An Examination of the Relationship Between Integrated Fiscal Policies and Exchange Rate Stability in Nigeria
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Background of the Study
Integrated fiscal policies, which harmonize revenue collection, expenditure, and borrowing strategies, play a crucial role in ensuring macroeconomic stability—including exchange rate stability. In Nigeria, the volatility of the exchange rate has been linked to fiscal imbalances and inconsistent economic policies (Okoro, 2024). Recent reforms have focused on integrating fiscal instruments to create a stable economic environment, thereby reducing speculative pressures on the currency (Balogun, 2025). A stable exchange rate is essential for maintaining investor confidence, controlling inflation, and ensuring a favorable trade balance. Research shows that when fiscal policies are well-integrated, they mitigate uncertainties in the foreign exchange market and promote currency stability (Adeyemi, 2023). This study investigates how integrated fiscal policies affect exchange rate stability by examining policy coherence, fiscal discipline, and market responses to fiscal adjustments. The findings aim to provide a comprehensive understanding of the interplay between fiscal management and currency stability, offering insights for enhancing Nigeria’s monetary and fiscal frameworks (Okoro, 2024; Adeyemi, 2023; Balogun, 2025).
Statement of the Problem
Nigeria continues to experience significant exchange rate volatility despite various fiscal policy reforms. The lack of effective integration among fiscal instruments has resulted in inconsistent policy signals, contributing to market uncertainty (Balogun, 2025). This volatility undermines investor confidence and exacerbates inflationary pressures. The failure to stabilize the exchange rate highlights the need for a coordinated fiscal approach that directly addresses the underlying fiscal imbalances (Adeyemi, 2023; Okoro, 2024).
Objectives of the Study
- To examine the impact of integrated fiscal policies on exchange rate stability.
- To identify the fiscal factors that influence currency volatility.
- To propose policy recommendations for achieving exchange rate stability.
Research Questions
- How do integrated fiscal policies affect exchange rate stability in Nigeria?
- What are the main fiscal factors contributing to exchange rate volatility?
- Which policy measures can improve exchange rate stability?
Research Hypotheses
- Integrated fiscal policies have a stabilizing effect on the exchange rate.
- Fiscal discipline is positively correlated with exchange rate stability.
- Enhanced policy integration reduces currency volatility.
Significance of the Study
This study is significant as it explores the relationship between fiscal policy integration and exchange rate stability. Its insights will help policymakers design coordinated fiscal strategies that support a stable currency environment, ultimately contributing to overall economic stability (Okoro, 2024; Adeyemi, 2023; Balogun, 2025).
Scope and Limitations of the Study
This study is limited to examining the relationship between integrated fiscal policies and exchange rate stability in Nigeria. It focuses exclusively on fiscal measures and their influence on currency fluctuations.
Definitions of Terms
• Integrated Fiscal Policies: Coordinated fiscal strategies that combine various fiscal instruments for coherent policy implementation.
• Exchange Rate Stability: The degree to which a country’s currency maintains a consistent value relative to other currencies.
• Fiscal Discipline: The practice of managing public finances to avoid excessive deficits and maintain sustainable debt levels.
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