Economic and Financial Review


Central Bank of Nigeria


Exchange Rate Volatility, Exchange Rate Returns, Speculative Bubbles, TGARCH


This study investigates the impact of naira-to-dollar exchange rate volatility on naira exchange rate returns in Nigeria. Using daily percentage exchange rate returns of the naira per US-Dollar, the study estimated an AR(5)-TGARCH (1,1) to examine whether there is an existence of asymmetry in the time path of the naira exchange rate volatility. The findings indicated that exchange rate volatility leads to increase in exchange rate returns (depreciation). Also, there is the presence of asymmetry in the movement of the exchange rate volatility, such that negative shocks that cause exchange rate returns to fall lead to fall in volatility by a sizehigher than the impact of positive shocks of the same magnitude. The paper recommends that the monetary authority should intensify its monitoring of the exchange rate behavior to curb excessive volatility or erratic market swings. It should also continue to ensure effective implementation of market rules and guidelines to checkmate any speculation-induced arbitrage opportunities and foster credible exchange rate management.

Author Bio

Adenekan, Adedapo T., Sanni, Ganiyu, K. and Itodo, Ahmed I., are staff of the Research Department, Central Bank of Nigeria.

Publication Title

CBN Economic and Financial Review





Recommended Citation

Adenekan, A.T.; Sanni, G. K. and Itodo, A. I. (2019). Investigating the Impact of Exchange Rate Volatility on Naira Exchange Rate in Nigeria. CBN Economic and Financial Review. 57(3), 17-38



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