Effect of Exchange Rate Volatility on Nigeria Economy (1991-2010)

The statistical test evaluated on 27 years time series data proved the significant impact of foreign exchange rate on Nigeria economy. And this exchange rate has continuously fluctuating, immerging, the country's foreign exchange rate volatility that favour Nigeria between 1981 and 1991 rises from N0.64 to N9.75) encouraged the nation's exportation. This continue, in 1992, the exchange rate rose to N17 to a US Dollar and in 1995 it increased to N21.89 but from 2003 to 2008 it reduces from N135.41 to N117.78 while later rises again to N147.20 and N150.3 in 200 and 2010 respectively t a US Dollar. At this period exportation was totally discouraged and gradually importation was later encouraged to meet the vast population. To control this fluctuation there is need to implement foreign exchange rate management policies which must be concerned with both the foreign sectors and domestic balance of the economy. This can be achieved if government focuses more attention on policies that will affect the accounts in balance of payment. Outcome of this paper work as proved it with decrease in the GDP by N0.02 as the export rate increases; that is the current exchange rate policy did not really affect the development of oil and non-oil export. Thus there is the need for proper management of the Nigeria foreign policy so as to achieve good level of exportation.