Effect of Monetary Policy on Exchange Rate in Nigeria: Examining the Pre-and-Post Global Financial Crisis

  • Mathew B. Ogunniyi Department of Economics, Faculty of Social Sciences, University of Lagos
  • Darlington Akam Department of Economics, Faculty of Social Sciences, University of Lagos
Keywords: Monetary Policy, Exchange Rate, Interest Rate, Global Finance Crisis


The authors investigated how monetary policy has affected the exchange rate in Nigeria before and after the global financial crisis, using Autoregressive Distributed Lag (ARDL) and Granger causality test. It is evident from the empirical results that a decrease (increase) in the supplyof moneyand increase (decrease) in interest rates of Nigeria have led to the appreciation (depreciation) of the national currency before Global Financial Crisis (GFC). However, this has led to the depreciation (appreciation) of the domestic currency after GFC. In summary, the Central Bank of Nigeria had a better control on the exchange rate before the GFC. Also, the causality test revealed that Nigeria’s exchange rate drives money supply before the GFC, while money supply and interest rate drive the exchange rate after the GFC. Therefore, policies that are conducive to stabilising monetary variables are essential in attaining exchange rate stability. Besides, the government should ensure optimal control of liquidity surplus in the banking system in order to strengthen the stability of the financial sector.


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