Title: Measuring the impact of exchange rate volatility on the depth and efficiency of the financial sector: evidence from Nigeria

Authors: Ezekiel Olamide Abanikanda

Addresses: Department of Economics, Obafemi Awolowo University, Ile – Ife, 230001, Nigeria

Abstract: This study examines the effect of exchange rate volatility on the depth and efficiency of Nigeria's financial sector over the period of 1986-2018 via the autoregressive distributed lag cointegration technique. The study employs four models that consist of financial institution and financial market indicators of depth and efficiency. The results from the study show that exchange rate volatility exerts a negative effect on financial institutions' depth and efficiency in both the short run and long run. The findings also show that exchange rate volatility wields a negative effect on financial market depth in the short run, albeit with no long run effect, whereas exchange rate volatility has an adverse effect on financial market efficiency in both the short run and long run. The paper recommends that the Central Bank of Nigeria should put in place adequate measures to keep the exchange rate stable in order to broaden the depth and efficiency of the financial sector.

Keywords: exchange rate volatility; financial sector; financial sector depth; financial sector efficiency; Nigeria.

DOI: 10.1504/IJMEF.2022.127161

International Journal of Monetary Economics and Finance, 2022 Vol.15 No.4, pp.331 - 352

Received: 05 Jul 2021
Accepted: 18 Jan 2022
Published online: 23 Nov 2022 *

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