ARIMA Intervention Modelling of Monthly GBP-NGN Exchange Rates
Ette Harrison Etuk, Yellow Mazi Dimkpa & Pius Sibeate
Department of Mathematics, Rivers state University of Science and Technology, Port Harcourt
Department of Statistics, Ken Saro Wiwa Polytechnic Bori, Rivers State, Ministry of Education Port Harcourt Rivers State Nigeria
Email: ettetuk@yahoo.com, ettehetuk@gmail.com, etuk.ette@ust.edu.ng
ABSTRACT
A look at the trend of monthly British Pound (GBP) – Nigerian Naira (NGN) exchange rates since 2008 to 2016 reveals a fairly horizontal trend prior to 2015 and all-time high values currently. This necessitates some intervention. Going by the time-plot, the intervention point is pegged at February 2015 after which the rates are above 280 naira to a pound sterling. Even though economic recession in Nigeria was noticeable in mid 2016, it is being believed that its earlier signals were being ignored leading to its manifestation. It is therefore being assumed that this relative depreciation of the naira is accounted for by the recession. The pre-intervention data is modelled as an ARIMA (18, 1, 18) process, on the basis of which post-intervention forecasts are obtained. The difference between the post-intervention forecasts and the actual post-intervention observations is modelled for the transfer function. There is a close agreement between the intervention forecasts and the observations in the period of study (2008 – 2016). The model may therefore be used as basis for intervention in the exchange rates.
Keywords: Naira, Pound, Exchange Rates, Intervention analysis, ARIMA modelling
