How Exchange Rates and Economic Policies Affect Nigeria’s Non-Oil Exports

What is it about?

Why do Nigeria’s non-oil exports remain low despite decades of reforms? This study investigates how exchange rate volatility and other macroeconomic factors affect the country’s non-oil export performance. Using annual data from 1989 to 2022, we apply ARDL and other robust econometric techniques (FMOLS, DOLS, CCR) to analyse both short- and long-run dynamics. The results show that exchange rate depreciation boosts non-oil exports, while GDP growth and trade openness also have positive effects. In contrast, interest rates and fuel prices negatively affect exports, and credit to the private sector appears statistically insignificant. Our findings highlight the urgent need for a stable exchange rate policy, investment in R&D, and upgrading non-oil exports from raw to processed goods to strengthen Nigeria’s export diversification drive.

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Why is it important?

Nigeria’s overdependence on oil exports (which represent about 84%) makes its economy highly vulnerable to global shocks. Non-oil exports (about 16%) offer a sustainable path to economic diversification, job creation, and inclusive growth. However, exchange rate instability and weak macroeconomic fundamentals have continued to limit this potential. By identifying the key macroeconomic factors that influence non-oil export performance, this study provides evidence-based insights that can guide policymakers in designing effective export and exchange rate policies. These findings are crucial for improving competitiveness, reducing revenue volatility, and achieving long-term economic resilience in Nigeria.

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