Asymmetric Effects of Exchange Rate on Trade Flows in Nigeria

Exchange rate plays a crucial role in determining trade flows, especially in developing nations like Nigeria where changes in exchange rates can have a big impact on the price of imports and the competitiveness of exports. Exchange rates have fluctuated often and persistently in the Nigerian economy in recent years, primarily due to changes in policy, global economic shocks, and changes in the price of oil. This study assessed the asymmetric effect of exchange rate on trade flows in Nigeria. Specifically, the study examined the effect of nominal effective exchange rate and real effective exchange rate on total trades in Nigeria. The study adopted ex-post facto research design and data were sourced using secondary means. This data was generated from the Central Bank of Nigeria Statistical Bulletin 2023. The study examined the descriptive statistics of the data for the variables, after which the series were tested for the presence of the unit root using the ADF unit root test. The Ordinary Least Square (OLS) procedure of analysis was used to estimate the model with the aid of computer statistical application (E-view 10). Findings revealed that there is a significant relationship between nominal effective exchange rate, real effective exchange rate and trade flows in Nigeria. Based on the findings, the study recommended that the Nigerian government and Central Bank should implement policies that are aimed at stabilizing the exchange rate to reduce fluctuations in exchange rate, which negatively affects trade flows