Foreign exchange volatility and inflation rate in Nigeria

The study examined exchange rate volatility and inflation rate in Nigeria. This research work is purely based on desk research where the researchers reviewed and discussed what other scholars have done on the subject matter in identifying and analyzing information. The study found that, foreign exchange volatility significantly influences inflation in Nigeria, primarily through imported inflation and altered consumer behaviour. Also, persistent fluctuations in the Naira’s value pose challenges to price stability and economic growth. Higher import costs driven by currency depreciation led to increased prices for consumers, eroding purchasing power and creating economic uncertainty. Thus, to mitigate the adverse effects of foreign exchange volatility on inflation, Nigeria must implement comprehensive strategies, including enhancing domestic production capacity, promoting currency stability, and diversifying the economy away from oil dependence. Furthermore, stabilizing the exchange rate, diversifying the economy, and strengthening institutional frameworks will help Nigeria manage forex volatility and maintain sustainable inflation levels, fostering economic resilience.