The Feedback effects of Exchange Rate Pass-through Inflation on sustainable Development in Nigeria

Abstract

The Nigerian Naira has become largely unstable due to the import-dependent nature of the economy and its over-reliance on oil revenues. The feedback effect of exchange rate pass-through inflation on sustainable development in Nigeria is the aim of the study. Annual time series data over the period of 1980 to 2018 from Central Bank of Nigeria statistical bulletin were collected and the Structural Vector Autoregressive (SVAR) estimation technique was employed in the analysis. The outcome indicates that inflation had a significant positive impact on sustainable development while interest rate has a negative significant impact on inflation in Nigeria. The study concluded that inflation had a positive, substantial influence on sustainable development and that the exchange rate had a long-term inflation relationship. The study therefore, recommends that excess dependency on primary commodities as a source of foreign exchange should be minimized by ensuring that value is added to all primary commodities before being traded abroad to reduce the country exposure to disturbances in the international commodity markets and improve the value of the local currency.