ABSTRACT
This with foreign exchange management in Nigeria by the Central Bank
of Nigeria (CBN) from 2006 to 2012. The need to manage foreign exchange
became imperative as a result of this equilibrium in the foreign
exchange market caused by inadequate supply of foreign exchange
management is a conscious attempt to harnesses foreign exchange
resources deploy them to service the economy so as to prevent the
economy from experiencing shocks due to foreign exchange volatility. The
central focus of this is to examine how CBN through its policy measures
manages foreign exchange in the country. To carryout this work, the
respondent makes use of both primary and secondary data. Questionnaires
were in line with the objective of the study. Based on the objective of
the study the findings reveal that the role of CBN in managing foreign
exchange is not impressive. The impact of exchange rate policy in
managing foreign exchange is not encouraging; the activities of panel
market operators negatively affect the effective operation of the
foreign exchange management. Conclusion and recommendations were made in
line with the findings.
TABLE OF CONTENT
Title page i
Approval page ii
Dedication iii
Acknowledgement iv
Abstract v
Table of content vi
CHAPTER ONE
INTRODUCTION
1.1 Background of the study 1
1.2 Statement of the problem 4
1.3 Objectives of the study 5
1.4 Research questions 5
1.5 Significance of the study 6
1.6 Scope of the study 7
1.7 Limitation of the study 7
CHAPTER TWO
REVIEW OF RELATED LITERATURE
2.1 Definition of foreign exchange 8
2.2 Foreign exchange in Nigeria 11
2.3 Structure of Nigeria's foreign exchange market 15
2.4 Growth of the market exchange in Nigeria 16
2.5 Foreign exchange market and monetary manage in Nigeria 20
2.6 The structure of the country's output 22
2.7 Overview of the Nigerian exchange rate policy 24
2.8 The efficacy of monetary policies in the management of
firms 28
2.9 Foreign exchange management objectives and policy 33
2.10 Foreign exchange problems 37
2.11 Foreign exchange control 39
CHAPTER THREE
METHODOLOGY
3.1 Design of the study 41
3.2 Area of the study 42
3.3 Population of the study 42
3.4 Sampling Method 43
3.5 Research Instrumentation 44
3.6 Validity and Reliability of the Instrument 45
3.7 Sources of Data 46
3.8 Analytical Technique 48
CHAPTER FOUR
PRESENTATION AND ANALYSIS DATA
4.1Data analysis 49
CHAPTER FIVE
SUMMARY OF FINDINGS, RECOMMENDATION AND CONCLUSION
5.1 Summary of Findings 61
5.2 Conclusion 62
5.3 Recommendation 63
Bibliography 64
Appendix I 69
Appendix II 70
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
MANAGEMENT OF FOREIGN EXCHANGE IN NIGERIA BY CBN
There is scarcely any country that lives in absolute autarky in this
globalised world. The economics of all the countries of the world are
linked directly or indirectly through asset or/and goods in the markets.
This linkage is made possible through trade and 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. The consequences of
substantial misalignments of exchange rates can lead to output
contraction and extensive economic hardship. Moreover, there is
reasonably strong evidence that the alignment of exchange rates has a
critical influence on the rate of growth of per capital output in low
income countries (Isard, 2007). Nigeria, like many other low income open
economics of the world, has adopted the two main exchange rate regimes
for the purpose of gaining internal and external balance.
Amidst complex economic development problems (broadly, summarized
under huge external and internal debts, chronic fiscal deficit and
serious economic decline, reflecting in stagflation pressure despite
abundant primary resources), there is the general consensus in Nigeria
that the primary goal of current macroeconomic policy is to put the
economy back on a path of sustainable, non -inflationary and self
reliant growth of output, employment and income. In this regard, this
primary goal is subsequently reinforced by the general assumption that
price and exchange rate stability are necessary for the growth of
output, employment and income.
This assumption is couched under the awareness that price and
exchange rate instability are injurious to existing producers, new
investors and consumers alike as they introduce uncertainty which
discourages long-term commitments without which sustained self-reliant
growth of output, employment and income will be difficult to achieve. In
recognition of the foregoing, both the monetary and fiscal authorities
have usually aimed at the attainment of price and exchange rate
stability. In this regard, while the monetary authorities in Nigeria
constantly search for the optimal quantity of money and interest rate,
that would support stable prices and exchange rate, the fiscal
authorities on their part constantly look for the constellation of
government
revenues and expenditure that will attain the same objective all in a
bid to foster economic growth and development. Given the foregoing, it
is conventional to assign the goal of price and exchange rate stability
primarily to monetary authorities. Thus, over the years, the primary
goal of monetary policy in Nigeria always relates to that of the
achievement of price and exchange rate stability, enunciated by the
Central Bank of Nigeria (CBN) in its various issues of Monetary, Credit,
Foreign Trade and Exchange Policy Guidelines.
1.2 STATEMENT OF THE PROBLEM
The primary objective of foreign exchange management is to reduce
foreign exchange instability and its adverse effect on the economy.
Despite government effects to achieve this objective though the Central
Bank of Nigeria (CBN), foreign exchange (Monitoring and miscellaneous
provisions) decree No.17 promulgated in 1995 and the introduction of the
use of forms A and M, a handled problems are still identified with
foreign exchange operation in Nigeria.
There problem include
i. Inadequate inflow of foreign exchange
ii. Balance of payments problems
iii. Debt services burden
iv. Continuous depreciation in the value of the naira.
v. Problem of funding sectorial allocation of foreign exchange in the foreign exchange market.
1.3 OBJECTIVE OF THE STUDY
The objectives of the study are
1. To examine the roles of the Central Bank of Nigeria in managing the countries foreign exchange.
2. To examine the impact of foreign exchange rate policy in the foreign exchange management.
3. To examine the effect of the activities of parallel market on the foreign exchange management.
4. Examine the problems facing foreign exchange management in Nigeria.
1.4 RESEARCH QUESTION
i. How can we determine the role of the central bank of Nigeria in managing the country’s foreign exchange?
ii. Is the impact of foreign exchange rate policy been encouraging?
iii. Is the activities of the parallel market operators
negatively affect the effective operation of the foreign exchange
management in Nigeria?
1.5 SIGNIFICANCE OF THE STUDY
i. This work is in partial fulfillment of the requirement
for the award of higher National Diploma (HND) in Banking and finance.
ii. The work will be of immense help to future researchers
who will make their own investigation into this subject area.
iii. The work will CBN regulate the activities of the bank
with their in getting them to find foreign exchange market adequately,
increase foreign exchange inflow and balance of payment, determine a
realistic exchange rate, and adequate foreign exchange control system.
1.6 SCOPE OF THE STUDY
The area of this thesis is Enugu. The research is to determine how
foreign exchange could be effectively managed in Nigeria by CBN. The
period under the study is 1959- to July 2004.
1.7 LIMITATION of the study
In the process of carrying out this study, the researcher encountered
some problems which include finance – the cost of transportation to
areas where data are to be collected was high.
The negatives attitude of CBN officials towards disclosure of information was a limiting factor.
Finally, there for data collection and attending lectures was a limiting factor.