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