An assessment of currency fluctuations’ economic impact on Nigeria’s trade: A study of the CBN (2000–2020)
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Background of the Study :
Currency fluctuations have long been recognized as a critical determinant of trade performance, influencing import and export dynamics as well as overall economic stability. In Nigeria, the Central Bank of Nigeria (CBN) has adopted various policies to manage currency volatility and maintain competitiveness in international markets. Between 2000 and 2020, the CBN implemented measures such as exchange rate adjustments and interventionist policies to stabilize the naira amid external shocks and domestic economic pressures (Ibrahim, 2023). These fluctuations affect the pricing of imports and exports, thereby directly impacting trade balances and the competitiveness of Nigerian products abroad. While a depreciated currency can boost export demand, it often increases the cost of imports and induces inflationary pressures (Okafor, 2024). This study investigates the economic impact of currency fluctuations on Nigeria’s trade by examining key trade indicators, exchange rate trends, and policy responses. The analysis will help elucidate the complex interplay between monetary policy, currency stability, and trade performance, and provide recommendations for improving the effectiveness of exchange rate management in bolstering trade outcomes (Chukwu, 2025).
Statement of the Problem
Despite the CBN’s efforts to manage currency fluctuations, Nigeria’s trade performance remains vulnerable to exchange rate volatility. Frequent and unpredictable changes in the naira’s value have led to increased import costs, inflation, and reduced export competitiveness. These challenges not only hamper trade growth but also undermine economic stability and investor confidence (Adebola, 2023). The misalignment between policy measures and market realities has resulted in an inconsistent trade environment, necessitating a detailed evaluation of how currency fluctuations impact trade. This study seeks to identify the key factors driving these fluctuations and assess their economic consequences, thereby providing a basis for more effective policy interventions to stabilize the currency and promote trade (Uche, 2024).
Objectives of the Study:
1. To evaluate the impact of currency fluctuations on Nigeria’s trade performance.
2. To analyze the effectiveness of the CBN’s policy interventions in stabilizing the currency.
3. To propose strategies for mitigating the adverse effects of exchange rate volatility on trade.
Research Questions:
1. How do currency fluctuations affect Nigeria’s trade performance?
2. What is the effectiveness of the CBN’s policies in managing exchange rate volatility?
3. What measures can reduce the negative impact of currency fluctuations on trade?
Research Hypotheses:
1. H1: Currency fluctuations significantly influence trade performance.
2. H2: CBN’s interventionist policies mitigate adverse trade impacts.
3. H3: Stable exchange rate policies improve export competitiveness.
Significance of the Study (100 words):
This study provides critical insights into the relationship between currency fluctuations and trade performance in Nigeria. Its findings will assist policymakers and financial regulators in designing more robust exchange rate management strategies, thereby enhancing trade stability and economic growth. By addressing the challenges of currency volatility, the research supports the development of policies that foster a more predictable and competitive trade environment (Oluwaseun, 2023).
Scope and Limitations of the Study:
The study is limited to assessing the impact of currency fluctuations on Nigeria’s trade, focusing exclusively on CBN policy interventions and trade indicators.
Definitions of Terms:
1. Currency Fluctuations: Variations in the value of a country’s currency relative to others.
2. Trade Performance: The effectiveness of a country’s export and import activities.
3. CBN: The Central Bank of Nigeria, responsible for monetary policy implementation
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