Empirical Modeling of Nigerian Exchange Rate Volatility

In this study, we examined the volatility of Naira/US Dollar and Naira/UK Pound Sterling exchange rates in Nigeria using GARCH model.The data on the monthly exchange rates were collected from Central Bank of Nigeria which spanned through the period 2007-2010, and the analysis of the series was carried out using Econometric software (E-view 7.0) Investigation conducted on the exchange rates showed that volatility on the returns is persistent. The result of normality test indicated that the series residuals are asymmetric The plots on the original series and unit root test on the return series established the non-stationarity status of Nigerian foreign exchange series.The paper therefore recommends that the impact of policies of government on foreign exchange rates should be investigated. Keywords: Exchange rates, GARCH model, Heteroscedasticity, Volatility, Uncertainty, Stability