IMPACT OF EXCHANGE RATE ON ECONOMIC GROWTH IN NIGERIA (1996-2020)
Need help with a related project topic or New topic? Send Us Your Topic
DOWNLOAD THE COMPLETE PROJECT MATERIAL
IMPACT OF EXCHANGE RATE ON ECONOMIC GROWTH IN NIGERIA (1996-2020)
Chapter one
INTRODUCTION
1.1 Background of the Study
A country’s foreign exchange policy is based on its perceived overall economic objectives and growth direction (CBN, 2003). As a result, non-conflicting sectoral policies are created within the context of the entire policy framework, with one sectoral policy reinforcing the others.
The simplest definition is that the exchange rate is the price of one currency in relation to another. Thus, it assesses the value of a domestic economy in terms of another economic system (Obeski, 1998).
Exchange rates are often reported between all major currencies, most notably those of trading partners, but one important currency (the dollar) is frequently used as a reference for expressing and comparing rates.
It is an important tool for economic management, as well as policy stabilisation and adjustment in developing countries. Exchange rate policies are critical in determining a country’s competitive position in the international market.
In independent markets, the currency rate was believed to be erratic, depreciating at will. This put pressure on the official foreign exchange market, making the period’s monetary policy target increasingly unrealistic due to inflationary financing of the government deficit and economic deregulation; a market-based framework for determining exchange rates was adopted.
It was expected that achieving macroeconomic stability would result in the elimination of external sector distortions, which would boost growth, stimulate non-oil exports, increase foreign exchange inflows, moderate demand pressure in the foreign exchange market, and generally improve foreign exchange to eliminate parallel market premium capital flight and increase foreign investigation inflows (CBN: 2003).
The foregoing demonstrates that the notion of exchange rate policy has an impact on one of the macroeconomic variables, contributing to Nigeria’s economic growth.
It is therefore vital to do study on this topic in order to provide recommendations that will serve as a guide towards the realisation of macroeconomic objectives that will result in the level of planned economic growth in Nigeria.
1.2 Statement of the Problem
During the oil boom era (1973-1979), the naira exchange rate remained reasonably constant. This was also true before to 1990, when agricultural goods accounted for more than 70% of the country’s GDP (Ewa, 2011). However, as a result of the rise in the petroleum oil sector in the 1970s, agriculture’s share of overall exports decreased.
considerably while the price of oil climbed. However, beginning in 1981, the global oil market began to worsen, resulting in economic issues in Nigeria due to the country’s reliance on oil sales for export revenues.
To highlight the significance of oil exports to the Nigerian economy, the gross national product (GNP) plummeted from $76 billion in 1930 to $40 billion in 1996, despite a number of governmental initiatives to revitalise and develop the economy. The real rate of economic growth became negative as a result of the adoption of the structural adjustment programme (SAP).
(Hinkle, 1999) stated that, while some economists question the ability of real exchange rate changes to improve developing countries’ trade balances due to the elasticity of their low exports
others believe that structural policies can change long-term trade trends and prospects for export growth. Foreign currency rate instabilities also pose a problem for the economy.
1.3 RESEARCH QUESTION.
The study’s objectives are to demonstrate the impact of exchange rates on gross domestic product, and hence how this affects the country’s growth.
The subobjectives are
To assess the influence of exchange rate variations on Nigeria’s growth.
To determine the effect of currency rates on Nigerians
1.4 RESEARCH QUESTIONS
To what extent does exchange rate volatility influence the magnitude of Nigeria’s economic growth?
What is the impact of exchange rates on Nigeria’s exports?
Need help with a related project topic or New topic? Send Us Your Topic