ABSTRACT
Many
Nigerians have been greatly concerned with the problem of Nigeria economy
especially the persistent depreciation of the naira exchange rate. Some have tri4ed
to summarize them and Infact, some impact have been made through their work I
identifying the major difficulties confronting the smooth running of the
economy and naira exchange in particular.
It
was in the light of these difficulties that the federal government launched the
structural adjustment programme.. (SAP) on 27th July 1986. and among
the component of SAP was second tier foreign exchange market (SFEM).
This
project is therefore designed to provide an in-depth of the cause of the
persistent depreciation of the naira and appropriate possible measures for
modalities. Frankly speaking, this topic cannot be effectively treated in
perfect isolation of the foreign exchange market (FEM). Therefore, the
beginning chapters of this project will deal mainly with the introduction,
difficulties and benefits as it pertain to naira exchange rate and the
subsequent chapters will attempt to summarize and provide possible measure
which will enhance the improvement of naira.
Moreover,
it should be appreciated that writing about fast changing and growing scene is
a very difficult and hazardous affairs. This project is not exception since
most data was collected for observation made from the day to day sessions of
the market which continue to change with time but in any case it provided
enough trends for forecast.
We
are greatly assisted by articles of the magazines; however, some of the primary
data are collected directly from Central bank official, Benin and Enugu state
through personal interview.
TABLE OF CONTENTS
Title
page
Approval
page
Dedication
Acknowledgement
Abstract
Table
of content
CHAPTER
ONE
Introduction
1.1
Background of the study
1.2
Statement of the problem
1.3
Purpose and objective of the study
1.4
Significance of the study
1.5
Limitation of the study
CHAPTER
TWO
Review
of related literature
CHAPTER
THREE
Research
design and methodology
3.1
Sources of data (secondary source only)
3.2
Location of data
3.3
Method of data collection (literature
works only)
CHAPTER
FOUR
Findings
CHAPTER
FIVE
Recommendation
and conclusion
Reference
CHAPTER
ONE
INTRODUCTION
During
the pre – Babangida administration years, the Nigerian currency was above the
dollar and at par with the pound, but now, the naira seems to be tumbling down
the abyss. Exchanging for #44 to the United States dollar and #120 to the pound
sterling in the parallel market as at October 1994 and despite the official
rate for the pound sterling at 336 to one dollar and #68 to one pound in the
official market. The question is how did we get to this present stage? What
happened between 1995 and now?
When
General Ibrahim Babangida mounted the seat, naira was overvalued, especially as
receipts from crude – oil – Nigerian main foreign exchange earner had been
decline over the years. So some thing was to be done about the naira.
Government manufacturers and other commentators came into a consensus that the
naira exchange rate should be more realistic.
On
the other hand, advocates of devaluation had a relief on 26th
September, 1986 when government introduced the second tier foreign exchange
market (SFEM) in line with the objective of SAP. As explained by victor odozi,
the CBN director of foreign currency operations “the move was to enable
education I the pressure on balance of payment”.
1.1
BACKGROUND OF THE STUDY
Naira
has lost its value? Cried a house wife who went to the market with some
boundless of naira and came home with few items in her basket and had no
balance from the money she went to market with.
Today, nobody wants to use naira as
medium of exchange, no body wants to counts his wealth in naira.
Some
ministers in the federal capital territory receive their salaries I dollars. In
same vein, many Nigerian, if given the opportunity wouldn’t want to be paid
with naira yet there is this obligation to every Nigerian to serve and love his
father’s land. Even some of the so – called fathers have no respect for the
land. Now the fact is that their children will come up tomorrow and would want
to be paid with dollar. Naira, which is their father’s land currency keep going
down.
Hard
currency is the order of the day. Every Nigerian want to fly to America or
Europe in pursuit of hard currency. To them naira has lost its value and it
seems to be a simple truth because what naira was able to buy in 10 years ago
has dropped to a great range if compare to what it can buy today.
Naira,
of a truth has lest its value and it is consistently going down hence, my
interest in this project.
1.2
STATEMENT OF PROBLEM
This
study embraces or covers the area of persisted depreciation of naira in
Nigerian.
For Nigerian, most of them have been
living in surprise of thunderbolt and the painful effect of a sledge hammer
blew, wages have been decrying and inflation increasing in leaps and bounds.
Eating good food has become a tough task while financing other recurrent
project like children’s school fees, hospital bills, clothing etc. things that
people should comfortably do without getting worries has become difficult task.
These problem enumerated above have
devastating impact on the economy in general as it pertains to the naira
exchange rate this study will go a long way in finding their causes and provide
possible lasting solution.
1.3
PURPOSE OF THE STUDY
Some
of the major functions of money are, it serves as a medium of exchange, services
as store of value and serves as a unit of account. Today nobody wants to use
the naira as a medium of exchange, nobody wants to count his wealth I naira,
and nobody wants to store it (naira) because of fear of lost of value as a
result of its persistent depreciation. It is also proven fact that naira is
shrinking of its value as the evidence is in the fast ad steady increase in the
price of commodities and services.
This study is designed to fine the
extent of the role play by (FEM) on the general and steady depreciation of the
nation’s currency with its associated increase in the price of goods and
service in order to find some lasting possible solution to them. The research
study will also disclose the causes of this persistent depreciation of the naira
and advice on the various avenues through which they can be alleviated.
1.4
SIGNIFICANCE OF TH STUDY
A country’s worth is dependent on it’s
currency because the international worth of a country is measured by the
performance of its currency in the foreign exchange market. This shows that the
currency of a nation is its symbol of personality.
The
value of a country’s currency can be traced from the GNP of its economy. In
other words, a country’s currency is its symbol of strength. The underlying
strength in the currency is the gross national product which include
agriculture mining, manufacturing etc. the sum total of what this country
product and hold come out to show in a strong currency. Thus a sound management
of the Nigerian foreign exchange market (FEM) will generate a reliable and
stable naira rate of exchange that will encourage manufacturers and
agriculturist to invest and will in turn leads to economic development and
growth and equally brings about a strong currency. It is a known fact, that a country
runs the risk of balance of payments unless the policy framework and management
of its’ scarce resources as regard foreign currency other wise known as foreign
exchange.
1.5
DEFINITION OF TERMS
(Fem)
foreign exchange market – this is a market where bank are allowed to source
their foreign exchange from any source and sell to and user at market
determined rates.
(G.D.P).
gross domestic product – this is the total value of the goods and service
produced in a country in a year plus the net income from abroad and it is
measured in monetary term.
Letter
of credit – this is a guarantee that foreign importers would get their money
from the importer though the importers bank correspondent abroad.
Forex:
simply means “foreign exchange”.
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