IMPACT OF EXCHANGE RATE VOLATILITY ON SELECTED CROPS (COCOA, RUBBER and CASHEW) EXPORT PERFORMANCE IN NIGERIA (1980-2016): A GARCH APPROACH

Abstract

The study investigated the impact of exchange rate volatility on the export performance of selected agricultural products mainly cash crops in Nigeria using time series data from 1980 to 2016. The selected agricultural commodities were cocoa, rubber, and cashew. The study used the Granger causality test, GARCH, and OLS regression models for the data analyses. From the results, the GARCH test for volatility revealed that the exchange rate was highly volatile for the period of study. The Granger causality test showed that a unidirectional causality from exchange rate volatility to export performance of cocoa and rubber existed, while the causality between exchange rate volatility and export performance of rubber was bidirectional. For the OLS regression analysis, it was found that exchange rate volatility had a significant impact on the export performance of cocoa, rubber, and cashew which led to the conclusion that exchange rate volatility is an important factor to consider in export trade. Based on the findings, it was recommended that monetary authorities should adopt a mechanism that will lead to the stability of the exchange rate.