Foreign Trade, Exchange Rate, and Human Development Nigeria

The study aimed to examine the relationship between foreign trade, exchange rate and human development in Nigeria over the period of 1980 to 2022. The study made use of a total of four (4) variables namely, Human Development Index (HDI), Gross Domestic Product per capita (GDPPC), the official exchange rate (OER), and trade openness (TO) sourced from the World Bank developmental indicator (WDI). The analysis of the data was done using ARDL model and Toda-Yamato granger with the aid of E-views version 10. The analysis showed that all the series are not stationary with the exception of trade openness which stationary at levels. The diagnostics analysis conducted showed that the model designed passed all diagnostic tests. The ARDL model explains a significant portion of the variation in the human development index in Nigeria, with an R-squared value of 0.702045 and an adjusted R-squared value of 0.547109. The analysis employs Human Development Index (LHDI) as the dependent variable, while the independent variables are Gross Domestic Product per capita (LGDPC), official exchange rate (LOER), and trade openness (TO). The long-run estimates reveal that the official exchange rate (LOER) has a positive and statistically significant impact on human development in Nigeria, with a 1% increase in the official exchange rate associated with a 0.042449% increase in the HDI. However, the coefficient of trade openness (TO) is positive but statistically insignificant in the long run, indicating that the impact of trade openness on human development is not conclusive in the Nigerian context. The coefficient of LGDPC is positive and highly significant in the short run, indicating that the impact of economic growth on human development may take time to manifest. The TY Granger Causality/Block Exogeneity Wald Tests table reveals a bidirectional causal relationship between the Human Development Index (LHDI), official exchange rate (LOER), trade openness (TO), and Gross Domestic Product per capita (LGDPC). This suggests economic growth and human development have a reinforcing effect, emphasizing the need for holistic policymaking. Based on the findings, the study recommends that policymakers should focus on sustainable economic growth, promoting private sector development, and diversifying the economy beyond oil exports. Trade openness can lead to trade-related gains, but barriers should be addressed. Exchange rate management should be holistic, maintaining a stable regime for export competitiveness and mitigating inflationary pressures. Investing in human capital development and social infrastructure, such as education and healthcare, can maximize the benefits of economic growth, trade, and exchange rate policies.