HOW DO EXCHANGE RATE DYNAMICS SHAPE INTERNATIONAL TOURISM DEMAND?

Abstract

This study examines the impact of exchange rate dynamics, trade performance, and inflation on international tourism demand in Nigeria from 1990 to 2023. Using annual time-series data sourced from the Central Bank of Nigeria Statistical Bulletin, the study employs the Autoregressive Distributed Lag (ARDL) approach to capture both short-run and long-run relationships among the variables. The results reveal that exchange rate depreciation positively influences tourism demand, particularly with a lag, indicating that foreign tourists respond to improved affordability over time. Total exports consistently enhance tourism inflows, reflecting the complementary relationship between trade performance and tourism, while persistent trade deficits exert a negative effect, signaling that macroeconomic imbalances can reduce international tourist arrivals. Inflation shows limited short-run effects but contributes positively in the long run, suggesting that moderate economic growth and price stability support tourism development. The study concludes that macroeconomic stability, export promotion, effective exchange rate management, and integrated tourism policies are critical for sustaining and increasing international tourism demand in Nigeria. Policy recommendations focus on maintaining competitive exchange rates, promoting exports, stabilizing trade balances, controlling inflation, and coordinating tourism development with broader economic strategies to enhance foreign exchange earnings and economic growth.