Nigeria’s Non-Oil Sector and its Impact on Exchange Rate Volatility (1981-2021)

The study investigates the impact of non-oil exports on exchange rate volatility in Nigeria using 40 years of time series data. The study makes use of an autoregressive distributed lagged model as the model for the data estimation. The variables used were found to be stationary at a mixture of level and first difference. The study found that non-oil exports have a negative impact on the exchange rate volatility in Nigeria. A 1% increase in non-oil exports will lead to a 0.64% reduction in exchange rate volatility. This implies that the less volatile the exchange rate becomes, the more interest there is in non-oil exports. This study recommends that it is high time Nigeria as a country diversified its economy and focused on massive investments into other sectors of the economy such as Agriculture, Manufacturing, Mining, Art, and entertainment to increase non-oil exports and prevent overreliance on crude oil exports as the only source of foreign exchange earnings. When we diversify the economy, we produce more, become less reliant on imports, and the exchange rate becomes more stable as a result.