DOLLARIZATION AND MARKET STABILIZATION IN NIGERIA: DYNAMICS ON FOREIGN EXCHANGE – TRADE SUSTAINABILITY NEXUS

Abstract

International trade prevails as means to avail resources for maximum use, create market to dispense country’s surpluses, and enable consumers choose from large variety, anchoring on foreign exchange dynamics. In Nigeria, reforms had featured at different times to reinvent fundamentals, but they still leave much to be desired. As the dollar takes centre stage, this study examines dollarization and market stabilization, focusing on exchange rate and trade sustainability nexus over the period 2008-2024. The hypothesis projects that Dollar to Naira exchange rate has no significant effect on Balance of Trade (BOT) growth rate in Nigeria. The research design is ex post facto, with requisite data from the Central Bank of Nigeria official website. Descriptive and multiple regression statistics are harnessed in data analysis, aided by E-Views 10, with the process stretching to Autoregressive Distribution Lag (ARDL). Based on p-value inference at the 0.05 level, the null hypothesis is accepted, affirming that Dollar to Naira exchange rate has no significant effect on BOT growth rate in Nigeria (p-value = 0.8041 > 0.05). The analysis concludes that the contribution of dollarization to market stabilization is not auspicious. It is yet peripheral and ephemeral as far as potency of the dynamics is concerned. The study recommends that governmental authorities should do more to strategically boost domestic production for greater competitiveness and intentionally woo the US to redirect auspicious trading engagements to the Nigerian economy. This is highly required for optimization of the dynamics to be sustainable on the domestic scene and in the global economy.