Exchange Rate Volatility and Non-oil Exports in Nigeria: 1986-2008

The paper investigates the impact of exchange rate volatility on non-oil exports in Nigeria, 1986(1)–2008(4). The paper confirms the existence of statistically significant relationship between real exports and exchange rate volatility. The results show that exchange rate, exchange rate volatility and foreign income have significant positive effects on non-oil exports in the long run. Imports, on the other hand, have a statistically negative effect on exports in the long run. The ECM results show that lagged foreign income has significant positive effect on non-oil exports. The coefficient of imports is positive supporting the import compression hypothesis in the short run. The results show that short run impact of the exchange rate volatility is statistically insignificant. The positive coefficient of the exchange rate variable (though not significant) suggests that an appreciable depreciation of the exchange rate could lead to increase in non- oil exports in Nigeria. Essentially, the results suggest that the exchange rate volatility is only effective in the long run but not in the short run in the case of Nigeria. Key words: Exchange rate volatility; Exports; Error correction; Nigeria