How Valid is the International Fisher Effect in Nigeria? Evidence on Naira Exchange Rate Against USA-Dollar and Euro-19 Currencies


  • Ibrahim Iliyasu Department of Economics, Umaru Musa Yar’adua University, Katsina
  • Ibrahim Mohammed Department of Economics, Umaru Musa Yar’adua University, Katsina



International Fisher’s Effect, Structural Breaks, Exchange rate Volatility, JEL Classification: C22, F31, F41


This paper investigates the validity of international Fishers Effect for Nigerian Naira against the USA-dollar and Euro-19 currencies. We applied Gregory-Hansen cointegration technique to account for single unknown structural break and ARDL techniques to estimate long-run and short-run parameters. Monthly data covering the period 2000:M1 to 2019:M12 is put to empirical testing. The results suggest the existence of a structural break in either 2016M04 or 2016M10 together with a cointergration or long-run relationship. However, only 10 percent and 21 percent volatility (depreciation) of Naira against the USA Dollar is accounted for by Nigeria-USA interest rate differentials in both the long-run and short-run respectively. Furthermore, about 21 percent and 20 percent in Naira-Euro-19 volatility (depreciation) is explained by Nigeria-Euro-19 interest rate differentials in both the long-run and short-run respectively. The implication of the results is that IFE is weakly valid in Nigeria and that movement in Naira exchange rate against the USA-dollar and Euro-19 currencies is rather determine by other fundamental factors such as economy-wide productivity, oil price volatility and import demand intensity. On the basis of these findings, the paper recommends that other tools besides interest rate should be used in management of exchange rate in Nigeria.


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How to Cite

Ibrahim Iliyasu, & Ibrahim Mohammed. (2021). How Valid is the International Fisher Effect in Nigeria? Evidence on Naira Exchange Rate Against USA-Dollar and Euro-19 Currencies. UMYU Journal of Accounting and Finance Research, 2(1), 1–16.