Exchange rate stability and export performance

Thesis Abstract

Exchange rate is the price of one currency in terms of another currency. Exchange rate stability has to do with government actions in order to stabilize exchange rate so as to increase export in Nigeria especially export of primary products (agricultural produce) over the years, Nigeria has adopted various exchange rate regimes ranging from fixed exchange regime to floating exchange regime. The main purpose of this work is to determine to what extend does the volatility and risks of exchange rate affect exports of agricultural produce in Nigeria. To do this, the classical Linear Regression Model is applied and the ordinary least square econometric technique is also used to estimate the impact of exchange rate on agricultural export trade earning. The variables used are export trade earnings as the dependent variable and exchange rate, interest rate, inflation and agricultural out put as the independent variables. Economic test shows the piori criteria of the parameters used to determine if it conforms to the economic theory. The statistical criteria employed are the F – test, the T – test and R2 which tests the significance of the parameters. The econometric criteria (second order test) used are the Durbin Watson test, which tests for the auto correlation and the randomness of the residuals. The Jarqu-Bera criteria is used to test for normality of the residuals. From the analysis of the result, it shows that there is a relationship export performance of agricultural product and real exchange rate stability in Nigeria. Exchange rate stability has a positive and significant effect on agricultural export. An increase in exchange rate stability raises the marginal utility of export revenue and therefore induces them to increase exports.