ESTIMATING THE EFFECT OF EXCHANGE RATE VOLATILITY ON NIGERIAN TOURISM INCOMES

Abstract

Due to a decline in global oil prices, the Nigerian government's revenues have fallen sharply, and the economy is facing numerous problems. Tourism revenues are a significant part of expanding the government’s revenue base. These revenues are affected by exchange rate volatility, warranting investigation. This study examines the effects of exchange rate volatility on tourism revenues in Nigeria from 1995 to 2015. Volatility in the real exchange rate was measured using an exponential generalised autoregressive conditional heteroscedasticity (EGARCH,1,1) model. The relationship between the series was analysed using Johansen's cointegration tests and error-correction models. Our findings indicate that exchange rate volatility negatively affects tourism revenues. Additionally, the study reveals a strong long-term relationship between the exchange rate and tourism revenues. It is recommended that maintaining a stable exchange rate could help in achieving higher tourism revenues