Exchange Rate Unification and Poverty Nexus in Nigeria (1986-2024)

Nigeria operated multiple exchange rate regimes which have created significant distortions in the economy resulting to low standard of living, inflation, and loss of investors' confidence. To address these challenges, the Nigerian government officially implemented exchange rate unification to close the gap between official and parallel market rates to reduce poverty level in the economy. The purpose of this study is to examine the effect of exchange rate unification on poverty in Nigeria which is yet to be investigated in the literature. The Autoregressive Distributed Lag model (ARDL) was used as a method of analysis whilst poverty is measured using multidimensional poverty. Data on Multidimensional Poverty, Exchange Rate Unification (ERU) (ratio between official and parallel rate), inflation, economic growth, unemployment, and government social expenditure were extracted from World Bank’s data base and Central Bank of Nigeria statistical bulletin. The study found that exchange rate unification is very significant in explaining long run poverty dynamics than conventional macro economic variables in Nigeria. The study further reveals that exchange rate unification exerts significant reduction in multidimensional poverty, contradicting the perception that unification harms the poor through short-run inflationary pressures, thereby establishing exchange rate unification as an effective policy instrument for inclusive development.