This study investigates the impact of Exchange rate fluctuations on trade balance in Nigeria over the period of 1981-2016 using time series data. The study uses trade balance, exchange rate and inflation as variables for the model. The Vector Error Correction framework is employed to empirically investigate the relationship between exchange rates and trade balance. The co-integration test confirms that there is a long run relationship between trade balances and exchange rates. The findings from the Vector Error Correction Estimate indicate that exchange rate volatility positively and significantly impacted Nigeria’s trade balance over the period of analysis. This could be interpreted as an evidenced-based rationalization of the current managed- float system in Nigeria. Based on the findings from the study, proper management of the exchange rate is therefore recommended to ensure exchange rate stability that will support development in the tradable goods sector.