Unstraining Productivity Growth in Nigeria: The Exchange Rate Perspective

Abstract

The volatile movement in Nigeria's exchange rate constitutes a severe headwind to the economic activity in the country and the eventual  performance of productivity and economic growth. This article explored the interrelationship between exchange rate volatility and  productivity in Nigeria. It reviewed the literature on the linkages between productivity and exchange rate volatility and highlighted the  different dimensions of relations between the two economic variables. The article highlighted the drivers of the recent turbulent movement in the Nigerian foreign exchange market, categorising them based on the demand and supply sides of the market. On both  sides, the escalation of market players' speculative behaviours has amplified the pressure on Naira. Meanwhile, the dependence on  imports for raw materials, intermediate inputs and finished products primarily drives exchange rate volatility. The article also strongly  emphasised the need for harmonising foreign exchange management guidelines and clarity and transparency in managing the foreign  exchange market.