation has a significant negative effect on the real exchange rate, while the lagged nominal devaluation has a significant positive effect on real exchange rate. Furthermore, excess domestic credit supply has a significant positive influence on real exchange rate, thus increases in domestic credit supply lead to exchange rate appreciation. Lastly, lagged growth differentials has positive and significant impact on real exchange rate. In Nigeria, Obadan (1994) reported that, whereas improvement in terms of trade leads to appreciation in nominal exchange rate, increases in net capital inflows results to real exchange rate appreciation. Furthermore, increases in monetary aggregates lead to real exchange rate depreciation. On his part, Juraj Stancik (2006) reported that whereas openness has a negative effect on exchange rate volatility, the 'news' variable has a positive influence on exchange rate volatility among the new EU members. Theoretical Framework The framework for this study is based on the Balassa-Samuelson hypothesis, which states that productivity differentials affect the movement of the real exchange rate. For example, if productivity in the tradeables sector of the economy grows faster than productivity in the non-tradeables sector, it will push-up wages in the economy, including the non-tradeables sector (David Faulkner and Konstantin Makrelor, 2008). The increase in wages in turn raises both domestic demand and prices of tradeables and non-tradeables, thereby leading to exchange rate appreciation. Thus, increases in productivity differentials results to an exchange rate appreciation. Besides productivity differentials, David Faulkner and Konstantin Makrelor (2008) argued that other variables can also influence the exchange rate. For instance, if a country is a net exporter of commodity, an improvement in the terms of trade would increase its wealth. This in turn increases domestic demand in the tradeables and the non-tradeables sectors of the economy. The increase in demand leads to higher commodity prices as well as exchange rate appreciation. On the contrary, deterioration in the terms of trade would not only reduce the wealth of a country, but also leads to a decline in domestic demand and prices, consequently exchange rate will depreciate. Moreover, David Faulkner and Konstantin Makrelor (2008) opined that, if a country has a positive net asset holding, it will enhance its capacity to import for some time. In addition, it will raise the country's demand for domestically produced goods (both tradeables and non-tradeables) as well as their prices, thus leading to exchange rate appreciation. Another important factor that affects the exchange rate is the degree of openness of the economy. If an economy protects its domestic producers (and goods) by introducing high tariffs, exchange controls and quotas on imports, domestic demand and commodity prices will increase. These lead to exchange rate appreciation. However, if the economy becomes more open and protection is reduced, the demand for domestic goods and their prices will fall, thus resulting to exchange rate depreciation (David Faulkner and Konstantin Makrelor, 2008). The authors also pointed out that foreign aid accounts for a high percentage of the GDP of many (poor) countries, and its eases their balance payments problems. They conclude that exchange rate rises with the inflow of foreign aid, and vice versa. Furthermore, the demand for a country's currency is an important determinant of the exchange rate. For example, if the demand for a country's currency is high, it will lead to exchange rate appreciation and vice versa (Mamta Chowdhury, 1999; Jhingan, 2003). Government fiscal policy also influences the movement of the exchange rate. For instance, an expansionary fiscal policy that raises government consumption expenditure would lead to high domestic demand for both tradeables and non-tradeables. This in turn leads to increase in commodity prices and exchange rate appreciation. Lastly, technological improvement (measured by the growth of real GDP) is also useful in explaining the exchange rate movement. Advancement in technology among other things raises the efficiency and productivity of factors of production, reduces costs of production and prices of the tradeables, and increases their competitiveness. This leads to exchange rate depreciation. However, if the advancement in technology raises income and demand for non-tradeables, but reduces the relative prices of tradeables to non-tradeables, exchange rate will appreciate (Mamta Chowdhury, 1999). III. METHODOLOGY AND MODEL ESTIMATION This study employs co-integration and error correction approach to estimate the relationship between exchange rate and its potential determinants. The econometric model has its basis on the Balassa-Samuel hypothesis which states that increases in productivity differentials lead to exchange rate appreciation. Thus the econometric model expresses the exchange rate (EXC) as a function of productivity differentials (PROD). However, in the literature, there are other variables that can influence exchange rate movement. They include government consumption expenditure (GOCO), openness of the economy (OP), investment (INVT), and interest rate differentials (INTD), inflation rate (INFL) and foreign exchange reserves (RES). Thus, the model is represented as: EXC = [[theta].sub.0] + [[theta].sub.1] [PROD.sub.t] + [[theta].sub.2] [GOCO.sub.t] + [[theta].sub.3] [INTD.sub.t] + [[theta].sub.4] [OP.sub.t] + [[theta].sub.5] [RES.sub.t] + [[theta].sub.6] [INVT.sub.t] + [[theta].sub.7] [INFL.sub.t] + [U.sub.t] (I) The variables are defined and measured as follows: productivity differentials refer to the growth rate of gross domestic product (GDP). Government consumption is measured as the ratio of government consumption expenditure to the GDP. Interest rate differentials refer to the difference between the Nigerian lending rate and the world interest rate (captured by the United States interest rate). Openness is measured by the ratio of total imports plus exports to the GDP. Investment is captured by the ratio of gross fixed capital formation to the GDP. Reserves refer to the nation's foreign exchange reserves, and inflation rate refers to the annual rate of inflation. Before estimating the exchange rate model, the authors determined whether the economic variables were stationary or not. This was done to avoid the generation of spurious results. The stationarity (unit root) test was conducted by employing the Augmented Dicker-Fuller (ADF) statistic. The result of the stationarity test is presented in the table below:
Table 1
Results of The Stationarity (Unit Root) Test
Variables ADF Statistic Critical values Order of integration
EXC -4.819583 1%=-2.630762 Stationary at first
(0.000) 5%=-1.950394 difference
10%=-1.611202
PROD -7.507163 1%=-2.634731 Stationary at first
(0.0000) 5%=-1.951000 difference
10%=-1.610907
OP -9.936828 1%=-2.630762 Stationary at first
(0.0000) 5%=-1.950394 difference
10%=-1.611202
INTD -6.364748 1%=-2.644302 Stationary at first
(0.0000) 5%=-1.952473 difference
10%=-1.610211
GOCO -6.177923 1%=-2.644302 Stationary at first
(0.0000) 5%=-1.952473 difference
10%=-1.610211
INVT -4.801166 1%=-2.644302 Stationary at first
(0.0000) 5%=-1.952473 difference
10%=-1.610211
RES -7.412588 1%=-2.636901 Stationary at second
(0.0000) 5%=-1.951332 difference
10%=-1.610747
INFL -5.946757 1%=-2.632688 Stationary at first
(0.0000) 5%=-1.950687 difference
10%=-1.611.059
ECM -2.185817 5%=-1.952473 Stationary at levels
(0.0299) 10%=1.610211
As indicated in the table above, variables such as exchange rate, productivity differentials, degree of openness, interest rate differentials, government consumption expenditure, investment, and inflation are stationary at first difference. However, foreign exchange reserves and the error correction variable are shown to be stationary at second difference and at levels, respectively. The next exercise is the estimation of the exchange rate function. The result of the estimation is presented below: Table 2 Results of the Regression Exercise Dependent Variable: EXC Method: Least Squares Date: 04/30/09 Time: 12:46 Sample (adjusted): 1977 2006 Included observations: 30 after adjusting endpoints Variable Coefficient Std. Error t-Statistic Prob. C 46.42800 29.28084 1.585610 0.1278 PROD(-2) -0.386215 0.138024 -2.798167 0.0108 OP(-1) 52.08746 24.30978 2.142655 0.0440 INTD(-1) 1.055282 0.665435 1.585853 0.1277 GOCO(-2) -233.9332 193.4497 -1.209272 0.2400 INVT -144.3614 57.26013 -2.521151 0.0198 RES 1.65E-05 3.43E-06 4.809739 0.0001 INFL -0.597042 0.199857 -2.987350 0.0070 ECM(-1) 0.811634 0.163857 4.953318 0.0001 R-squared 0.925151 Mean dependent var 38.07074 Adjusted R-squared 0.896638 S.D. dependent var 50.75758 S.E. of regression 16.31856 Akaike info criterion 8.665808 Sum squared resid 5592.204 Schwarz criterion 9.086168 Log likelihood -120.9871 F-statistic 32.44584 Durbin-Watson stat 1.836997 Prob(F-statistic) 0.000000 Note: Negative sign implies appreciation, while positive sign denotes depreciation. IV. DISCUSSION OF RESULTS The regression results indicate that the explanatory variables account for approximately 92.52 percent changes (or variations) in the exchange rate. The Durbin Watson statistic (1.84) illustrates the absence of autocorrelation. The F-statistic (32.45) shows that the explanatory variables are jointly significant and are capable of explaining changes in exchange rate. Moreover, the estimation reveals that productivity differentials is statistically and economically significant in explaining exchange rate. A 1 percentage increase in the productivity differentials in the previous two years leads to approximately 0.39 percentage appreciation in the exchange rate. This is in line with the work of Hsieh (1982) Marston (1987) Edison and Klovland (1987). Thus, if higher productivity results to an increase in higher wages and domestic demand, as well as raise prices of commodities in the economy, exchange rate will appreciate. The results also reveal that the degree of openness of the economy is statistically significant in explaining exchange rate movement. For instance, a 1 percentage increase in the degree of openness in the previous one year results in approximately 52.09 percentage decrease in exchange rate. This finding lends support to the one reported by Aron et al. (1997) and Takaendesa (2006). Thus, the more the economy is open, the lower the demand for domestically produced goods. This in turn reduces prices of domestically produced goods, consequently exchange rate will depreciates. Furthermore, the interest rate differential is shown to be statistically and economically significant in explaining the exchange rate. A 1 percentage increase in the interest rate differentials in the previous one year causes the exchange rate to depreciate by approximately 1.06 percentage. This confirms the work of Annosofie Petersson (2005). Thus, the higher the gap between Nigerian interest rate and the international rate, the higher the inflow of foreign capital, thereby causing exchange rate to appreciate. The results also show that investment has a statistically significant influence on exchange rate. A 1 percentage increase in investment causes the exchange rate to appreciate by approximately 144.36 percentage. This is in line with Patel and Srivastava (1997) and Beatrice (2001). Thus, if increases in investment lead to higher productivity, income and demand, as well as increase in prices within the economy, it will lead to exchange rate appreciation. Another discovery from the estimation is that foreign exchange reserves has a statistically significant effect on the exchange rate. For instance, a 1 percentage increase in the foreign exchange reserves causes the exchange rate to depreciate only by little. Thus, if increase in foreign exchange reserves raises the demand for imports, it will lead to exchange rate depreciation. The results also reveal that inflation rate is statistically significant in explaining exchange rate. A 1 percentage increase in inflation results to approximately 0.60 percentage appreciation in the exchange rate. This may be true if the increase (mild) in inflation induces producers to increase investment and raise production. This will in turn raise income, thereby leading to exchange rate appreciation. Unfortunately, the estimation reports that government consumption has an insignificant effect on the exchange rate. Lastly, the error correction variable has been found to be significant and positive, implying that there is a divergence between the actual and desired levels of exchange rate in Nigeria. V. RECOMMENDATIONS AND CONCLUSION Following the results obtained from the regression results, we recommend the following: (i) Government and policy makers should employ policies that would increase productivity in all sectors of the economy, through the creation of an enabling environment and provision of subsidies so that businesses can grow. This in turn would lead to exchange rate appreciation. (ii) Both private and public sector investment should be increased, in order to raise production. Public investment should take the form of increased spending on infrastructural development. This would induce and encourage private sector investment through increased profitability, consequently leading to exchange rate appreciation. (iii) Efforts should be geared towards increasing the nation's foreign exchange reserves. Increase in reserves ensures some level of stability in the exchange rate. The recent stability in the Nigerian exchange rate has been attributed to the rise in the foreign exchange reserves, which has enhanced the central bank's ability in meeting high foreign exchange demand. (iv) The economy should accommodate or tolerate some level of (mild) inflation in order to encourage producers to expand production of goods and services. This will eventually lead to exchange rate appreciation. (v) Government should employ appropriate trade policies in order to enhance exports and raise the value of the exchange rate. These include reduction in export and excise duties, including the value added tax VAT. (vi) Interest rate should be further liberalized so as to encourage the inflow of foreign capital. This will increase domestic investment and production, including demand for good and services, thereby leading to exchange rate appreciation. (vii) Government consumption expenditure should be carried out in a manner that it will encourage and promote investment, and increase domestic demand. Consequently, it will lead to exchange rate appreciation. (viii) Finally, government should ensure that the political system is deepened further, improve power supply and intensify the war against corruption, in order to encourage both domestic and foreign investment, as well as raise productivity. All of these should check the continuous depreciation of the exchange rate, and over a long term leads to its appreciation or stability.
APPENDIX 1: EXCHANGE RATE (NAIRA AGAINST THE AMERICAN DOLLAR)
Exchange rate Exchange rate
(Naira against depreciation/
Years the American dollar) Appreciation (9 b)
1970 0.7143 --
1971 0.6955 -2.70309
1972 0.6579 -5.71515
1973 0.6579 0
1974 0.6299 -4.44515
1975 0.6159 -2.2731
1976 0.6265 1.691939
1977 0.6466 3.108568
1978 0.606 -6.69967
1979 0.5957 -1.72906
1980 0.5464 -9.02269
1981 0.61 10.42623
1982 0.6729 9.3476
1983 0.7241 7.070847
1984 0.7649 5.334031
1985 0.8938 14.42157
1986 2.0206 55.76561
1987 4.0179 49.71005
1988 4.5367 11.43563
1989 7.3916 38.62357
1990 8.0378 8.039513
1991 9.9095 18.88794
1992 17.2984 42.71436
1993 22.0511 21.55312
1994 21.8861 -0.7539
1995 21.8861 0
1996 21.8861 0
1997 21.8861 0
1998 21.8861 0
1999 92.6934 76.38872
2000 102.1052 9.217748
2001 111.9433 8.788467
2002 120.9702 7.462086
2003 129.3565 6.483091
2004 133.5004 3.104036
2005 132.147 -1.02416
2006 128.6516 -2.71695
2007 117.968 -9.05635
Source: column 2 is obtained from Central Bank of Nigeria statistical
bulletin (various issues), column 3 was computed by the author
APPENDIX 2: MACROECONIC INDICATORS
Exchange GDP Consumer
Years Rate (NI $) (Nm) Price Index
1970 0.7143 5,205.10 N.A
1971 0.6955 6,570.70 N.A
1972 0.6579 7,208.30 N.A
1973 0.6579 10,990.70 N.A
1974 0.6299 18,298.30 N.A
1975 0.6159 20,957.00 N.A
1976 0.6265 26,656.30 25.6
1977 0.6466 31,520.30 29.6
1978 0.606 34,540.10 34.5
1979 0.5957 41,947.70 38.5
1980 0.5464 49,632.30 42.3
1981 0.61 50,456.10 51.2
1982 0.6729 51,653.40 55.1
1983 0.7241 56,312.90 67.9
1984 0.7649 62,474.20 94.8
1985 0.8938 70,633.20 100
1986 2.0206 71,859.00 105.4
1987 4.0179 108,183.00 116.10
1988 4.5367 142,618.00 181.20
1989 7.3916 220,200.00 272.70
1990 8.0378 271,908.00 293.20
1991 9.9095 316,670.00 330.90
1992 17.2984 536,305.10 478.40
1993 22.0511 688,136.60 751.90
1994 21.8861 904,004.70 1,180.70
1995 21.8861 1,934,831.00 2,040.40
1996 21.8861 2,703,809.00 2,638.10
1997 21.8861 2,801,972.60 2,863.30
1998 21.8861 2,721,178.40 3,149.20
1999 92.6934 3,313,563.10 3,357.60
2000 102.1052 4,727,522.60 3,923.80
2001 111.9433 5,374,334.80 4,268.10
2002 120.9702 6,232,243.60 5,151.50
2003 129.3565 6,061,700.00 5,493.30
2004 133.5004 11,411,066.90 6,318.40
2005 132.147 15,610,881.50 7,446.40
2006 128.6516 18,564,594.70 8,059.60
2007 117.968 23,280,715.00 N.A
Export Import Max. Lending
Years (NM) (Nm) Rate (%)
1970 885.4 756.4 8
1971 1,293.40 1,078.90 10
1972 1,434.20 990.10 10
1973 2,278.40 1,224.80 10
1974 5,794.80 1,737.30 10
1975 4,925.50 3,721.50 9
1976 6,751.10 5,148.50 10
1977 7,630.70 7,093.70 6
1978 6,064.40 8,211.70 11
1979 10,836.80 7,472.50 11
1980 14,186.70 9,095.60 9.5
1981 11,023.30 12,839.60 10
1982 8,206.40 10,770.50 11.75
1983 7,502.50 8,903.70 11.5
1984 9,088 7,178.30 13
1985 11,720.80 7,062.60 11.75
1986 8,920.60 5,983.60 12
1987 30,360.60 17,861.70 19.2
1988 31,192.80 21,445.70 17.6
1989 57,971.20 30,860.20 24.6
1990 109,886.10 45,717.90 27.7
1991 121,535.40 89,488.20 20.8
1992 205,611.70 143,161.20 31.2
1993 218,770.10 165,629.40 36.09
1994 206,059.20 162,788.80 21
1995 950,661.40 755,127.70 20.79
1996 1,309,543.40 562,626.60 20.86
1997 1,241,662.70 845,716.60 23.32
1998 751,856.70 837,418.70 21.34
1999 1,188,969.80 862,515.70 27.19
2000 1,945,723.30 985,022.40 21.55
2001 2,001,230.80 1,358,180.30 21.34
2002 1,882,668.20 1,512,695.30 30.19
2003 2,889,846.70 2,080,235.30 22.88
2004 4,620,085.20 1,987,045.30 20.82
2005 6,310,247.90 3,792,821.20 19.49
2006 5,752,747.70 4,296,716.40 18.41
2007 8,126,000.50 5,289,824.40 18.36
Investment Interest Reserves
Years (Nm) Rate (%) (Nm)
1970 N.A N.A 104.6
1971 N.A N.A 132.3
1972 N.A N.A 191.6
1973 N.A N.A 241
1974 N.A N.A 3,112.50
1975 5,019.80 N.A 3,380.10
1976 8,107.30 5.05 3,057.60
1977 9,420.60 5.54 2,521.00
1978 9,386.30 7.93 1,249.10
1979 9,094.50 11.2 3,043.20
1980 10,841.20 13.36 5,445.60
1981 12,215.00 16.38 2,424.80
1982 10,922.00 12.26 1,026.50
1983 8,135.00 9.09 781.70
1984 5,417.00 10.23 1,143.80
1985 5,573.00 8.1 1,641.10
1986 7,323.00 6.81 3,587.40
1987 10,661.10 6.66 4,643.30
1988 12,383.70 7.61 3,272.70
1989 18,414.10 9.22 13,457.10
1990 30,626.80 8.1 34,953.10
1991 35,423.90 5.7 44,249.60
1992 58,640.30 3.52 13,992.50
1993 80,948.10 3.02 67,245.60
1994 85,021.90 4.2 30,455.90
1995 114,476.30 5.84 40,333.20
1996 172,105.70 5.3 174,309.90
1997 205,553.20 5.46 262,198.50
1998 192,984.40 5.35 226,702.40
1999 175,735.80 4.97 546,873.10
2000 268,894.50 6.24 1,090,148.00
2001 371,897.90 3.89 1,181,652.00
2002 438,114.90 1.67 1,013,514.00
2003 429,230.00 1.13 1,065,093.00
2004 456,970.00 1.35 2,232,837.00
2005 1,780,040.00 3.21 3,647,998.70
2006 2,272,760 4.96 5,425,578.60
2007 N.A 4.5 6,055,717.00
Source: Central Bank of Nigeria (various issues), International
Monetary Fund (various issues)
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