The Impact of Exchange Rate Management on the Growth of Nigeria Economy (2015 – 2022)
CHAPTER ONE
Objective of the study
The objectives of the study are;
- To examine the impact of exchange rate on Gross Domestic Product (GDP) in Nigeria.
- To evaluate the effect of exchange rate on Gross National Product (GNP) in Nigeria.
- To determine the impact of exchange rate on unemployment in Nigeria
CHAPTER TWO
LITERATURE REVIEW
Concept of exchange rate
Exchange rate is the price of one country’s currency expressed in terms of other currencies. It determines the relative price of the domestic goods, as well as the strength of external sector participation in the internal trade. Exchange rate regime and interest rate remain important issues of discourse in the international finance as well as in developing nations, and more in economics embracing trade liberalization as requisite for economic growth (Obansa, Okoroafor, Aluko & Eze, 2003). In our own view, exchange rate refers to the absolute value of a country’s currency in comparison with other currencies on equal footing. It is the weight of a country’s currency in an international scale. It is usually the basis of international payment between countries. Certain factors affect it. Bergen (2017) argues that it is affected by differential in inflation, differential in interest rate, current account deficits, public debts, balance of trade, political stability and economic performance.
DETERMINANTS OF NIGERIA’S EXCHANGE RATE VOLATILITY
Exchange rate movements is an important determinant of international transactions. In Nigeria, the fluctuation according to Omojimite and Akpokodje (2010) have been influenced by changing pattern of international trade, institutional change in the economy and structural shifts in production. Furthering, Ogunleye (2010) noted that the real exchange rate in Nigeria has been principally influenced by external shocks resulting from the vagaries of world price of agricultural commodities and oil prices, both major sources of Nigeria export and foreign exchange earnings; contending that when the economy depended on agricultural exports, real exchange rate volatility was less pronounced given the fact that these products were subjects to less volatility and that there were more trading partners involved in the calculation of the country’s real exchange rate. This is minimally affected by the real exchange rate fluctuating by only 0.14% between 1970 and 1977. the increased dependence of the country on oil, resulted in 20 several trade shocks from global oil price shock fluctuating the naira exchange rate by 10% between 1970 – 1985 (Ogunleye 2010). To Iyoha and Oriakhi (2002), movements in real exchange rate during this period were nominal shocks resulting from fiscal expenditure in ambitious development projects; and when the windfall ended, the government resorted to financing its expenditures through money creation. Thus expansionary monetary fiscal policy according to him, exerted upwards pressure on inflation, aggravating sharp movements in real exchange rate. From 1986, the adoption of the structural adjustment programme (SAP) became a contributory factor in shaping the dynamics of real exchange rate in Nigeria. One of the cardinal points of this policy was floating nominal exchange rate policy. As the naira was allowed to float the nominal exchange rate movement became more pronounced. Contributing to stronger movements in exchange rate dunng this period. Between 1986 and 1992, Ogunleye (2010) observed that the mean annual change in real exchange rate in the country increased to 25% reducing to 4.5% between 2000 and 2006. favourable terms of trade, less fiscal dominance, effective monetary policy induced by more independent and foreign exchange rate volatility.
CHAPTER THREE
RESEARCH METHODOLOGY
INTRODUCTION
In this chapter, we described the research procedure for this study. A research methodology is a research process adopted or employed to systematically and scientifically present the results of a study to the research audience viz. a vis, the study beneficiaries.
RESEARCH DESIGN
Research designs are perceived to be an overall strategy adopted by the researcher whereby different components of the study are integrated in a logical manner to effectively address a research problem. In this study, the researcher employed the survey research design. This is due to the nature of the study whereby the opinion and views of people are sampled. According to Singleton & Straits, (2009), Survey research can use quantitative research strategies (e.g., using questionnaires with numerically rated items), qualitative research strategies (e.g., using open-ended questions), or both strategies (i.e., mixed methods). As it is often used to describe and explore human behaviour, surveys are therefore frequently used in social and psychological research.
CHAPTER FOUR
DATA PRESENTATION AND ANALYSIS
INTRODUCTION
This chapter presents the analysis of data derived through the questionnaire and key informant interview administered on the respondents in the study area. The analysis and interpretation were derived from the findings of the study. The data analysis depicts the simple frequency and percentage of the respondents as well as interpretation of the information gathered. A total of eighty (80) questionnaires were administered to respondents of which only seventy-seven (77) were returned and validated. This was due to irregular, incomplete and inappropriate responses to some questionnaire. For this study a total of 77 was validated for the analysis.
CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATION
Introduction
It is important to ascertain that the objective of this study was to ascertain the impact of exchange rate management on the growth on Nigeria economy. 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 impact of exchange rate management on the growth on Nigeria economy
Summary
This study was on the impact of exchange rate management on the growth on Nigeria economy. Three objectives were raised which included: To examine the impact of exchange rate on Gross Domestic Product (GDP) in Nigeria, to evaluate the effect of exchange rate on Gross National Product (GNP) in Nigeria and to determine the impact of exchange rate on unemployment in Nigeria. A total of 77 responses were received and validated from the enrolled participants where all respondents were drawn from CBN, Abuja. Hypothesis was tested using Chi-Square statistical tool (SPSS).
Conclusion
Certain policy implications arose from the findings. Principal among them is that exchange rate depreciation affects GDP and GNP. It demonstrates the need for a monetary policy frame work that complements the existing exchange rate policy
Recommendation
1 Micro-economic factors that tend to influence GDP should be properly managed to help in stabilizing the exchange rate to the benefit of the citizens.
2 Government should provide enabling environment to encourage individuals to put in their best to enhance the GNP which will translate to a better wellbeing of the masses.
3 There should be a deliberate effort by the government to stimulate small and medium scale enterprises so that the rising unemployment in the country can be checkmated.
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