A Critical Analysis of Exchange Rate Variation and Economic Output in Nigeria from 1999 to 2026

This study examines the relationship between exchange rate variation and economic output in Nigeria from 1999 to 2026. Relying time-series data from the Central Bank of Nigeria, National Bureau of Statistics, World Bank, and International Monetary Fund, the analysis adopted the Autoregressive Distributed Lag (ARDL) bounds testing approach to assess both short‑run dynamics and long‑run equilibrium. Findings reveal a substantial negative short‑run impact of exchange rate depreciation on real GDP growth, with a pass‑through elasticity of –0.34 in the first year. In the long run, 10 per cent sustained depreciation reduces output by roughly 1.8 per cent, principally due to a high import dependence (over 60 per cent of manufacturing inputs imported) and low non‑oil export diversification. The structural break in 2016 strengthened this negative relationship, while the post‑2023 merger incidence has so far delivered modest output gains. Policy recommendations highlight productive‑base diversification and a credible, unified exchange rate regime with a maximum quarterly depreciation below 2.4 per cent.