Page 133 - Contributed Paper Session (CPS) - Volume 5

CPS1144 Adeniji Nike Abosede et al.
17889 unit increase will lead to oil export. Since the dynamic mode was fixed
and a positive relationship were examined, we go ahead and studied the
forecast error variance decomposition i.e. the variation explained due to shock
on each other using eight forecast time horizon. Tables 1, displace the forecast
error variance decomposition at both aggregate and disaggregate level.

Period Non – oil export Oil export Total export
1 18.39643 8.868136 9.996062
2 18.42322 14.85511 13.61430
3 18.44418 15.18785 13.62520
4 18.47710 15.27060 13.63614
5 18.52831 15.27970 13.63624
6 18.60795 15.28121 13.63628
7 18.73163 15.28140 13.63629
8 18.9234 15.28143 13.63730
Table 1: Forecast error variance of naira/dollar exchange rate on total
export, non- oil, and oil export from 1980 -2010 using eight forecast time
horizons

4. Discussion and Conclusion
In other not to have a spurious regression results from a time series data,
we subjected each variable to unit root test through the use of ADF test under
two different assumptions that the data generating mechanisms followed. We
address the forecast error variance decomposition on the impact of foreign
exchange rate volatility on Nigeria export growth using annual time series data
for period 1980 to 2010 using time series technique which encompasses unit
root test, vector auto regression to look at the dynamic relationship and
variance decomposition to study the changes in variation of variable to one
another. The error derived from eq(7) showed that it explained all the forecast
error variance of non – oil, total oil and oil export at all eight forecast time
horizon, indicating that non – oil, oil, and total export can be treated as pure
endogenous variables. In this sense, past and current values of naira/dollar
exchange rate can be used in predicting each of the dependent variables.
Naira/dollar exchange rate had slight effect on export at both aggregate and
disaggregates level. For improvement on Nigeria export growth, a well
appreciable mechanism should be adopted either through devaluation or
currency restructuring which will aid policy decision makers, investors and
other business attributes to have efficient productivity on Nigeria export
growth.

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