ABSTRACT
The research work was carried out to examine the importance
of import and exports in International Trade Finance, various risks, methods of
preventing these risks, trade incentives and facilities the Federal Government
is rendering to facilitate international trade.
TABLE OF CONTENTS
Title page i
Certification ii
Dedication iii
Acknowledgement iv
Abstract v
Table of contents vi
CHAPTER ONE
1.0 Introduction
1
– 2
1.1 Background
of the study 2
1.2 Purpose
of the study 3
1.3 Statement
of problem 3
1.4 Significance
of the study 3
- 4
1.5 Delimitation
of the study 4
1.6 Limitation
of the study 4
1.7 Definition
of terms 4
- 6
CHAPTER TWO
REVIEW OF RELATED LITERATURE
2.1
Introduction 7
2.2
Historical background of Eco Bank Plc. 7
2.3
Formation and process of finance 7 - 8
2.4
International finance 8
- 9
2.5
Importance of international finance 9 - 10
2.6
Factors affecting international finance 10 - 11
2.7
Roles of banks in finance international finance 12
- 17
2.8
Currency transfer mechanic 18 - 19
2.9
Inter bank finance instrument 19 - 20
2.10
The tradable currencies 20
– 21
CHAPTER THREE
RESEARCH METHODOLOGY
3.0
Research methodology 23
3.1 Population/Area
of the study 23
3.2 Sampling
techniques 23
3.3 Research
instrument 23
- 24
3.4 Method
of data collection 24
3.5 Research
design 24
– 25
3.6 Method
of data analysis 25
CHAPTER FOUR
PRESENTATION AND ANALYSIS OF DATA
OR RESULT
4.1
Introduction 26
4.2
Data analysis 26
– 27
4.3
Testing of hypothesis 27
– 29
4.4
Interpretation of finding 29
CHAPTER FIVE
SUMMARY, CONCLUSION AND POLICY
RECOMMENDATION
5.1 Summary
30
– 31
5.2 Conclusion 31
5.3 Policy
recommendation 31
– 32
5.4 References
33
5.5 Appendices
34
– 35
Appendix
I
Appendix
II
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
International trade is the exchange of goods and services between
countries including business enterprises and individual domiciled in different
countries of the world. The exchange of goods and services through
international trade does not only enable a country to produce these goods and services
for which if is best suited, based on its natural endowments (e.g. fertile
soil, mineral resources, climate) but also allow a country experiencing. Acute
domestic, shortage (resulting perhaps from bed harvest, draught e.t.c) to
remedy the situation through importation. Thus, it has been said that
international trade cannot be gain said.
Natures of world are not self
sufficient. They rely on each other for the supply of what they lack. Thus,
natures exchange what they have with what they do not have.
International trade can be bilateral or multilateral. If it is bilateral
it means such trade is between two countries only e.g Nigeria
exchanges her crude oil with Britain
and in return. Britain
gives her manufactured goods to Nigeria
such as building materials, tires, foods, item etc. when a trade is
multilateral; it means such trade involves more than two countries. It can be
trade between U.S.A, Nigeria,
Switzerland
and India.
Trade could be tangible or intangible. Tangible goods are physical or visible
good and intangible goods are invisible goods, such as shipping, banking,
insurance etc.
The country economy today is dominated by oil sector, which accounted for
over 90% of Gross Domestic Product (GDP) before the increase in the price of
oil in the early seventies, agricultural produce are used to finance the
immediate post independence development programmed for this reason, Nigeria has
since the attainment of independence been at the vanguard of exportation of
goods and services subsequent to the discovery of crude oil. It is noteworthy
that little was know by economic Plaines about export promotion, financing and
activities were limited to a range of agricultural commodities and these solely
financed by the marketing board. In industrial sector, import substitution was
the cornerstone of industrialization policy. The policy whose main objective
was to offer protection to in faint industrial, replace imported goods and
there by conserving foreign exchange.
The economic problem could be traced to the world economic depression.
The fall of our export was due to the mono-product nature of external trade.
Misplacement of priorities by our leaders and frivolous spending pattern of the
civilian administration causes by money illusion we had over the years and this
led to unemployment problem low production and services which brought about
difficulties in balance of payment with all the problem the country them
realized the need to look beyond the oil sector for the purpose of generating
more earnings an exports. It is for these reasons that the Nigeria Export
Promotion Council (NEPC). Nigeria Export and Import Bank (NEXIM), Nigeria
Association of Exports (NAE) were established to improve the differences
between the exporters and importers. It could be recalled that one of the major
specific objectives of structural adjustment programme (SAP) introduced in 1986
was to restructure and diversify the productive base of the economy in order to
reduce the dependence on oil and imports. In strong attempt to lay a foundation
for the promotion of non-oil exports, the government promulgated export
incentive and miscellaneous provision decree which was designed to enhance the
exportation of non-oil products from the country.
The introduction of second – Tier Foreign Exchange Market (SFEM) marked
the beginning of aggressiveness in non-oil export marketing in Nigeria and the
assumption of change in export financing activities by banks. There is no doubt
tat the high prices arising from the new exchange rates been an important
factor in stimulating agricultural sector, which has a big potentials for
increasing agricultural production for export in particular.
The prices of major agricultural produce have increased since the
adjustment was started. The history of banking then gradually spread and become
substantially involved in financing the product marketing of the companies. The
services the universal bank offer to the customer, government and the society
at large include lending, acceptance of deposits, bill discounting and from
exchange transaction to meet the universal and industry. Among the services
includes the provision of working capital requirement, short, medium and long
term loans, foreign exchange transactions involving letter of credit,
documentary collecting etc.
Bankers’ letter now gone beyond the provision of banking services to
corporate services. The corporate financial services offered by bank range from
capital issue, loan syndication to equipment lending forfeiting acceptance
credits, availing, bonds, guarantees and indemnities, etc. in this way, bank
can as part and parcel be included in the history of international trade
finance in Nigeria.
1.2
PURPOSE OF
THE STUDY
It is established fact that there is need to promote exportation so as to
make Nigeria economy export oriented to ensure balance of trade, but
importation can not be absolutely discourage because some goods (e.g. heavily
duty machine, chemical etc.) have to be imported so as to facilitate produce
for exportation.
It is in line with this and the desire to respond to economic problem
that this project is set dig deep into roles of universal bank in development
of export and import of goods and services to point out the factors or risks militating
against the maximization of the objectives or gains arising from international
economic activities, and possible solution to these critical budget factors and
the trade facilities and incentives put in place by the government in
supporting the Nigeria bank in financing international trade.
1.3 STATEMENT
OF PROBLEM
The purpose of this study is to ingidre into the Nigeria Economy and in
so doing, the following will be analyzed.
Hi: That the value of Nation’s Currency has an
impact on the International Trade.
Hi: That a highly international trade
financing will be affected by interest rate risks.
Hi: That the exchange regulation of the
countries concerned highly affects international trade
finance.
Hi: That these inflation rate and partly
conditions have great impact on International Trade
finance.
Hi: That the International Trade finance has
effect on the banks.
Hi: That the International Trade finance
should be encouraged.
1.3
SIGNIFICANCE
OF THE STUDY
This study will go a long way in revealing to the general
public/importers and exporters the importance of International Trade finance,
to achieve this:
- The research will ensure and facilitate replication.
- It will enlighten the students as well as the
general public about the various service that universal have at their
disposal in International Trade Financing.
- It will reveal to the general public/importers and
exporters of the various risks that is attached to International Trade and
how they can get access to these incentives and facilities.
- It will add to the numerous materials in the
library as well as widen the horizon of the general public.
- It will cover major aspects of international finance
in perspective in order to exposing the major details of international
finance activities for the purpose of a systematic appraised of the skills
required of an ideal finance mangers that can entrusted with the full
responsibilities of the foreign operation of an enterprises.
1.5 SCOPE
OR DELIMITATION OF THE STUDY
It is necessary at the on set to delimit the scope of this study. The
research work will be careful to the importance of international finance, factors
affecting finance of International Trade and the possible remedies, the roles
of universal banks in international Trade financing, currency transfer
mechanics methods of setting international transaction and inter bank financial
instruments.
1.6 LIMITATION
OF THE STUDY
The researcher intends to have in the course of the study an over view of
finance of International Trade financing and the incentives and facilities
provided by the government to facilitating
international finance. In the course of carrying out this study, the researches
are as follows:
TIME: - The researchers tight schedule which
he must also use for the other alternative such as daily lectures and non
academic activities count a lot for the researchers ability to get needed
materials and information for the research work.
FINANCE: - It is the economic main source
of power of everyone in any undertaking owing to financial constraints faced by
the researchers hews could not get all the necessary materials.
1.7 DEFINITION
OF TERMS
Law of comparative advantage: - this is an economic theory propounded by
an ancient economist named David Ricardo. The law of comparative advantages
state that a country should concentrate absolutely in the production of goods
and services in which she can produce at least or lowest cost, so that she can
have advantage (in term of production) over other countries of the world.
COLLECTION: - Collection means the
handling by bank of financial and of commercial document in accordance with instruction
received. In order to obtain acceptance and payment or deliver document on
other terms and conditions.
CLEAN COLLECTION AND DOCUMENTARY COLLECTION:
- Clan collection means collection of financial documents not accompanied by
universal document e.g collection of proceeds of a foreign cheque or bill of
exchange etc. while a documentary collection is the collection of universal documents
whether or not they are accompanied by financial documents.
DOCUMENTARY LETTER OF CREDIT: - According
to UCP 500, it means any agreement however named or described, whereby a bank (the
“issuing bank”) acting at the request and on the instructions of a customers (The
applicant”) or on its own behalf.
i.
Is to make a payment to or the order of third party (the
“Beneficiary”) or is to accosts and pay bills of exchange (Draft(s)) drawn by
the beneficiary, or.
ii.
Authorizes another bank to effect such payment, or to
accept and pay such bill osf exchange (Draft) or
iii.
Authorizes another bank against stipulated documents,
provides that the terms and conditions oaf the credit are complied with
Foreign Exchange: - This is
mathematical expression of the international medium of exchange and monetary
system as a process of setting foreign accounts or debts arising from international
economic activities.
Exchange Rates: - These are
the rates quoted for the purchase and sales of foreign exchange where delivery
is to be made at future date. Forward rates arises under forward exchange
contracts and this is a contract entered into between exporter/importer where bank
agree to buy and sell the stated quantity of foreign currency at a future date
at a rate of exchange determined when
the forward contract is made.
Cross Rates: - This is the
rate at which price of the currency of one country is quoted viz. another
country’s currency but in dealing canter of a third country. Hence, cross rates
and rates of exchange which are between two currencies but in a third country.
Forward Exchange Contract: - A
forward exchange contract is defined as an immediate film and binding contract
between a bank and its customers for the purchase or sale of a specified quantity
of a stated foreign currency and payment for it at a future time which is
agreed upon making the contract.
Option Contract: - An option
contract is a forward exchange contract of which gives the customer the option
to call performance of the contract other at any date from the day the contract
was made to specified dates both of which are in future. The purpose of an
option contract is to avoid having to renew a forward contract through extending
it for a few days.
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