Cryptocurrency Price Fluctuations and Exchange Rate Volatility in Nigeria: A BEKK-MGARCH Approach

This paper looks at how the prices of Bitcoin and Ethereum move up and down, and how that shakes the naira exchange rate in Nigeria. Many Nigerians now buy and sell Bitcoin and Ethereum every day, and this may be pushing the exchange rate around too. The paper uses monthly data from January 2018 to December 2025, which gives 95 points to work with. Before running the main test, the study checked if the data had a unit root using the Augmented Dickey-Fuller test, and also checked for ARCH effects. The main tool used is the Diagonal BEKK Multivariate GARCH (BEKK-MGARCH) model, built on the work of Baba, Engle, Kraft, and Kroner (1990) and Engle and Kroner (1995). This tool is good because it can show how the shaking (volatility) in Bitcoin and Ethereum prices spills over into the shaking of the exchange rate. The results show that past shocks in the exchange rate and in Bitcoin and Ethereum prices both feed strongly into how much the exchange rate shakes today. The ARCH term for the exchange rate is 1.062 in the Bitcoin system and 0.905 in the Ethereum system, and both are significant at 1 percent. The GARCH term for the exchange rate is only significant in the Bitcoin system (0.572), while Bitcoin's and Ethereum's own volatility is very sticky, with GARCH terms of 0.639 and 0.751. The paper finds that the way Bitcoin and the naira move together changed direction over time, from a small negative link before 2022 to a strong positive link from 2022 onward, right after the exchange rate reforms. The paper says the Central Bank of Nigeria should watch cryptocurrency trading more closely and should build a way to track digital asset flows so it can guard the naira exchange rate better.

cryptocurrency, Bitcoin, Ethereum, exchange rate, volatility, BEKK-GARCH, Nigeria

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