EXCHANGE RATE FLOATING AND ITS IMPLICATIONS ON NIGERIA’S ECONOMY

Abstract

This paper examined the effect of exchange rate floating on economic growth of Nigeria. After critical evaluation of relevant literature, the researcher found out that floating of the naira caused more volatility, instability and depreciation in the currency rates, and these volatility and instability triggered a decline in investor’s confidence, and endangered the stability of the financial system. The researcher therefore recommends amongst others that there is need for government to set up policies that would be favourable to exporters and promote exports, so as to motivate companies to produce high quality goods for export. This will generate revenue and boost the inflow of foreign exchange to create a more secure economy and stabilize the exchange rate. Also, support and priority should be given to the agricultural and manufacturing industries to increase productivity, reduce imports and increase exports of quality products with a view to attracting more foreign currencies that could help to stem the tide of foreign currency demand pressure.