Real Gross Domestic Growth Determinants in an Oil Revenue Dependent Country: An Assessment of Nigeria’s Exchange Rate and Interest Rate

Felicia Akujinma Anyanwu; Patrick Kanayo Adigwe; Amalachukwu Chijindu Ananwude

doi:doi:10.11648/j.sjee.20170504.11

| Peer-Reviewed

Real Gross Domestic Growth Determinants in an Oil Revenue Dependent Country: An Assessment of Nigeria’s Exchange Rate and Interest Rate

Felicia Akujinma Anyanwu, Patrick Kanayo Adigwe, Amalachukwu Chijindu Ananwude

Published in Science Journal of Energy Engineering (Volume 5, Issue 4)

Received: 30 June 2017 Accepted: 17 July 2017 Published: 23 October 2017

Views: Downloads:

Download PDF

Share This Article

Twitter
Linked In
Facebook

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.

Published in	Science Journal of Energy Engineering (Volume 5, Issue 4)
DOI	10.11648/j.sjee.20170504.11
Page(s)	78-86
Creative Commons	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

Real Gross Domestic Product, Exchange Rate, Interest Rate

References

[1]	Anyanwu, F. A., Ananwude, A. C. & Okoye, N. T. (2017). Exchange rate policy and Nigeria’s economic growth: A granger causality impact assessment. International Journal of Applied Economics, Finance and Accounting, 1 (1), 1-13.
[2]	Amer, C. & Amer, D. S. (1984). Dictionary of business and economics. Macmillan Publisher, USA.
[3]	Reinhart, C. M. & Rogoff, K. S. (2009). Prices, exchange rate, currency debasement and real GDP in this time is different eight centuries of financial folly. Princeton University Press, USA.
[4]	Ibenta, S. N. O. (2012). International Trade and Finance. Ezu Book Ltd, Enugu.
[5]	Jhingan, M. L. (2003). Macroeconomic Theory. New Delhi, Nisha Enterprises.
[6]	Obioma, E. C. (2014). External reserve management and utilization: Nigeria experience. CBN Bullion, 37 (2), 10-26.
[7]	Chimobi, O. P. (2010). Inflation and economic growth in Nigeria. Journal of sustainable Development, 3 (2), 159-166.
[8]	Inam, U. S. & Umobong, E. S. (2015). An empirical analysis of the relationship between exchange rate movements and economic growth in Nigeria. European Journal of Business and Management, 7 (30), 191-199.
[9]	Akpan, E. O. & Atan, J. A. (2015). Effects of exchange rate movements on economic growth in Nigeria. CBN Journal of Applied Statistics, 2 (2), 1-14.
[10]	Ismaila, M. (2016). Exchange rate depreciation and Nigeria economic performance after Structural Adjustment Programmes (SAPs). NG-Journal of Social Development, 5 (2), 122-132.
[11]	Amassoma, D. & Odeniyi, B. D. (2016). The nexus between exchange rate variation and economic growth in Nigeria. Singaporean Journal of Business Economics, And Management Studies, 4 (2), 8-28.
[12]	Obansa, S. A. J., Okoroafor, O. K. D., Aluko, O. O. & Eze, M. (2013). Perceived relationship between exchange rate, interest rate and economic growth in Nigeria: 1970-2010. American Journal of Humanities and Social Sciences, 1 (3), 116-124.
[13]	Onuorah, A. C. & Osuji, C. C. (2014). Exchange rate and the economic growth in Nigeria. International Journal of Management Sciences, 2 (2), 78-87.
[14]	Diabate, N. (2017). Causality between economic growth and changes of the real exchange rate in Côte d'Ivoire. Journal of Economics and International Finance, 9 (1), 1-11.
[15]	Musyoki, D., Pokhariyal, G. P. & Pundo, M. (2012). The impact of real exchange rate volatility on economic growth: Kenyan evidence. Business and Economic Horizons, (7) 1, 59-75.
[16]	Uddin, K. M. K., Rahman, M. M. & Quaosar, G. M. A. A. (2014). Causality between exchange rate and economic growth in Bangladesh. European Scientific Journal, 10 (31), 11-26.
[17]	Basirat, M., Nasirpour, A. & Jorjorzadeh, A. (2014). The effect of exchange rate fluctuations on economic growth considering the level of development of financial markets in selected developing countries. Asian Economic and Financial Review, 4 (4), 517-528.
[18]	Kogid, M., Asid, R., Lily, J., Mulock, D. & Loganathan, N. (2011). The effect of exchange rates on economic growth: empirical testing on nominal versus real. A paper was presented at the International Conference on Applied Business Research (ICABR), November 28 December 2, 2011, Johor Bahru, Malaysia.
[19]	Eichengreen, B. (2007). The real exchange rate and economic growth. University of California, Berkeley. A prepared for the World Banks Commission on Growth.
[20]	Obamuyi, T. M. (2009). An investigation of the relationship between interest rates and economic growth in Nigeria, 1970 – 2006. Journal of Economics and International Finance, 1 (4), 93-98.
[21]	Fasanya, I. O., Onakoya, A. B. O. & Agboluaje, M. A. (2013). Does monetary policy influence economic growth in Nigeria? Asian Economic and Financial Review, 3 (5), 635-646.
[22]	Udoka, C. O. & Anyingang, R. A. (2012). The effect of interest rate fluctuation on the economic growth of Nigeria, 1970-2010. International Journal of Business and Social Science, 3 (20), 295-302.
[23]	Tahir, S. H., Shehzadi, I., Ali, I. & Ullah, M. R. (2015). Impact of bank lending on economics growth in Pakistan: An empirical study of lending to private sector. American Journal of Industrial and Business Management, 5, 565-576.
[24]	Anaripour, J. T. (2011). Study on relationship between interest rate and economic growth by eviews (2004-2010, Iran). Journal of Basic and Applied Science Research, 1 (11), 2346-2352.
[25]	Saymeh, A. A. F. & Orabi, M. M. A. (2013). The effect of interest rate, inflation rate, GDP on real economic growth rate in Jordan. Asian Economic and Financial Review, 3 (3), 341-354.
[26]	Obadeyi, J., Akingunola, R. & Afolabi, V. (2013). Interest rate targeting: A monetary tool for economic growth in Nigeria? - Stakeholders’ approach. Advances in Economics and Business, 1 (2), 103-123.
[27]	Babalola, O. O., Danladi, J. D., Akomolafe, K. J. & Ajiboye, O. P. (2015). Inflation, Interest Rates and Economic Growth in Nigeria. European Journal of Business and Management, 7 (30), 91-102.
[28]	Giovanni, J. & Shambaugh, J. C. (2008). The impact of foreign interest rate on the economy: The role of the exchange rate regime. Journal of International Economics, 74, 341-361.
[29]	Jelilov, G. (2016). The impact of interest rate on economic growth example of Nigeria. African Journal of Social Sciences, 6 (2), 51-64.
[30]	Gujarati, D. N. (2004). Basic Econometric. 4th Ed., New York, McGraw-Hill Inc.
[31]	Danladi, J. D. & Uba, U. P. (2016). Does the volatility of exchange rate affect the economic performance of countries in the West African Monetary Zone? A case of Nigeria and Ghana. British Journal of Economics, Management and Trade, 11 (3), 1-10.
[32]	Lawal, E. M. (2016). Effect of exchange rate fluctuations on manufacturing sector output in Nigeria. Journal of Research in Business and Management, 4 (10), 32-39.
[33]	Akinlo, O. O. & Lawal, Q. A. (2016). Impact of exchange rate on industrial production in Nigeria 1986-2010. International Business and Management, 10 (1), 104-110.
[34]	Ali, A. I., Ajibola, I. O., Omotosho, B. S., Adetoba, O. O. & Adeleke, B. O. (2015). Real exchange rate misalignment and economic growth in Nigeria. CBN Journal of Applied Statistics, 6 (2), 103-131.
[35]	Amassoma, D. (2017). The nexus between exchange rate variation and economic growth in Nigeria. Journal of Entrepreneurship, Business and Economics, 5 (1), 1–40.
[36]	Oleka, C. D. & Okolie, P. I. P. (2016). The impact of floating exchange rate regime on economic growth in Nigeria (1986–2015). Journal of Economics and Finance, 7 (5), 35-42.
[37]	Etale, L. M. & Ayunku, P. E. (2016). The relationship between interest rate and economic growth in Nigeria: An Error Correction Model (ECM) approach. International Journal of Economics and Financial Research, 2 (6), 127-131.

Cite This Article

Plain Text BibTeX RIS

APA Style

Felicia Akujinma Anyanwu, Patrick Kanayo Adigwe, Amalachukwu Chijindu Ananwude. (2017). 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, 5(4), 78-86. https://doi.org/10.11648/j.sjee.20170504.11

Copy | Download

ACS Style

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. Sci. J. Energy Eng. 2017, 5(4), 78-86. doi: 10.11648/j.sjee.20170504.11

Copy | Download

AMA Style

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. Sci J Energy Eng. 2017;5(4):78-86. doi: 10.11648/j.sjee.20170504.11

Copy | Download

@article{10.11648/j.sjee.20170504.11,
  author = {Felicia Akujinma Anyanwu and Patrick Kanayo Adigwe and Amalachukwu Chijindu Ananwude},
  title = {Real Gross Domestic Growth Determinants in an Oil Revenue Dependent Country: An Assessment of Nigeria’s Exchange Rate and Interest Rate},
  journal = {Science Journal of Energy Engineering},
  volume = {5},
  number = {4},
  pages = {78-86},
  doi = {10.11648/j.sjee.20170504.11},
  url = {https://doi.org/10.11648/j.sjee.20170504.11},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.sjee.20170504.11},
  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.},
 year = {2017}
}

Copy | Download

TY  - JOUR
T1  - Real Gross Domestic Growth Determinants in an Oil Revenue Dependent Country: An Assessment of Nigeria’s Exchange Rate and Interest Rate
AU  - Felicia Akujinma Anyanwu
AU  - Patrick Kanayo Adigwe
AU  - Amalachukwu Chijindu Ananwude
Y1  - 2017/10/23
PY  - 2017
N1  - https://doi.org/10.11648/j.sjee.20170504.11
DO  - 10.11648/j.sjee.20170504.11
T2  - Science Journal of Energy Engineering
JF  - Science Journal of Energy Engineering
JO  - Science Journal of Energy Engineering
SP  - 78
EP  - 86
PB  - Science Publishing Group
SN  - 2376-8126
UR  - https://doi.org/10.11648/j.sjee.20170504.11
AB  - 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.
VL  - 5
IS  - 4
ER  -

Copy | Download

Author Information

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

Download PDF

Sections

Plain Text BibTeX RIS

APA Style

Felicia Akujinma Anyanwu, Patrick Kanayo Adigwe, Amalachukwu Chijindu Ananwude. (2017). 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, 5(4), 78-86. https://doi.org/10.11648/j.sjee.20170504.11

Copy | Download

ACS Style

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. Sci. J. Energy Eng. 2017, 5(4), 78-86. doi: 10.11648/j.sjee.20170504.11

Copy | Download

AMA Style

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. Sci J Energy Eng. 2017;5(4):78-86. doi: 10.11648/j.sjee.20170504.11

Copy | Download

@article{10.11648/j.sjee.20170504.11,
  author = {Felicia Akujinma Anyanwu and Patrick Kanayo Adigwe and Amalachukwu Chijindu Ananwude},
  title = {Real Gross Domestic Growth Determinants in an Oil Revenue Dependent Country: An Assessment of Nigeria’s Exchange Rate and Interest Rate},
  journal = {Science Journal of Energy Engineering},
  volume = {5},
  number = {4},
  pages = {78-86},
  doi = {10.11648/j.sjee.20170504.11},
  url = {https://doi.org/10.11648/j.sjee.20170504.11},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.sjee.20170504.11},
  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.},
 year = {2017}
}

Copy | Download

TY  - JOUR
T1  - Real Gross Domestic Growth Determinants in an Oil Revenue Dependent Country: An Assessment of Nigeria’s Exchange Rate and Interest Rate
AU  - Felicia Akujinma Anyanwu
AU  - Patrick Kanayo Adigwe
AU  - Amalachukwu Chijindu Ananwude
Y1  - 2017/10/23
PY  - 2017
N1  - https://doi.org/10.11648/j.sjee.20170504.11
DO  - 10.11648/j.sjee.20170504.11
T2  - Science Journal of Energy Engineering
JF  - Science Journal of Energy Engineering
JO  - Science Journal of Energy Engineering
SP  - 78
EP  - 86
PB  - Science Publishing Group
SN  - 2376-8126
UR  - https://doi.org/10.11648/j.sjee.20170504.11
AB  - 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.
VL  - 5
IS  - 4
ER  -

Copy | Download