The Effect of Exchange Rate Fluctuation on Imported Goods in Nigeria (A Case Study of Toyota Nigeria Limited, Lagos)
Chapter One
PURPOSE OF THE STUDY
The objective of this study is to ascertain the effect of exchange rate fluctuation on imported goods in Nigeria.
The objective can be broken down as follows:
- To know the reason for this upward movement in the pricing of goods in Nigeria.
- To discover why Nigeria depends solely on imported industrial inputs for its industrial use.
- To x-ray why the a steady rise in the exchange of the Naira over other currencies.
CHAPTER TWO
LITERATURE REVIEW
INTRODUCTION
Over the years the Nigeria economy witnessed instability and all these can narrow down to the upheaval of the exchange rate. This led the Nigeria government into promulgating the structural adjustment degree 23 of July, 1986. Exchange rate policy was one of the policies embarked upon to turn around the economy. Ojo (1998:6) said that movement on the exchange rate are known to have ripple effect on other economic variables such as interest rate, unemployment, money supply import volume etc. these facts underscore the importance of exchange rate to the economy of every what opens its doors to International Trade in goods and services. In a market friendly economic environment, the exchange rate should respond to the market forces of demand for supply of foreign exchange.
At the other extreme, the exchange rate may be administered determined depending on the peculiarities of the economy that is adopting the system.
However, exchange rate which is synonymous with price is best fixed at equilibrium where demand and supply interest which is mostly likely to be at a price commensurate with the perceived value of the offer or else buyers will turn to competitors for their product choice (Kotler 1984:70) but in the case of foreign exchange rate there is alternative to it and it is like the dealers enjoy autonomous monopoly this is the reason why foreign exchange market is a peculiar one that has constituted a source of worry to the government and the populace.
The exchange rate has always being on the increase, any downward trend is momentary and it goes up again. This chapter will be discussed under the following headings:
- Exchange rate development in Nigeria.
- The policies governing external trade and finance in Nigeria.
- Exchange rate fluctuations and the Dollar problem its effects on imported goods.
CHAPTER THREE
METHODOLOGY
INTRODUCTION
In this chapter, the following issues are described namely: the research design, simple of study, instrument for data collection, valuation of the instrument, distribution and retrieval of instrument and method of data analysis.
DESIGN OF THE STUDY
There are number of research designs available for use in social science research among which is the survey method was used as the primary data gathering techniques balance researcher considers it to be the most suitable instrument for discerning why something happen (Slatter 1968).
Imported input, it is difficult to see how it would significantly shore up forex demand when and users are still battling with massive unplanned inventions due to low consumer demand. The resultant effect is that imported goods are averagely expensive out of the research of common men.
This has also affected the locally assembled goods whose inputs are imported e.g. Toyota products.
AREA OF THE STUDY
The study set to x-ray the effect of exchange rate fluctuation on the prices of imported goods in Nigeria. The period covered by the research is 2000 to 2012 and limited to some financial establishment and importers within Lagos metropolis, because the believes that the general position in Nigeria would be the same from the result of the study in Lagos metropolis since the same exchange rate fluctuation prevails throughout the country.
POPULATION OF THE STUDY
The population of the study is five hundred and twenty (520), which comprises of one hundred fifty (150) staff of financial institutions and three hundred and seventy (370) importers of various goods in Lagos metropolis.
In order to obtain a proper representation of the entire population, a stratified random sampling method was adopted.
CHAPTER FOUR
DATA PRESENTATION AND ANALYSIS
This chapter deals with the presentation and analysis of data collected for the study. This is to enable the researcher master his findings and proffer possible solution to the problem under study.
CHAPTER FIVE
SUMMARY CONCLUSION AND RECOMMENDATIONS
SUMMARY OF FINDINGS
From the analysis and interpretation of the primary and secondary data, the following findings were uncovered;
- In table I we discovered that the upward movement of the pricing of goods in Nigeria is due to exchange rate fluctuation.
- We also found out that table (ii), the over dependency in importation of industrial equipment is because Nigeria lack the advantage of economic scale.
- From table three (iii), the respondents believed that the steady rise in price of imported goods in Nigeria have something to do with exchange rate of Naira to Dollar.
- Finally, table four (iv), show that, the price of made in Nigeria goods fluctuates with the price of imported goods in Nigeria.
CONCLUSION
- The effects of exchange rate fluctuation in Nigeria cannot be neglected of the country should make any meaningful development advancement in 21stcentury. This is because all economic indices respond to the exchange of the Naira, and for any reliable long-term plans to be made, government agents should not neglect the exchange rate fluctuations.
- Since the upward movement of the price of goods in Nigeria is due to exchange rate fluctuation, the price of goods and services should not be left in the hands of market forces of demand and supply.
- The higher the cost of production inputs of local goods occasioned by high exchange rate, the performance should be controlled administratively.
- If we must less inflation in this country so as to reduce it to zero, there must be a check on the sky-rocketing and fluctuating rate of exchange of the Naira.
RECOMMENDATIONS
- Government should would tirelessly with its monetary agencies to fix the rate of Naira, for no country of the world leaves US currency of 10 at to the pros cons of forces demand and supply.
- Government as the largest employers of labour should embark on the periodic upward review of the income of its work force to meet with the level of influence.
- The authorities should aim or re-orienting the mentality of Nigeria toward their assessment of locally industries.
- Efforts should be geared towards diversification and expansion of economy agricultural and exploration of non mineral.
- Government should also review the present pricing policy in the country.
LIMITATION OF THE STUDY
Several factors militated against the success of this research, these constraints include the following:
Time:
Time was a very serious constraint. This research was conducted in conjunction with the researcher full time academic work.
Un-cooperative Attitude of Respondents:
Most of retailers of some imported goods misconstrue researchers on data collection drive as government agent or revenue collector.
They are therefore apprehensive and are reluctant to give correct information.
Financial Constraint
Financial constraints adversely affected scope and coverage of this study. Data collection involve lost in time and money.
SUGGESTION FOR FURTHER RESEARCH
The following areas are hereby suggested for further research work.
- The factors responsible for non-appreciation of the Naira over foreign currencies in Nigeria.
- The effect of Naira depreciation on the volume of imports in Nigeria.
- The factors affecting the pricing policy of the Nigeria businessmen in a deregulated economy.
REFERENCES
- Ifezu A.N. (1990) Principles of Marketing Enugu, ABIC and equipment sited edition Kotler P. (1977) Marketing Management Analysis Planning Implementation and Control.
- New Jersey; USA Prentice Hall Inc. Kotler P. (1984) Marketing Management, Edition, Prentice Hall Inc Englewood
- Chiff New Jersey Ntekop Top (1992), Foreign Exchange Market in Nigeria CBN Economics and Financial Review Vol. 6.
- Obaseki, P.J. (1997), the need for exchange rates convergence in Nigeria CBN Economic and Financial Review Vol. 35.
- Ojo, M.O. (1990), the Management of Foreign Exchange Resources in Nigeria, CBN Economic and Financial Review Vol. 28, No. 2 June.
- Samuel (1989), Economic Twelfth Edition, Inc Graw Hall Book Co. New York Olukole, R.A (1992), Exchange rates developments in Nigeria, Bullion Jan/March, Vol. 16 No. 1.
- Uduebo, M.A. (1990), the policies governing external trade and finance in Nigeria, Bullion April/June Vol. 4, No.2.