International Journal of Business and Economics Research

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The Prospect of Dollarization in Nigeria: An Empirical Review

Received: 13 June 2019    Accepted: 12 July 2019    Published: 26 July 2019
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Abstract

Dollarization has been perceived in literature as a strategy that could help emerging and developing economics achieve price stability via lower inflation rates occasioned by the adoption of a stronger currency. Supporters of dollarization also infer that the strategy has the ability to affect positively real economic variables such as growth and employment through its ability to lower interest rates, increase investment and eliminate currency risk thereby increasing international trade. In this study, we examined the effect of dollarization on selected macroeconomic variables in Nigeria from 1972 to 2017. Using simple regression models, we analysed the impact of real dollarization index on prime lending rates, inflation, unemployment, PCI, FDI, real GDP growth and total trade in Nigeria. Empirical results revealed that dollarization did not exert significant positive effect on the selected macroeconomic variables. The study therefore recommended that government should be intentional about putting measures in place to strengthen the Nigerian naira so that economic agents will see no need to hold their wealth in or transact with a foreign currency. This will discourage dollarization in Nigeria which is perceived to be a major driver of inflation in the country.

DOI 10.11648/j.ijber.20190804.17
Published in International Journal of Business and Economics Research (Volume 8, Issue 4, August 2019)
Page(s) 220-231
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This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.

Copyright

Copyright © The Author(s), 2024. Published by Science Publishing Group

Keywords

Dollarization, Prospect, Macroeconomic Variables, Nigeria

References
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Author Information
  • Department of Economics, Veronica Adeleke School of Social Sciences, Babcock University, Ilishan Remo, Nigeria

  • Department of Economics, Veronica Adeleke School of Social Sciences, Babcock University, Ilishan Remo, Nigeria

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    Uduakobong Edy-Ewoh, Babatunde Binuyo. (2019). The Prospect of Dollarization in Nigeria: An Empirical Review. International Journal of Business and Economics Research, 8(4), 220-231. https://doi.org/10.11648/j.ijber.20190804.17

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    Uduakobong Edy-Ewoh; Babatunde Binuyo. The Prospect of Dollarization in Nigeria: An Empirical Review. Int. J. Bus. Econ. Res. 2019, 8(4), 220-231. doi: 10.11648/j.ijber.20190804.17

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    Uduakobong Edy-Ewoh, Babatunde Binuyo. The Prospect of Dollarization in Nigeria: An Empirical Review. Int J Bus Econ Res. 2019;8(4):220-231. doi: 10.11648/j.ijber.20190804.17

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  • @article{10.11648/j.ijber.20190804.17,
      author = {Uduakobong Edy-Ewoh and Babatunde Binuyo},
      title = {The Prospect of Dollarization in Nigeria: An Empirical Review},
      journal = {International Journal of Business and Economics Research},
      volume = {8},
      number = {4},
      pages = {220-231},
      doi = {10.11648/j.ijber.20190804.17},
      url = {https://doi.org/10.11648/j.ijber.20190804.17},
      eprint = {https://download.sciencepg.com/pdf/10.11648.j.ijber.20190804.17},
      abstract = {Dollarization has been perceived in literature as a strategy that could help emerging and developing economics achieve price stability via lower inflation rates occasioned by the adoption of a stronger currency. Supporters of dollarization also infer that the strategy has the ability to affect positively real economic variables such as growth and employment through its ability to lower interest rates, increase investment and eliminate currency risk thereby increasing international trade. In this study, we examined the effect of dollarization on selected macroeconomic variables in Nigeria from 1972 to 2017. Using simple regression models, we analysed the impact of real dollarization index on prime lending rates, inflation, unemployment, PCI, FDI, real GDP growth and total trade in Nigeria. Empirical results revealed that dollarization did not exert significant positive effect on the selected macroeconomic variables. The study therefore recommended that government should be intentional about putting measures in place to strengthen the Nigerian naira so that economic agents will see no need to hold their wealth in or transact with a foreign currency. This will discourage dollarization in Nigeria which is perceived to be a major driver of inflation in the country.},
     year = {2019}
    }
    

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    AB  - Dollarization has been perceived in literature as a strategy that could help emerging and developing economics achieve price stability via lower inflation rates occasioned by the adoption of a stronger currency. Supporters of dollarization also infer that the strategy has the ability to affect positively real economic variables such as growth and employment through its ability to lower interest rates, increase investment and eliminate currency risk thereby increasing international trade. In this study, we examined the effect of dollarization on selected macroeconomic variables in Nigeria from 1972 to 2017. Using simple regression models, we analysed the impact of real dollarization index on prime lending rates, inflation, unemployment, PCI, FDI, real GDP growth and total trade in Nigeria. Empirical results revealed that dollarization did not exert significant positive effect on the selected macroeconomic variables. The study therefore recommended that government should be intentional about putting measures in place to strengthen the Nigerian naira so that economic agents will see no need to hold their wealth in or transact with a foreign currency. This will discourage dollarization in Nigeria which is perceived to be a major driver of inflation in the country.
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