An Asymmetrical Approach to Exchange Rates, Inflation Uncertainty, and Savings in Nigeria

This study uses the Nonlinear Autoregressive Distributed Lag (NARDL) model to examine the asymmetric impacts of inflation uncertainty and currency rate volatility on savings behavior in Nigeria. The findings show that savings are adversely affected by positive cumulative changes in inflation uncertainty as determined by the GARCH-based conditional variance of inflation. Households are forced to devote more resources to immediate spending due to rising inflation uncertainty, especially during times of food scarcity and insecurity. However, because families continue to have doubts about longterm economic stability, a decrease in inflation concern does not result in an instant increase in savings. Additionally, because consumers anticipate more currency depreciation, previous currency depreciations have a longlasting detrimental impact on savings. These results provide insights into the intricate relationships between exchange rate volatility, inflation uncertainty, and saves behavior in Nigeria when understood within the frameworks of the Precautionary saves Theory, Life-Cycle Hypothesis, and Permanent Income Hypothesis.