The Impact of Combined GDP and Inflation Trends on National Exchange Rate Movements in Nigeria
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Background of the Study
Exchange rate movements are vital for understanding the competitiveness of an economy and its integration with global markets. In Nigeria, combined trends in GDP growth and inflation play a significant role in shaping national exchange rate movements. GDP growth often signals economic strength, attracting foreign investment and supporting currency appreciation, while high inflation may erode the value of the domestic currency (Adeyemi, 2023). Recent fiscal and monetary policies have attempted to harness GDP growth and control inflation to stabilize the exchange rate (Okoro, 2024). Empirical studies indicate that the interaction between these variables can either stabilize or destabilize the currency, depending on policy responses and market perceptions (Balogun, 2025). This study examines how the combined trends in GDP and inflation influence the exchange rate, with the goal of providing insights that can lead to more effective monetary policies and improved currency stability.
Statement of the Problem
Nigeria’s exchange rate remains volatile despite efforts to stimulate GDP growth and control inflation. Inconsistent economic performance and persistent inflation contribute to exchange rate fluctuations, undermining investor confidence and economic stability (Adeyemi, 2023). The complex relationship between GDP, inflation, and exchange rate movements calls for a detailed investigation to guide policy interventions (Okoro, 2024; Balogun, 2025).
Objectives of the Study
- To analyze the impact of GDP growth on exchange rate movements.
- To examine the influence of inflation trends on the exchange rate.
- To recommend policies for achieving exchange rate stability.
Research Questions
- How do combined GDP and inflation trends affect exchange rate movements in Nigeria?
- What is the role of GDP growth in influencing currency value?
- Which policy measures can stabilize the exchange rate amid these trends?
Research Hypotheses
- GDP growth positively influences exchange rate stability.
- High inflation contributes to exchange rate volatility.
- Improved macroeconomic management leads to a more stable exchange rate.
Significance of the Study
This study is significant as it explores the combined impact of GDP growth and inflation trends on national exchange rate movements in Nigeria. The insights derived will assist policymakers in designing monetary policies that promote a stable and competitive currency, fostering sustainable economic integration (Adeyemi, 2023; Okoro, 2024; Balogun, 2025).
Scope and Limitations of the Study
This study is limited to investigating the impact of combined GDP and inflation trends on exchange rate movements in Nigeria. It focuses exclusively on these economic variables without considering global market dynamics.
Definitions of Terms
• GDP Growth: The increase in a country’s economic output.
• Inflation Trends: The pattern of changes in the general price level over time.
• Exchange Rate Movements: Fluctuations in the value of a country’s currency relative to others.
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