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