Dual Foreign Exchange Rate in Nigeria: Stylised Facts and Volatility Modelling
E. O. Ohwadua
*
Department of Mathematical Sciences, Bingham University, Nasarawa State, Nigeria.
A. R. Akanji
Department of Mathematical Sciences, Bingham University, Nasarawa State, Nigeria.
*Author to whom correspondence should be addressed.
Abstract
This study examines the dual dynamics of Interbank Foreign Exchange Market (IFEM) and Bureau De Change (BDC) Market rates between the Nigerian Naira and the US Dollar over a ten-year period from 2012 to 2022. We investigate the dual foreign exchange rates – Interbank Foreign Exchange Market (IFEM) and Bureau De Change (BDC) Market rates between the Nigerian Naira and the US Dollar for ten years from 2012 to 2022. By employing MGARCH (multivariate generalized autoregressive conditional heteroscedasticity), we analyse the volatility of the naira in the dual foreign exchange windows and examine the stylised facts as it affects forex management in Nigeria. Our findings confirm and extend the results of previous research, emphasizing the role of market segmentation, information asymmetry, autocorrelation, stationarity, volatility clustering, correlation dynamics, and spillover effects in the foreign exchange markets.
Keywords: Bureau De Change (BDC) market, Interbank Foreign Exchange market (IFEM), MGARCH (multivariate generalized autoregressive conditional heteroscedasticity), volatility