Effectiveness of Foreign Exchange Market Intervention in Nigeria (1970-2013)
Siba Dayyabu,
Ahmad Azrin Adnan and
Zunaidah Sulong
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Siba Dayyabu: Faculty of Economics, Accountancy and Management Sciences, Universiti Sultan Zainal Abidin, Gong Badak Campus, 21300, Kuala Terengganu, Terengganu, Malaysia
Ahmad Azrin Adnan: Research Institute for Islamic Products and Civilization, Universiti Sultan Zainal Abidin, Gong Badak Campus, 21300, Kuala Terengganu, Terengganu, Malaysia,
Zunaidah Sulong: Faculty of Economics, Accountancy and Management Sciences, Universiti Sultan Zainal Abidin, Gong Badak Campus, 21300, Kuala Terengganu, Terengganu, Malaysia.
International Journal of Economics and Financial Issues, 2016, vol. 6, issue 1, 279-287
Abstract:
The instability in the value of naira have made the Central Bank of Nigeria (CBN) a regular actor in the foreign exchange market (FEM) in its efforts to stabilize the value of Naira and counter the disorderly behavior of the market. This paper examines the effectiveness of the CBN's intervention operations in the FEM using annual secondary time series data of four variables. The variables are the exchange rate, money supply, net foreign asset (a proxy for intervention variable), and lending rate ranging from 1970 to 2013. The result from the Johansen Juselius cointegration test shows that the naira exchange rate, intervention variable and monetary aggregates are cointegrated. The result from the error correction model also indicates that the naira exchange rate will adjust and re-establish itself at the speed of 12% annually. Moreover, the result of the Granger causality test the CBN intervention is non-sterilized. Therefore, the CBN should provide an effective way through which its FEM intervention could be efficient and sterilized so as to ensure stability in the exchange rate and the price level.
Keywords: Foreign Exchange Market; Nigeria; Exchange Rate (search for similar items in EconPapers)
JEL-codes: E50 E52 E58 F31 (search for similar items in EconPapers)
Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:eco:journ1:2016-01-36
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