The Effect of Exchange Rate on the Nigerian Manufacturing Sector
CHAPTER ONE
OBJECTIVE OF THE STUDY
The objectives of the study are;
- To ascertain the impact of exchange rate fluctuation on the Nigerian manufacturing sector
- To ascertain the effect of exchange rate fluctuation on Nigerian import or export and capital goods.
- To determine if the continuous fluctuation of exchange rate of naira have an impact on the quality and quantity of output of manufacturing firms.
CHAPTER TWO
REVIEW OF RELATED LITERATURE
INTRODUCTION
The monetary and traditional flow theory serves as the theoretical basis for this study. The monetary approach to exchange rate determination postulates that the relative supply of the demand for money between two countries is the basis for the determination of exchange rate. It views increase in the supply money as being able to generate inflation, hence, resulting in exchange rate depreciation. The model opines that a situation of falling prices with a given nominal money supply results in exchange rate depreciation while traditional flow model is essentially based on the principle of the interplay of demand and supply. The forces of the market (interaction between demand and supply) determine the rate of exchange. However, when there is speculation or expectation of a change in the rate of exchange, this could lead to the disequilibrium even without any change in the initial determined factors. Exchange rate can adversely affect the ability to import and therefore manufacturing output. Fluctuations in exchange rate will cause instability in purchasing power and hence, negatively impact on investment in import of manufacturing inputs. On the other hand, the effect on manufacturing output and overall income level will also affect investment in import of inputs and invariably the exchange rate. This is because among the determining factors of the rate of exchange are the demand for foreign exchange, the supply itself being influenced by an economy’s productivity level. Nigeria being an import dependent nation particularly for capital goods and considering the centrality of the rate of exchange of such country’s currency to her trading partner’s currency, a number of writers have expressed their interest and position on this important subject. More recently, Azu and Nasiri (2015) researched on Exchange rate Fluctuation and Sustainable Economic growth in Nigeria and the essence of their research is to ascertain the relationship between real exchange rate and economic development applying those variables that adjudged to make up equilibrium exchange rate thereby defining how interrelated are Real Exchange Rate (RER), Gross Domestic Product (GDP), Export (EXP), Import (IMP), Foreign Exchange Reserve (FER) and Foreign Direct Investment (FDI). The major aim was to define how exchange rate fluctuation stimulates economic development in Nigeria from 2004 to 2014.
CHAPTER THREE
RESEARCH METHODOLOGY
Research design
The researcher used descriptive research survey design in building up this project work the choice of this research design was considered appropriate because of its advantages of identifying attributes of a large population from a group of individuals. The design was suitable for the study as the study sought the effect of exchange rate fluctuation on the Nigeria manufacturing sector.
CHAPTER FOUR
PRESENTATION ANALYSIS INTERPRETATION OF DATA
Introduction
Efforts will be made at this stage to present, analyze and interpret the data collected during the field survey. This presentation will be based on the responses from the completed questionnaires. The result of this exercise will be summarized in tabular forms for easy references and analysis. It will also show answers to questions relating to the research questions for this research study. The researcher employed simple percentage in the analysis.
CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATION
Introduction
It is important to ascertain that the objective of this study was to ascertain the effect of exchange rate fluctuation on the Nigeria manufacturing sector. In the preceding chapter, the relevant data collected for this study were presented, critically analyzed and appropriate interpretation given. In this chapter, certain recommendations made which in the opinion of the researcher will be of benefits in addressing the challenges of exchange rate fluctuation on the Nigeria manufacturing sector
Summary
This study was on the effect of exchange rate fluctuation on the Nigeria manufacturing sector. Four objectives were raised which included: To ascertain the impact of exchange rate fluctuation on the Nigerian manufacturing sector, to ascertain the effect of exchange rate fluctuation on Nigerian import or export and capital goods, to determine if the continuous fluctuation of exchange rate of naira have an impact on the quality and quantity of output of manufacturing firms. In line with these objectives, two research hypotheses were formulated and two null hypotheses were posited. The total population for the study is 200 staff of Dangote group of company, Lagos state. The researcher used questionnaires as the instrument for the data collection. Descriptive Survey research design was adopted for this study. A total of 133 respondents made production managers, engineers, administrative staff and junior staff were used for the study. The data collected were presented in tables and analyzed using simple percentages and frequencies
Conclusion
The study empirically verified the effect of exchange rate fluctuations on the manufacturing sector. This is against the backdrop of the fact that exchange rate is a crucial variable and the manufacturing sector is expected to be the moving force in the drive towards industrialization. It is observed that the fact that Nigeria is highly dependent on the external sector for import of inputs has made the effect of exchange rate devaluation worse especially in manufacturing because capacity to import was constrained by the depreciating currency leading to a corresponding decline in output. It is pertinent to note that the devaluation of exchange rate in association with factors such as technology and human skills are necessary for a country to be established in the export market which are lacking in the case of Nigeria. The country should therefore, embark on improving basic amenities like electricity, transportation, water supply, telecommunication, human resource development, instead of implementing policies in an unhealthy economic and social structure
Recommendation
- The government should restrict the importation of similar products manufactured in Nigeria to increase the buying of Nigerian products.
- Government should stimulate export diversification in the area of agriculture; agro-investment, and agro-allied industries, oil allied industries such will improve Exchange rate fluctuations on manufacturing sector in Nigeria Economy.
- The government should therefore, embark on improving basic amenities like electricity, transportation, water supply, telecommunication, human resource development, instead of implementing policies in an unhealthy economic and social structure.
REFERENCES
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