International Journal of Humanities and Social Science

ISSN 2220-8488 (Print), 2221-0989 (Online) 10.30845/ijhss

THE PRICE OF OIL AND EXCHANGE RATE DETERMINATION IN NIGERIA
Ben U. Omojimite

Abstract
This paper examine whether a link exists between oil price shocks and the Nigerian real effective exchange rate and other determinants of exchange rate. Unit root tests on the variables indicate that they could be characterised as 1(1). Johansen cointegration tests revealed at least three cointegration relationships using the trace and maximum eigen value rank test statistic. The evidence of cointegration enables us to estimate a cointegrating regression using real effective exchange rate as the dependent variable. The results show that the price of oil and openness of the economy significantly explain the level of exchange rate in Nigeria. The paper recommends expanded sources of foreign exchange for adequate funding of the market and import demand management as strategies in exchange rate management in Nigeria.

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