Background of the Study
A country foreign exchange policy is derived from the perceives overall economic objectives to be achieved and the expected direction of growth (CBN, 2003). Consequently, non conflicting sectoral policies are conceived within the ambit of the overall policy framework such that each sectoral policy reinforces each other.
A simplest definition has it that exchange rate is the price of one currency in terms of another. Thus, it measures the worth of a domestic economy in terms of another economics (Obeski, 1998:1)
Exchange rates regularly quoted between all major currencies mostly that of the trading partners, but frequently one important currency (that is the dollar) is used as a standard in which to express and compare all rates.
It is one of the key tools in economic management and in the stabilization and adjusts policies in developing countries. Exchange rate policies play a vital role in determining the position of a country in terms of international competition.
In autonomous markets, the exchange rate was seen to be volatile, and depreciated at will. This exerted pressure on the official foreign exchange market , and made the monetary policy target of the period to continually unrealistic due to the inflationary financing of government deficit with the deregulation of the economy, a market –based framework for the determination of exchange rate was adopted. It was envisaged that the realization of macroeconomic stability would lead to the elimination of distortions in the external sector and this enhance growths, stimulate non oil exports, increase foreign exchange inflows, moderate demand pressure in the foreign exchange market and generally improve foreign exchange utilization. The attainment of a realistic exchange rate was also expected to eliminate the parallel market premium capital flight and also enhance the inflow of foreign investments (CBN: 2003).
From the forgoing it becomes clear that the concept of exchange rate policies has the impact so as to show in the one of the macroeconomic variables, it contribute to economic growth of Nigeria. It is therefore necessary that a research work be carried out to this effect so as to provide suggestion that will served as a guide towards the actualization of macroeconomic objectives that will bring about the level of targeted economic growth in Nigeria.
Statement of the Problem
The foreign exchange suggests that exchange rate risk as it affects the importer is one that is enough to hinder development in the country thereby defeating laudable objectives of government.
Therefore, the questions that this project addressed are stated below:
(i) who bears the burden to delay interest on money transaction caused by “remittance lag”?
(ii) How ca we achieve exchange rate stability?
(iii) How to know if there is any impact in exchange rate on international trade?
(iv) Also to determine the possible method by which risk associated with exchange rate fluctuation can be minimized and to discover whether government importers are given preferential treatment as regard of funds?
(v) What range of fluctuation is constituent with the underlying fundamentals and hence acceptable?
(vi) What policy tools can be effectively deployed to keep rate within those ranges?
(vii) Should the range be decided in advance?
(viii) Should they be announced to keep secretly or should they be simply applied in an ad-hoc manner?
Objective of the Study
The objectives of this research work are stated as fellows:
(1) To ascertain how far the Nigeria exchange rate over the period of this research has contributed in the optimization of output stabilization in the Nigerian economy.
(2) To seek and determine as far as possible method by which this risk associated with exchange rate fluctuation can be minimized to promote economic growth in Nigeria.
(3) To see how exchange rate in Nigeria interact with a macroeconomic variable to bring about economic growth.
(4) To ascertain the effect of policy recommendations on both exchange rate and economic growth using macro-economic variables.
Statement of Hypothesis
The hypotheses of this research work can be stated as follows:-
H0: There is no relationships that exist between the Nigerian exchange rate policies on her level of economic growth since 1990-2008.
H1: There is a relationship that exists between the Nigeria’s exchange rate policies on her level of economic growth since 1990-2008.
Significance of Study
The
significance of this study lies on the recommendations made at the end of the study and its implantation. In general, the research is of immense benefit to the following:-
(1) Importer who make payments in foreign currencies.
(2) Policy makers of the central bank of Nigeria who issues the guideline government international trade practice.
(3) Bank-especially the commercial banks and merchant banks.
(4) The general public who has a right to contribute and be informed of the activities our banking institutions.
(5) It is hoped that the findings and recommendations of this study will adequately benefit the various interest groups named above.
Scope of the Study
This research project which is on the impact of the Nigeria’s exchange rate on economic growth since 1990 will be guided by the objective stated above. It covers the various exchange rate used in Nigeria since 1990 to 2008.
Limitation of the Study
During the course of this research the researcher experiences a number limitations and constraints.
The researcher was faced with the already known problem of gathering materials from the Nigerian organizations. Almost every information is classified and therefore most of the companies and banks approached were weary of releasing financial information related to the topic.
Gathering of information from public organization such as federal ministry of finance, federal of statistics and central Bank of Nigeria was also difficult.
A PROJECT WORK SUBMITTED TO THE DEPARTMENT OF ECONOMIC, FACULTY OF SOCIAL SCIENCES,
EBONYI STATE UNIVERSITY, ABAKALIKI
IN PARTIAL FULFILLMENT OF THE REQUIREMENT FOR THE AWARD OF BACHELOR OF SCIENCE (B.Sc) DEGREE IN ECONOMIC
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