This study aims to examine the relationship between the oil price and the exchange rate for nigeria between january 1997 and december 2012. Exchange rate management in nigeria introduction economic theory, in the quest for simplicity, assumes that the exchange rate is any other price and that it is determined by the forces of demand and supply in a perfectly competitive market and in a world where free international exchange is the rule. Although exchange rates were not static, they were not active. The newly introduced foreign exchange policy by the central bank of nigeria cbn will help shore up the naira, an official of the bank has said. Previous empirical studies revealed an ambiguous relationship between crude oil prices and exchange rates, a reason for exploring the differential effects of positive and negative oil price shocks on the exchange rate. Iii some issues in the analysis of statistical propoerties of daily. This study examines the monetary model of exchange rate in nigeria, using an autoregressive distributed lag ardl approach over the period 1998q1 to 2012q2. The impact of exchange rate fluctuation on the nigerian. The exchange rate is the price of one currency in terms of another currency, that is, the current market price for which one national currency can be exchanged for another. The overriding objective has been to achieve a realistic and stable exchange rate consistent with. Obafemi department of economics university of calabar p. Impact of exchange rate fluctuation on nige rias economic growth 19812015, full project materials. Exchange rate management policy in nigeria has passed through four major stages, which are. Live nigerian naira ngn exchange rates today with best.
This study seeks to find out the relationship between foreign exchange rate and foreign direct investment fdi and the impact of fdi on the gross domestic product gdp in nigeria, this is important in view of the recent and past devaluation of nigeria currency as well as the exchange rate changes over the years to be precised 26years coverage 19902015. Nigerias exchange rate policy and management michael i. Exchange rate instability is menacing economic growth in nigeria. His dual exchange rate structure, which the imf has long urged nigeria to scrap, may not last much longer. Retail dutch auction system rdas of foreign exchange management oct 231, 20 interbank foreign exchange market closure of official window february 2015. There are four main types of derivatives, namely swaps, forwards, futures, options. The management of exchange rates is one of the instruments used by a. Shortrun macroeconomic effects of bank lending rates in nigeria, 198791. Pdf the political economy of exchange rate and capital. Over the years, nigeria has adopted various exchange rate regime ranging research work is centered on the impact of exchange rate on the nigeria economic growth with special emphasis on the purchasing power of the average nigeria and the level of international trade transaction. There is therefore paucity of empirical evidence on the impact of exchange rate volatility and stock market performance on international capital flows both in.
Effects of exchange rate fluctuations on economic growth. Central bank of nigeria foreign exchange management. The nigerian naira ngn exchange rates represented on this page are live, updated every minute within the forex market. The literature is relatively scanty on exchange rate volatility, stock market performance and fdi nexus. It is 1 foreign exchange rate1 1 contributors to this series are. Between 1970 and mid 1980 nigeria exchange rate policy shifted from fixed exchange rate. Exchange rate depreciation and the structure of sectoral prices in nigeria under an alternative pricing regime, 198689 by olu ajakaiye and ode ojowu, research paper 25. Foreign exchange market and monetary management in nigeria. Exchange rate policy remain one of the most indices that shapes economic growth, especially for developing countries thus, its management is of priority to.
An analysis on the effect of external public debt on. For instance, exchange rate managements in nigeria has witness different significant changes over the past four decades. The impact of exchange rate fluctuations on foreign direct. Pdf impact of exchange rate management on the nigerian. Objectives of the study in a highly import dependent economy like nigeria, the naira exchange rate has become one of the most widely discussed topic in the country today. Having conducted a feasibility study towards the introduction of various derivative products, fmdq exchange has initiated plans to rollout, key interest rates and currency derivatives into the nigerian financial markets. The management of foreign exchange in nigeria has come a long way from the days of the military regimes when exchange rates were determined by military fiat up till now when there appears to be some semblance of stability in the value of the naira. Pdf this paper examined the impact of exchange rate management on economic growth in nigeria between 1980 and 2015. Small and mediumscale enterprise development in nigeria by d. Jm jun dec macroeconomic malpractices mar sept market forces million monetary authorities monetary policy naira exchange rate nigeria s exchange rate nominal exchange rate nonoil exports nontradable obadan official exchange rate operators parallel market. Effect of exchange rate fluctuations on manufacturing. The scheme was designed to encourage banks to increase lending to the agricultural sector by providing guarantee against inherent risks. Exchange rate is the price of the currency of one country expressed in terms of the currency of another.
When the demand for foreign exchange exceeds supply, the value of the naira will go up, and if exchange rate supply exceeds demand, the value of. Pdf the impact of exchange rate regimes on economic. Exchange rate depreciation, budget deficit and inflation the nigerian experience b fy. According to kinggeorge 20, the effect of exchange rate fluctuations on the nigeria manufacturing sector was set to find out the effect of exchange rate on the nigeria manufacturing sector. The changes in exchange rate have been seen to exhibit an appreciating and volatile trend which is detrimental to an economy as it affects economic growth. Acgs was established in 1977, under the management of the central bank of nigeria. The estimation results show that there is long run relationship among variables of the monetary model of exchange rate for nigeria. Get free research paper on monetary policy and exchange rate in nigeria our project topics and materials are suitable for students in nigeria with case studies in pdf, doc. The current foreign exchange control regime and implications for taxation and fiscal policy overview it is tough to manage an economy even in simple terms, in times of boom so it is definitely government influences the quantity and value of tougher to do so in times of. Exchange rate fluctuation on nigeria economic growth.
The usdngn spot exchange rate specifies how much one currency, the usd, is currently worth in terms of the other, the ngn. A major limitation of this study is that it focuses only on one determinant of export in the empirical investigate and that is the exchange rate. An exchange rate is an important aspect in a nations international trade, balance of payments and. Oil price shocks and exchange rate in nigeria emerald. While the usdngn spot exchange rate is quoted and exchanged in the same day, the usdngn forward rate is quoted today but for delivery and payment on a specific future date. Exchange rate volatility, stock market performance and.
Nigeria public debt and broad money supply exert a long run positive and significant effect on external reserve while nominal exchange rate was insignificantly related to external reserve. This paper therefore proposes to provoke some thoughts on the foreign exchange market and monetary management in nigeria. Published by human resource management academic research society. The empirical investigation of the relationship between exchange rate and nigeria s export are restricted to the period between 1970 and 2010 due to data nonavailability. Nigerian exchange rate policy dilemma by bismarck rewane ceo, financial derivatives company ltd.
That is, the estimated coefficients of the money supply, income and interest rate differentials support. Newly introduced foreign exchange policy will strengthen. Foreign exchange and interest rates and manufacturing. Charles robertson, global chief economist at renaissance capital in london, believes that nigeria is preparing to unify its exchange rate system this year. B 1115, calabar nigeria abstract the study estimated the effect of exchange rate on the balance of trade of nigeria for the period 19702012 using annual data. It is, however, a matter of regret that this seeming stability has come at a great cost. For example, the nigeria naira has exchange rate against the u. Interest rate management refers to the totality of steps and processes designed and used by the monetary authorities the cbn to determine, sustain or support. Nigerias dual exchangerate system may be ending the. Obsession with a number exchange rate rather than the process exchange rate policy 40. Foreign exchange management in nigeria past, present and the. Nigeria maintained fixed exchange rates from 1960 till the breakdown of the bretton woods monetary system in the early 1970s.
The importance, how to, effect causes relationship, comparison, history, role, solutions are discussed. Nigerian manufacturing sector depends heavily on import of inputs and capital goods which are paid for in foreign exchange and which rate of exchange is. This study empirically investigated the effects of external public debt on real effective exchange rate. Furthermore the peculiarity of the kenyan economy makes exchange rate management critical to the overall wellbeing of the economy. The nigerian experience before the introduction of the structural adjustment programme sap in 1986, the country operated a fixed exchange rate regime based on trade and exchange controls, which was anchored through import license controls regime. In nigeria, maintaining a realistic exchange rate for the naira is very crucial, given the structure of the economy, and the need to minimize distortions in production and consumption, increase the inflow of nonoil export receipts and attract foreign direct investment. Institutional reforms and the management of exchange rate policy in nigeria by kassey odubogun, research paper 36.
Exchange rate fluctuation on nige ria economic growth is an important economy metric as it reflects underlying strength and competitiveness with world economies asinya and takon, 2014. How falling oil prices caused foreign exchange rate. Nigerias move from a fixed to a floating exchangerate policy june 30, 2016 10. Original research article foreign exchange management in. The choice and management of an exchange rate regime is a critical aspect of economic management to safeguard competitiveness, macroeconomic stability, and sustainable development. Pdf exchange rate volatility and banks performance. Evidence from nigeria article pdf available in international journal of business, economics and management 24 january 2016 with 5,931 reads. However, the fixed exchange rate policy was implemented using different systems depending on the. Impact of exchange rate on the nigeria economic growth. Interest and exchange rates management in nigeria nairametrics. A foreign exchange rate is the price at which one currency may be converted into another.
It is the required amount of units of a currency that can buy another amount of units of another currency. It may be expressed as nominal exchange rate or real exchange rate. Cbn, pwc estimates with the outlook on the oil price and level of reserves accretion usd40. According to kinggeorge 20, the effect of exchange rate fluctuations on the nigeria manufacturing sector was set to find out the effect of exchange rate on the nigeria. Exchange rate policy in nigeria in nigeria the main objectives of exchange rate policy in nigeria are to preserve the value of the domestic currency, maintain a favourable external reserves position and ensure external balance without compromising the need for internal balance and the overall goal of macroeconomic stability. Exchange rate behaviour and trade balances in nigeria. The official exchange rate is determined by the monetary authoritycentral bank, while the market exchange rate is basically determined by market forces of demand and supply.
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