Impact of Environmental Factors on Foreign Exchange Fluctuations in Nigeria
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Date
2017
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Journal ISSN
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Publisher
International Journal of Economics and Financial Research
Abstract
The study tried to examine the effect of environmental forces on foreign exchange market in
Nigeria. The PEST- Political variables such as change in government (CIG) and democratic rule (DMR);
Economical variables such as interest rate spread (IRS) and inflation in consumer prices (ICP); Social variable
like population growth (PGR); and Technological variables such as fuel exports in merchandise (FEM) and
technology export (TEX) were used to evaluate the impact these environmental factors have on foreign
exchange market (official exchange rate). This study employed a time series data with the time frame 1973-
2015. A multiple regression model was developed and analyzed using the ordinary least square method (OLS)
with the help of E-views, a statistical package. The result showed that in isolation, IRS, FEM and DMR
significantly influenced dealing rates in the Nigerian foreign exchange market while ICP, CIG, PGR, and TEX
did not show any significant influence on foreign exchange market in Nigeria. However, the overall result
showed a significant positive relationship between the environmental forces and the foreign exchange market in
Nigeria with a p -value of 0.000000. We therefore concluded that environmental factors have significant
influence on the Nigerian Foreign Exchange market. Hence, we recommended that relevant stake holders
should pay proper attention to those environmental factors with significant impact on our Foreign Exchange
Market in Nigeria.