The Impact of Exchange Rate Fluctuation on Macroeconomic...

THE IMPACT OF EXCHANGE RATE FLUCTUATION ON MACROECONOMIC PERFORMANCE IN NIGERIA CHAPTER ONE INTRODUCTION 1.1 BACKGROUND OF THE STUDY This study is designed to examine the causes of exchange rate fluctuations and their impact on the Nigerian economy since there is scarcely any country that lives in absolute autarky in this globalised world. The economies of all the countries of the world are linked directly or indirectly through asset or/and goods markets. This linkage is made possible through trade and facilitated by foreign exchange. The price of foreign currencies in terms of a local currency (i.e. foreign exchange) is therefore important to the understanding of the growth trajectory of all countries of the world. According to†¦show more content†¦1.2 STATEMENT OF THE PROBLEM In every country of the world, exchange rate level is the paramount target of economic policy targeting. In other words, exchange rate policy should be geared towards the attainment of long-term equilibrium rate, so as to achieve certain macro-economic objectives e.g. balance of payments equilibrium, through proper management of the Nigerian exchange rate policy. The country started operating the floating exchange rate system in 1986 after the introduction of SAP. It was expected that the country experience development but the reverse was the case because the country suffered consistent hopeless development situation as her naira depreciates often against other foreign currencies, especially the dollars which was universally accepted as the global medium of exchange. Before the floating system was introduced, $1=NO.89 but after that in 1966 we have $1=N22.05 and even today we have $1=N150.7 .This is quite disheartening, regardless of the effort of the government of Nigeria through th e activities of the regulatory body such as the establishment of second tier foreign exchange market (SFEM) in 1986 and interbank foreign exchange market (IFEM) in 1989 and currently the foreign exchange market (AFEM) in 1995. The depreciation of naira over the years has caused many firms especially the import dependent firms to suffer many loses as a result of exchange rate fluctuations. This has further led to difficulty inShow MoreRelatedOil Price Shock On Exchange Rate1393 Words   |  6 PagesOil Price Shock on Exchange Rate, Interest Rate, and Stock Exchange Performance: Crude oil and its byproducts since its discovery is one of the most basic input to the world particularly for energy. It is important to human existence and also, finite in supply. It has several other uses which include: hydrocarbons for plastic, pharmaceutical, and other basic day to day items. More so, most of our equipments depends on oil and its product to enable them work. Like every other product that is tradedRead MoreThe Impact of Macroeconomic Instability on the Banking Sector7782 Words   |  32 PagesInvestment and Banking ISSN 1450-288X Issue 7 (2009)  © EuroJournals Publishing, Inc. 2009 http://www.eurojournals.com/JMIB.htm The Impact of Macroeconomic Instability on the Banking Sector Lending Behaviour in Nigeria Somoye, Russell Olukayode Christopher Associate Professor, Department of Banking and Finance Olabisi Onabanjo University, Ago-Iwoye P.O Box 1140 Ijebu Ode , Nigeria E-mail: olukayodesomoye@hotmail.com Tel: + 234-8033335688 Ilo, Bamidele M Department of Banking and Finance, Olabisi OnabanjoRead MoreEffects of Finanacial Crises on Nigerian Capital Market5207 Words   |  21 Pagesmarket provides an avenue for sale and purchase of existing securities. It also accommodates external capital through foreign direct investment. Making it expose to fluctuations in the foreign economies. Scope of study This paper is focus on the impact of global financial crises on the Nigerian capital market laying emphasis impact of foreign direct investment and the prices of crude oil. This study also attempt to established the linkage between the Nigerian economy and the rest of the worldRead MoreDrop in Price of Crude Oil: Implication on the Nigerian Economy2414 Words   |  10 PagesDROP IN PRICE OF CRUDE OIL: IMPLICATION ON THE NIGERIAN ECONOMY PAPER DELIVERED TO BOARD OF DIRECTORS OF GUINNESS NIGERIA PLC Executive Summary The volatility in the prices of crude oil in the international oil market which was triggered by factors within the global economy has impacted the Nigeria economy to some degree with dire consequences for the implementation of the 2012 budget. Some of the factors which triggered the fall in oil prices include a massiveRead MoreDomestic and External International Factors on African Macroeconomic Formulation.4066 Words   |  16 PagesDomestic and External Factors on African Macroeconomic Formulation Introduction Growth, productivity and employment are the most common economic variables to reduce extreme poverty and break poverty trap. Report from World Bank in 2007 revealed that one percent in GDP growth results to 1.3% poverty decline in low-income countries. Moreover, development in the productive capacity leads to reduction in sustainable poverty. With improvement in the economic growth, many people have been removedRead MoreEconomic And Political Interests Of Oil Exporting Economies1799 Words   |  8 Pagesin the demand for dollar-denominated assets, which ultimately would enable the expansion of the US current account deficit (Setser, 2007). The real exchange rate, which is a measure of the price of foreign goods, relative to domestic goods across different countries, is a critical factor in determining the capital account, along with the interest rate. It is an indicator of the competitiveness of traded goods, and is a good measure of national income and trade behaviour. A resource windfall wouldRead MoreThe Economic Impact On The Economy2362 Words   |  10 Pagesthen, the economy became dependant on crude oil revenues to finance government budget and provided the required foreign exchange to pay imports bill. During the period 2000 – 2011, Sudan witnessed a higher growth rate of its Gross Domestic Product, driven mainly by the oil sector (World Bank, 2009). This situation has exposed the economy to the negative effects of fluctuations in oil prices in the global markets. It is worth noting that during the period under investigation Sudan was a net oil exporterRead MoreTrade Openness and Economic Growth in Nige ria23422 Words   |  94 Pagesdismantled, but at a slower rate when compared with tariffs. The liberalization of trade has led to a massive expansion in the growth of world trade relative to world output. While world output (or GDP) has expanded fivefold, the volume of world trade has grown 16 times at average compound rate of just over 7% per annum. In fact, it is difficult, if not impossible, to understand the growth and development process of countries without reference to their trading performance. (Thirlwall, 2000). LikewiseRead MoreTrade Reforms Policy Impacts on Non-Oil Exports in Nigeria11960 Words   |  48 Pagesreduce the perceived dependence on imports; a corollary to that objective was a desire to reduce the level of unemployment and generate more revenues from the non-oil sector. Non-oil export sector in Nigeria constitutes products of agriculture, industry and services that are exported by Nigeria (Ojowu, 1989). Agriculture is the primary non-oil product sector, which provides food, and fiber for the economy, while industry, as the modern sector, produces manufactured goods. The non-oil export sectorRead MoreThe Role of Agriculture in the Nigerian Economy8784 Words   |  36 Pagesfollowing heading: ââ€" ¡ Role of Agriculture in an Economy ââ€" ¡ Importance of Agriculture ââ€" ¡ Analysis of Selected Indicators of Agricultural Growth ââ€" ¡ Agricultural Constraints ââ€" ¡ Institutional Reforms ââ€" ¡ Major agricultural policies in Nigeria from 1960-2005 ââ€" ¡ Macro-economic variables affecting economic growth ââ€" ¡ Government expenditure ââ€" ¡ Investment ââ€" ¡ Foreign investment ââ€" ¡ The new Nigerian Agricultural Policy 2.0 The role of agriculture in an economy It is