Economics, Econometrics and Finance
8 years ago

Oil revenues drive real exchange rate fluctuations in Nigeria, impacting stability.

SSRN Electronic Journal
Real Exchange Rate Misalignment: An Application of Behavioral Equilibrium Exchange Rate (BEER) to Nigeria
Shehu Usman Rano Aliyu

Paper Summary

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The article estimates the long-term real exchange rate in Nigeria by analyzing factors like terms of trade, oil volatility, monetary policy, and fiscal stance. Results show that deviations from the equilibrium are corrected within one to two years. Episodes of overvaluation and undervaluation were linked to oil revenues and macroeconomic performance. The study suggests that maintaining a stable monetary policy and reducing fiscal dominance can help achieve real exchange rate and macroeconomic stability in Nigeria.