Impact of Money Supply and Exchange Rate on Economic Growth in Nigeria

The study examines the interplay between money supply, exchange rate, and economic growth in Nigeria over a period of 20 years. It sought to evaluate the extent to which the money supply affects gross domestic product and also, to find out the effect of exchange rate on gross domestic product in Nigeria. To achieve these objectives, a model was formulated, and an Autoregressive Distributed Lag (ARDL) Cointegration Technique was used as a method of analysis. The variables used in the study were further subjected to Bounds test and other econometric tests. The data were cointegrated at order 1(1) and order 1(0). The long-run relationship of the underlying variables is detected through the F-statistic (Wald test). The study revealed that exchange rate has positive and significant influence on the economic growth in Nigeria measured with LGDP. The result was not consistent with the negative a priori expectation. Also, the result obtained shows that the relationship between money supply and gross domestic product in Nigeria is positive but insignificant. The study, therefore, recommends that regulators should hand down regulations that control the supplies of money in the circulation and that government should put on policy implementation that will ensure the stability of naira value.