EFFECT OF MONETARY POLICY ON THE FINANCE OF FOREIGN TRADE
Need help with a related project topic or New topic? Send Us Your Topic
DOWNLOAD THE COMPLETE PROJECT MATERIAL
EFFECT OF MONETARY POLICY ON THE FINANCE OF FOREIGN TRADE
ABSTRACT
The goal of this research is to examine how monetary policy affects foreign trade finance. To accomplish this, data were gathered from both primary and secondary sources. CBN officials are primary sources, whereas textbooks, journals, and other secondary materials are available.
The questionnaire is the primary data collection instrument; the data is provided in a table and analysed using chi-square. Following data analysis, the following conclusions were reached.
1. There is a degree to which monetary policies have been effective in funding foreign commerce.
2. There are variables working against the efficiency of monetary policy in Nigeria’s international trade activity. The following are the study’s findings.
CHAPTER ONE:
1.1 STATEMENT OF THE PROBLEM.
Since the 1980s, a number of monetary and economic policy measures have been included into the Nigerian economy, not only to attain macroeconomic stability but also to improve international trade financing. However, these policy measures have resulted in inflationary pressure, a depreciated foreign exchange rate, an increase in foreign debt, and a deficit balance of payment (Ogwuma 1997).
As a result, the cost of foreign exchange has risen dramatically, while foreign exchange inflows have decreased drastically. This circumstance has put further strain on the foreign exchange budget and has harmed foreign trade finance.
The study’s goal is to investigate the impact of monetary policy on foreign trade financing.
1. To ascertain the influence of monetary policy on foreign trade finance.
2. To assess the extent to which monetary policies have been effective in funding foreign trade.
3. To identify the variables impeding the effectiveness of monetary policies in Nigeria’s foreign trade activity.
1.2 RATIONALE OF THE STUDY
This work was chosen with the goal of determining how to finance and improve foreign trade through monetary policy measures. The adjustment of the nation’s monetary policy plays a critical role in the financing of its overseas commerce.
Monetary policy influences foreign trade finance by directing deregulation of the foreign exchange market, inter-bank lending, monetization of foreign exchange earnings for petroleum export depreciation, and domestic price stabilisation. The study is important for a variety of reasons.
Foreign trade is extremely vital in any country’s economy, and any distortion is certain to have a ripple impact on the economy. The government (via the Central Bank of Nigeria) needs to know how successfully their monetary policy measures are being implemented, and whether they are accomplishing the desired goal of stabilising the economy and improving international trade financing.
1.3 SIGNIFICANCE OF THE STUDY
This study will be extremely beneficial to the federal government since it will expose the many monetary policies that must be implemented in order to attain good or favourable foreign commerce.
This study will assist the general public and financial institutions in recognising the need to strengthen foreign trade finance.
Finally, the study will provide a foundation for future studies for researchers who wish to go deeper into this topic or those conducting research in adjacent fields.
1.2 RATIONALE OF THE STUDY
This effort was chosen with the goal of determining how to finance and improve foreign trade through the use of monetary policy instruments. The modification of a country’s monetary policy has a significant impact on the financing of its overseas commerce.
Monetary policy influences foreign trade financing via directing deregulation of the foreign exchange market, interbank lending, monetization of foreign exchange earnings from petroleum export depreciation, and domestic price stabilisation.
SIGNIFICANCE OF THE STUDY.
This study is essential for a variety of reasons. Foreign trade is vital to any country’s economy, and any distortion is certain to have a ripple impact on the economy. This study will be extremely beneficial to the federal government since it will expose the many monetary policies that must be implemented in order to attain good or favourable foreign commerce.
This study will assist the general public and financial institutions in recognising the need to strengthen foreign trade finance.
Finally, the study will provide a foundation for future studies for researchers who wish to go deeper into this topic or those conducting research in adjacent fields.
1.4 BACKGROUND OF THE STUDY
The government enacts various economic policies that are implemented in the economy to influence economic activity. The government’s goal in doing so is to attain some monetary target deemed beneficial for the economy. Typically, such economics featured monetary policies aimed at achieving macroeconomic stability and even promoting economic growth (Ogbonna 1997).
According to Anyanuwokoro (1999; 163), monetary policy is a set of policies aimed to control the value, supply, and cost of money in an economy.
Since the early 1980s, several developing countries have seen their balance of payments deteriorate, owing in part to large international trade imbalances. As a result, numerous countries, including Nigeria, have implemented various monetary policies to finance their foreign commerce rather than resuming foreign borrowing (Onah, 1997. 16).
In Nigeria, monetary policy measures aim to reduce inflationary pressures, strengthen the naira’s exchange rate, improve the balance of payment position, and increase foreign exchange inflows for foreign trade finance (Nwankwo 1998).
Prior to the implementation of the structural adjustment plan (SAP) in the second half of the 1980s, the Federal Government pursued a trade liberalisation policy that encouraged enormous imports of commodities and services.
To that aim, monetary policy in operations encouraged international trade by imposing proper foreign exchange limits, and the naira’s overvaluation resulted in the implementation of the structural Adjustment Programme (SAP), which significantly impacted foreign trade finance (Ekamem 2001).
Throughout the majority of the 1990s, trade and exchange policy indicators mirrored cautious monetary policies. The purpose of the domiciliary account scheme was to induce foreign exchange inflation, to end subsidised funding of postsecond-tier foreign exchange market transactions, and to provide more fiscal concessions on exports.
So far, sustained pressure on the balance of payments has necessitated an inquiry into the role of monetary measures in this regard. Against this backdrop, this study will investigate the impact of monetary policy on foreign trade financing.
DEFINITION OF TERMS
The following terminology are specified in the study so that readers do not misinterpret the content:
Fiscal policy;-
This is the employment of monetary instruments to impact the cost, value, and supply of money, and hence economic activity, or the endeavour of monetary authorities (the CBN) to control the money supply and credit conditions in order to achieve particular broad economic goals.
FINANCIAL INSTRUMENTS
This encompasses all of the methods employed by the central bank to regulate the amount of money in circulation.
PAYMENT ANALYSIS
This is a record of a country’s overall economic transactions with the rest of the globe over a specified time period.
INDICATORS OF ECONOMIC POLICY.
This is a measure of the impact of current policies.
INFLATION.
This is the general price level’s long-term upward tendency.
EXCHANGE OF VALUES
This is a reference to foreign currency.
RATE OF FOREIGN EXCHANGE;-
This is the value of a national currency in relation to another national currency.-
Need help with a related project topic or New topic? Send Us Your Topic