of the most dramatic events in Nigeria over the past decade was the devaluation
of the Nigeria naira with the adoption of structural adjustment programme (SAP)
,this devaluation resulted in changes in the structure and volume of Nigeria's
agricultural export as empirically determined by many researchers (Oyejide, 1986,Ihlmodu,1993;
Osuntogun et al,1994; World Bank 1994 the depreciation also increased the
prices of agricultural exports and studies have shown a marked increase in volume
of agricultural exports over the years .However ,the volatility ,frequency and
instability of the exchange rate movement since the beginning of the floating
exchange rate raise a concern about the impact of such movements on
agricultural trade flows.
other measures, the structural adjustment programme (SAP),which started in 1986
abolished the commodity Board, the body that since 1960 had been responsible
for organization and purchase of agricultural exports .As a result farmers
could sell their products directly to foreign and local processors without any
intermediary ,thus obtaining higher prices for their products .This was
expected to remove the excessive taxation on farmers products by the erstwhile
marketing board and leave producer prices to be determined by market forces.
Given that agricultural output is influenced by prices among other factors, the
depreciation of the naira and abolish of the commodity boards were expected to
result in an overall increase in production of exports.
STATEMENT OF THE PROBLEM
in income earning of exports crop producers come as a result of either increase
or decrease in international world price of exports or devaluation of the
currency and the subsequent increase in product prices. Such price/exchange
rate changes, however, may lead to a major decline in future output if they are
unpredicted and erratic. Fluctuation -whether positive or negative is not
desirable as it increase risk and uncertainty in international transactions
costs. An IMF (1984) study cites arguments that exchange rate variability would
also tend to induce macroeconomic phenomena that are undesired, for example
inflation and protectionism. Despite this assertion and that of other studies
more recent research explains why a positive effect could also be possible (de
Grauwe, 1988); Caballero and Corbo, 1989).
firms hedge against exchange rate risk, one could not expect to find a strong
negative effect on trade .Hedging against risk can be done via future or
forward market Where forward markets exist, the nature of the uncertainty faced
by traders is transformed .Forward market represents, in effect, a guaranteed
forecast of the exchange rate that will prevail at the end of the contract
period, which a trader can take advantage of by payment of a small margin
around the forward rates .Since currency uncertainty can be removed from short
run trading transaction by payment of this margin ,the cost of such uncertainty
cannot be higher than the cost of purchasing insurance against it.
the above research problems, the following research question was formulated to
provide solution to the problem under investigation. These are thus:
exchange rate contributed to export of agricultural product in Nigeria?
ii. To what extent export
of agricultural product contribute to economic growth of Nigeria?
are challenges of agricultural development in Nigeria?
1.4 OBJECTIVES OF THE STUDY
general objective of this study is to determine the impact of exchange rate on
export of agricultural product in Nigeria.
specific objectives are as thus:
examine the contribution of exchange rate on export of agricultural product in
determine the extent which export of agricultural product contributed to
iii. To examine the challenges of agricultural
development in Nigeria.
1.5 STATEMENT OF HYPOTHESIS
research study empirically tested hope to achieve the following
There is positive significant
contribution of export agricultural Output to economic development in Nigeria.
Ho: There is no positive
significant contribution of export of Agricultural output to economic
development in Nigeria.
SIGNIFICANCE OF THE STUDY
inefficient and ineffectiveness on the export of agricultural products in the
provision of competitive goods in the foreign market has been ascribed to a
combination of factors including low level of industrialization, inadequate
financing of export industries, inefficient performance of export promotion
agencies, inadequacy of incentive schemes, inappropriate export promotion
strategies, inadequate infrastructural facilities ,high cost of production.
Series of efforts have been made to arrest this problems but with little or no
effect in the sector.
export supply capacity
ii. Formulate and implement
effective strategies to strengthen productivity and growth in output
Ensuring that agricultural export
business remains profitable.
Ensuring that exporter attains
SCOPE AND LIMITATION
bases of our research on the impact of exchange rate fluctuation on the export
of agricultural products in Nigeria will be limited to the agricultural export
because of the non-feasibility of caring out a research on the agricultural
sector as a whole.
the fact that the research is limited to the scope of the agricultural export
of the sector, we are still going to be faced with difficulties like the
variation in the data obtained from different official i.e. political data,
conversion of such data into a whole since the data were complied with
different base years and irregularities in the process of data collection in
the society pose a big problem, for the researcher.
or risk in international commodity trade usually emanates from two main sources
changes in world prices or in fluctuations in exchanges rates. These may affect
trade by increasing the uncertainties of trade or effecting a change in the cost
of transaction, processing etc. The state of the two major sources determines
the eventual domestic trade price of a commodity over a period of time.
a decision to produce for export involves uncertainties about the prices
foreign exchange that such sales will realize as well as the exchange rate at
which foreign exchange receipts can be converted into domestic currency .In a
period of fixed exchange rates, the major source of concern in international
trade for a developing country (Nigeria) is the fluctuation that may arise from
the world price of primary commodities.
has been substantial literature on the effects of exchange rate volatility on
the volume of trade .Most of these studies focus on the argument that exchange
rate volatility increases risk and uncertainty in international transaction and
thus discourages trade. If traders are risk averse, they will be willing to
incur an added cost to avoid the risk associated with the exchange rate
volatility .Thus, a firm's export supply (import demand) curve will shift to
the left (right) in the presence of exchange rate volatility; for any quantity
of export or imports, the corresponding price will be higher under exchange
rate volatility (risk) than without it (Quran and Varangis 1992) .Some studies
(e.g. Grauwe,1988,Caballero and Corbo 1989; Kumar and Dhawan 1991 ) have in
fact concluded that due to the political economy effects of exchange rate
volatility, its increase was responsible for the slowdown in trade in the
1.9 MODEL OF SPECIFICATION
It has been shown that the analytical
framework and testing procedure used to measure the effect of exchange rate
volatility determine the conclusion thereof.
model used in the majority of studies based on the a linear regression form;