Inflation Anchoring, Exchange Rate and Sectoral Economic Growth in Nigeria

  • David Mautin Oke University of Lagos
  • Augustus Onyokwonu University of Lagos
Keywords: Inflation anchoring; Exchange rate; Sectoral economic growth; Cointegration


The Nigerian economy has been faced with high inflation rate, accompanied with a devastated exchange rate and a slow growth rate of the economy. The authors, in this paper, have examined inflation anchoring, exchange rate and sectoral economic growth nexuses in Nigeria. A multivariate cointegration approach was adopted. The result shows that inflation anchoring with a rising exchange rate would have contractionary effects on economic growth, agricultural output, industrial output and trade output in Nigeria. However, such policy would not have significant impacts on the building and construction sectors as well as service sector of the economy.  The inflation threshold for Nigeria has been found to be 9 percent. Thus, inflation anchoring policy may be meaningful in Nigeria if exchange rate is well managed and the sub sectors of the economy are developed. A piecemeal disbursement of loan facilities for accountability, at low interest rate to the agricultural, industrial and trade sectors remains promising in promoting the growth of the sectors, while a low inflation rate is pursued and secured. Studies in future on the subject may essentially examine how inflation anchoring would affect economic growth in Nigeria without interacting inflation anchoring with exchange rate in their models.

Author Biographies

David Mautin Oke, University of Lagos

Senior Lecturer & Managing Editor, Journal of Economics and Policy Analysis, Department of Economics

Augustus Onyokwonu, University of Lagos

Erstwhile Postgraduate Student, Department of Economics, Faculty of Social Sciences


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