Forecasting Nigeria Foreign Exchange Rate Dynamics

This study introduces an examination of the forecasting of Nigeria’s foreign exchange rate dynamics using time series data considering the Monthly official foreign exchange rate between the Nigerian Naira and the US Dollar. Utilizing the Box-Jenkins ARIMA approach, the monthly data spanning from January 2011 to December 2023 was forecasted. Analysis of the results indicated that the series achieved stationarity upon differentiation. Through diagnostic evaluation, it was determined that the ARIMA (0, 1, 2) model was the most suitable based on the Akaike’s information criterion (AIC). Projections for future exchange rates indicated a consistent revaluation of the Naira. These predictions could offer valuable insights for policymakers in Nigeria to anticipate the Exchange rate variations and potential fluctuation ranges of the Nigerian Naira against the US Dollar in the future.