Monetary policy dynamics and export competitiveness in Nigeria

Abstract

This study examines the effect of monetary policy dynamics on export competitiveness in Nigeria between 1994 and 2024. The persistent challenges of high interest rates, exchange rate instability, and inflationary pressures have raised concerns about the effectiveness of monetary policy in enhancing external sector performance. The study employed an ex-post facto research, while Autoregressive Distributed Lag (ARDL) model was used to estimate both short-run and long-run relationships among the variables. The data were subjected to series of statistical test, pre-estimation test (descriptive statistics, correlation, variance inflator factor, and unit root tests), standard econometric analysis (multiple regression analysis using the autoregressive distributed lag - ARDL model) and diagnostic test (multi-collinearity, serial correlation, CUSUM and CUSUM of square tests) at 5% level of significance The findings reveal that monetary policy has a significant effect on export competitiveness in Nigeria. Variables of monetary policy jointly had significant effects on export competitiveness {Adj.R² = 0.78, F(8, 21) = 23.08, prob. (0.0000), p < 0.05}. Specifically, interest rates, exchange rate fluctuations, and real effective exchange rate negatively affect export competitiveness in both the short and long run, while the error correction term indicates a rapid adjustment speed toward long-run equilibrium. The study concludes that unstable monetary conditions and weak exchange rate management undermine Nigeria’s export performance. It recommends the stabilization of exchange rates, moderation of interest rates, and stronger macroeconomic coordination to enhance export competitiveness and improve Nigeria’s integration into global markets.