Exchange Rate and its Volatility Effects of Covid-19 Pandemic: The Nigeria Case

  • Felix G. Olaifa Department of Economics, Kwara State University, Kwara, Nigeria
  • Oluwatosin J. Oyetayo Department of Banking and Finance, Federal University of Agriculture, Abeokuta, Nigeria
  • Ebenezer A. Olubiyi Department of Economics, Federal University of Agriculture, Abeokuta, Nigeria
Keywords: Pandemics, Foreign exchange, Autoregressive Distributed lag (ARDL), Generalized Autoregressive Conditional Heteroscedasticity (GARCH) Model


The debate on the impacts of Covid -19 pandemic on exchange rate and its volatility is up and running.  This study examines the case of Nigeria.  Daily data from March 20, 2020 to September 3, 2021 for relevant variables were utilized.  The bounds test for cointegration and autoregressive distributed lag (ARDL) and GARCH (1,1) methods were employed to examine the effect. The bounds co-integration test results disclosed that there is both short-run and long-run relationship among the variables. The result from the ARDL estimation shows that new Covid-19 cases has a positive but insignificant effect on parallel market exchange rate while numbers of recovered patients from covid-19, oil and stock prices negatively and significantly affects parallel market exchange rate.  Results from the GARCH also indicates that new Covid-19 cases   have negative, albeit, insignificant effect on the parallel market exchange rate volatility while recovered cases of Covid-19 has negative and significant effect.  Further, oil and stock prices have positive and significant effect on parallel market exchange rate volatility.  Following these results, it was recommended that government should embark on policy that will diversify its revenue base and also intensify efforts on preventing any forms of pandemic so as not only to achieve the objective of increasing the value of Nigeria currency but also to reduce its volatility.


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