International Journal of Econometrics and Financial Management
ISSN (Print): 2374-2011 ISSN (Online): 2374-2038 Website: Editor-in-chief: Tarek Sadraoui
Open Access
Journal Browser
International Journal of Econometrics and Financial Management. 2016, 4(1), 11-16
DOI: 10.12691/ijefm-4-1-2
Open AccessArticle

Test for Autoregressive Conditional Heteroscedasticity in Naira/US Dollar Exchange Rate in Nigeria

Emenike Kalu O.1, and Peter Ifeanyichukwu Ali2

1Department of Banking and finance, Rhema University Aba, Abia State, Nigeria

2Department of Financial Management Technology, Federal University of Technology Owerri, Imo State, Nigeria

Pub. Date: February 24, 2016

Cite this paper:
Emenike Kalu O. and Peter Ifeanyichukwu Ali. Test for Autoregressive Conditional Heteroscedasticity in Naira/US Dollar Exchange Rate in Nigeria. International Journal of Econometrics and Financial Management. 2016; 4(1):11-16. doi: 10.12691/ijefm-4-1-2


The objective of this paper is to analyse the behaviour of Naira/US$ exchange rates in Nigeria. Specifically, the paper examines the descriptive statistics of Naira/US$ exchange rates and whether the series follow autoregressive conditional heteroscedastic (ARCH) using monthly data sample covering January 2000 to December 2013. The estimates from descriptive statistics show that the official market exchange rate in Nigeria is negatively skewed with platykurtic distribution. The Jarque-Bera statistics support evidence of non-normality in the Naira/US$ exchange rate series. The results of the augmented Dickey-Fuller (ADF) unit root tests suggest that the series contain unit root at level but are stationary at first difference. Estimates from the ARCH tests show that official market exchange rates in Nigeria are heteroscedastic. This implies that ARCH family models are appropriate for modeling volatility exchange rate in Nigeria.

exchange rates descriptive statistics heteroscedasticity ARCH model Nigeria

Creative CommonsThis work is licensed under a Creative Commons Attribution 4.0 International License. To view a copy of this license, visit


[1]  Adelowokan, O. A. (2012). Exchange rate pass-through in Nigeria: Dynamic evidence. European Journal of Humanities and Social Sciences, 16(1), 784-801.
[2]  Ajao, M. G. & Igbekoyi, O. E. (2013), The determinants of real exchange rate volatility in Nigeria. Academic Journal of Interdisciplinary Studies, 2(1), 459-471.
[3]  Aliyu, S. U. R. (2010). Exchange rate volatility and export trade in Nigeria: an empirical investigation. Applied Financial Economics, 20(13), 1071-1084.
[4]  Bangak√©, C. (2008). Exchange rate volatility and optimum currency area: Evidence from Africa. Economics Bulletin, 6(12), 1-10.
[5]  Bayoumi, T. & Eichengreen, J. (1998). Exchange rate volatility and intervention: Implications of the theory of optimum currency areas. Journal of International Economics, 45, 191-209.
[6]  Bollerslev, T., Chou, R.Y. & Kroner, K.F. (1992). ARCH modeling in finance: A review of the theory and empirical evidence. Journal of Econometrics, 55, 5-59.
[7]  Emenike, K. O. & Aleke, S. F. (2012). Modeling asymmetric volatility in the Nigerian stock exchange, European Journal of Business and Management, 4(12), 52-60.
[8]  Engle, R.F. (1982). Autoregressive conditional heteroscedasticity with estimates of the variance of the United Kingdom inflation. Econometrica, 50, 987-1008.
[9]  Jhingan, M. L. (1997). Money, Banking and International Trade (5th Ed), Delhi India: Vrinda Publications Ltd.
[10]  Mordi, N. O. (2006). Challenges of exchange rate volatility in economic management in Nigeria. Central Bank of Nigeria Bullion, 30 (3), 17-25.
[11]  Obadan, M. I. (2006). Overview of exchange rate management in Nigeria from 1986-2006. Central Bank of Nigeria Bullion, 30(3): 1-9.
[12]  Olusola, O. and Opeyemi, A. (2013), Exchange Rate Volatility in Nigeria: Evidence from a Parametric Measure. Australian Journal of Business and Management Research Vol.3 No.05 [12-17], August-2013.
[13]  Omojimite, B. U. & Akpokodje, G. (2010). A comparative analysis of the effect of exchange rate volatility on exports in the CFA and non-CFA countries of Africa. Journal of Social Sciences, 24(1): 23-31.
[14]  Opara, C. C., Emenike, K. O. & Ani, W. U. (2015). Behaviour of Nigeria financial market indicators: Evidence from descriptive analysis, American Journal of Economics, Finance and Management, 1 ( 5), pp. 421-429.
[15]  Taiwo, O. & Adesola, O. A. (2013). Exchange Rate Volatility and Bank Performance in Nigeria, Asian Economic and Financial Review, 3(2), 178-185.