A Causality Test of Exchange Rate and International Trade Volume in Nigeria

The study examined the causal relationship between exchange rate and trade volume in Nigeria from 1995 to 2014 with a major objective of determining the relationship between exchange rate and international trade. Using Annualized time series drawn from the from World Bank Databank for covering the period 1995 to 2014, it was established that a unidirectional causality exist between exchange rate and net export. A unidirectional causality was also found running from import to export without feedback. It can therefore be concluded that an effective and efficient exchange rate policy is an essential ingredient for enhancing the trade volume of a country like Nigeria.