THE EFFECT OF EXCHANGE RATE ON THE NIGERIAN BALANCE OF PAYMENTS (1970-2010)

ABSTRACT

This work sets out to examine the relationship between balance of payment and exchange rate. The work is divided into five chapters; chapter 1 gives a general introduction to the subject matter, chapter two gives the general review of literature in the subject matter, chapter 3 gives or states the methodology and specifies the model used for testing. Chapter four runs the required test and provides the result as well as the interpretation and chapter five concludes the findings and recommends policy for the government based on the findings in the test.The ordinary least square regression ols method is used to test for Rsquared test explanatory power of the variables, Ttest for the reliability, Ftest for the overall significance of the exponentials and D.W test which is the econometric criterion for testing for presence of auto regressive scheme. The result shows a negative relationship between balance of payment and trade openness, also there exists a positive relationship between exchange rate and foreign direct investment. Since trade openness has a negative impact on the balance of payment it is recommended that the government should not consider it a policy for economic development.