Real Gross Domestic Growth Determinants in an Oil Revenue Dependent Country: An Assessment of Nigeria’s Exchange Rate and Interest Rate
Science Journal of Energy Engineering
Volume 5, Issue 4, August 2017, Pages: 78-86
Received: Jun. 30, 2017; Accepted: Jul. 17, 2017; Published: Oct. 23, 2017
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Authors
Felicia Akujinma Anyanwu, Department of Banking and Finance, Nnamdi Azikiwe University, Awka, Nigeria
Patrick Kanayo Adigwe, Department of Banking and Finance, Nnamdi Azikiwe University, Awka, Nigeria
Amalachukwu Chijindu Ananwude, Department of Banking and Finance, Nnamdi Azikiwe University, Awka, Nigeria
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Abstract
The determinants of real gross domestic product growth in Nigeria was ascertained in this study. The research was motivated by 1.53 percent decline in real gross domestic product growth rate in 2016 coupled with the foreign exchange crisis that engulfed the economy. Specifically, the study determined whether exchange rate and interest rate predict real gross domestic product growth using secondary data obtained from Central Bank of Nigeria for the period 1980 to 2016. Aside testing for stationarity of the data and diagnosing the model to meet standard econometric postulations, the Granger Causality prediction estimation was employed to realize the objective of the research. Firstly, by the application of Johansen co-integration and ARDL methodology, the study identify that exchange rate and interest rate are not co-integrated/related with real gross domestic product growth. Secondly, the multiple regression estimated via ARDL shows that exchange rate and interest rate have negative but insignificant relationship with real gross domestic product growth. Finally, the study empirically found that exchange rate and interest rate are not determinants of real gross domestic product growth in Nigeria. To strengthen the value of the local currency against the US dollar in particular, and other currencies of the world, a well-managed foreign exchange floating system is preferred. Diversification from oil to non-oil policies should be pursued with vigour with the view of aggressively down playing importation to reduce the pressure on forex which jolts up exchange rate position adversely.
Keywords
Real Gross Domestic Product, Exchange Rate, Interest Rate
To cite this article
Felicia Akujinma Anyanwu, Patrick Kanayo Adigwe, Amalachukwu Chijindu Ananwude, Real Gross Domestic Growth Determinants in an Oil Revenue Dependent Country: An Assessment of Nigeria’s Exchange Rate and Interest Rate, Science Journal of Energy Engineering. Vol. 5, No. 4, 2017, pp. 78-86. doi: 10.11648/j.sjee.20170504.11
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Copyright © 2017 Authors retain the copyright of this article.
This article is an open access article distributed under the Creative Commons Attribution License (http://creativecommons.org/licenses/by/4.0/) which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
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