ABSTRACT
This study, an analysis of development in Nigerian balance of payment
(1995 – 1999) was carried out to assertion whether Nigeria has been
paying her wages internationally to examine the statement with a view to
determine what recent developments have taken place in Nigerians
foreign trade and others transaction with the rest of the world.
Information
was collected using literary method i.e. various publications,
textbooks newspapers, magazines and journals. Also, oral interviews were
used to elicit information from some government officials (staff).
It
was found out that the exports receipts were sufficient to pay for the
imports and settle some international obligations that fell due within
the period, the fact remains that the managers of the economy did not
exercise a considerable amount of control over the foreign exchange
resources.
It was however, recommended that if not for the debt
management strategies pursued by government during that period, there
would have been more years deficits in the balance of payment position
over and above four years recommended.
CHAPTER ONE
1.0 INTRODUCTION
In an era when advancements in
travel and communication technology have reduced the whole world to what
may at best be described as a global village and the barriers that had
hither to separated one country from the other appear to have been
reduced to the bearest minimum, economic relationships can be
established with little or no difficulty amongst nations.
Consequently,
there is a continuos flow of resources across boarders. The continuity
which characterizes the flow of resources makes reckoning imperative
balance of payment statement is the means through which the reckoning is
performed ad it is a summary of a country’s international transaction.
The
major components of that activity are the trade balance (Merchandise
exports minus merchandise imports), the current account balance (trade,
services and transfer) and the capital accounts balance. The net total
of these balances must equal zero, since the quantity of naira paid must
equal the quantity received. It can also be deduced that the number of
possible “balances” in the balance of payment is equal to the number of
possible groupings of accounts in that statement. Balance computed on
the basis of certain accounts in the balance of payments provide an
indication of how given economic sectors contribute to the economic
position of the country in international market.
For instance, an
analysis of a surplus in the merchandise trade account can show the
contribution that net export of goods from that country make to the
country’s acquisition of external purchasing power. However, the most
common reason for computing “a balance” in the balance of payment is to
understand the net market pressures that affect the international value
and availability of the currency between (1995 – 1999).
Finally, the balance of payment figures report the amount of international flows on a historical basis, after the fact.
Thus,
when we include the reserves accounts, the supply of exchange equals
the demand for exchange, just as "“debits equal credit" if we want to
use the balance of payment as a tool to measure the pressures in the
exchange market; we must look to the future. It is only this sense that
we can see imbalance between supply and demand for foreign exchange
developing at the going exchange rates. Governments may choose to
provide the funds needed to establish balance at the going exchange rate
or alternatively, they may let the exchange rate fluctuate to bring the
forces of supply and demand into balance. International monetary
agreements adjusting imbalances in international flow.
1.1 BACKGROUND OF THE STUDY
The background of
this study is to analyze the recent trends in Nigeria balance of payment
with a view to determining whether the country was able to pay her way
internationally within periods of 1995 – 1999 and to determine whether
the monetary and exchange rate policies pursued were effective.
To
carryout this study work the main data will be carried out through
primary data source, interviewing with Central bank of Nigeria (CBN) and
top ranking officials while the secondary data will be collected from
an extensive research in CBN as well as other libraries, books, journals
and other publications. Further deductive logic will be used to arrive
at certain conclusion.
1.2 STATEMENT OF PROBLEM
Considering the
importance of balance of payments, statement as a source of information
for the managers of the Nigerian economy and indeed other interested
users of the balance of payment statement, these is a compelling need to
constantly analyze the statement with the view of determining:
1. Whether the nation is paying her wages internationally in other
words, is the nation paying for goods, drawing down her foreign reserves
accumulating foreign liabilities or through the receipt of gifts and
donations.
2. Is the country borrowing or lending money to the international community?
3. How effective are the various policy initiatives I checking international payments imbalances?
These problems are what this project is out to investigate.
1.3 OBJECTIVES OF STUDY
1.
With due reference to the questions raised on the proceeding section,
this researchers intends to collect, collate and analyze data on
Nigerian balance of payment position for the period covering 1995 – 1999
all inclusive.
2. It is also the intention of this researcher to critically examine
the statement with a view to determining what recent developments have
taken place in Nigerians foreign trade and other transactions with the
rest of the world.
3. In particular, this researcher will try to ascertain whether Nigeria has been paying her wages internationally.
Not
only that, the question as to whether the various policy packages have
been effective or not will be thoroughly investigated.
1.4 RESEARCH QUESTIONS
1. What was the general trend on the balance of payment of Nigeria within the period under study?
2. Were export receipts sufficient to pay for imports and settlement of international obligations within the period?
3. What policy measures were adopted to address balance of payment
problems within the period under study and how effective were they?
4. Did exchange rate depreciation through the operations of the foreign exchange market stimulate exports?
5. Did exchange rate depreciation discourage import?
6. Did Nigeria borrow from or lend to the international community within the period under study.
7. Did de-regulation in the economy encourage inflow or outflow of capital?
8. How effective was monetary policy in addressing international payment imbalances within the period under study.
9. Exchange control/import licensing vs. the foreign exchange market
as mechanism for foreign exchange allocation, which is a better option
for Nigeria?
1.5 RESEARCH HYPOTHESIS
In evaluating this
research work, we postulate the following hypothesis in determining the
analysis of development in Nigerian balance of payment.
1995 – 1999.
The hypothesis are formulated in both Null (Ho) and alternative (Hi).
Ho: The country in question was not able to pay her wages internationally within periods of 1995 – 1999
Hi: The country was able to pay her wages internationally within the periods of 1995 – 1999.
Ho: The monetary and exchange rate policies pursued were not effective.
Hi: The monetary and exchange rate policies pursued were effective.
1.6 SIGNIFICANCE OF THE STUDY
This research work
is significant in that it set out to analyze the recent developments in
the balance of payments of Nigeria. This work is extremely important in
view of the severe economic problems, which this nation has had to
grapple with as a result of adverse balance of payments, coupled within
effective policies.
The study if fully digested will provide an
invaluable information and guide to various groups in difference ways.
To the mangers of the economy, a due as to the efficiency or otherwise
of the monetary and exchange rate policies in addressing Nigerian
balance of payment problems.
To the foreign investors, it will
provide an insight into the viability of the Nigerian economy. It will
provide the citizens of this country a better understanding of how the
economy is managed and expectations they should have from the
government.
In particular, the study will provide the authorities a
good insight into the effectiveness of the policies of the past
administration which will serve as a guide for future policy
initiatives.
1.7 SCOPE AND LIMITATION OF THE STUDY
This study was designed to analyze the recent developments in Nigeria balance of payment from 1995 – 1999.
a. For a study of this nature to be useful to many parties at the
same time, there is the need for adequate statistics to measure for
instance:
i. The influence of foreign trade and transaction on the national income of the country.
ii. To determine the effect of changes in tax and tariff on foreign trade etc.
In
Nigeria, the scarcity of accurate national statistics is a common
knowledge. Even when they are available, the quantity, quality and
turning of the supply is a major problem. This researcher did not have
access to adequate statistics for the type of analysis enunciated above
and consequently did not attempt to measure the indexes refereed to
above.
b. Another problem encountered while conducting this
research was that of differentiating the impact of one-policy measures
from that of others. For instance, within the period under study, others
policy measures such as income policy, trade as well as fiscal policies
were at one time or another targeted at the balance of payments.
The result is that even the most rigorous analytical technique cannot
sufficiently disentangle the maze of inter relationships and assign
success or failure to each policy measure with a time-space dimension.
What this researcher did was to adopt in a global sense a lump sum
approach in evaluating the effectiveness of various policy measures on
the balance of payments.
c. Another important limitation was the scarcity of books and related
literature on the subject matter written with the Nigerian background.
As a result of this limitation due reliance was placed on official
publications and foreign.
d. A fourth and perhaps the most limiting problem encountered was the
un-co-operative attitude of some academic staff of some universities
and government officials who were consulted for advice.
In some cases, some of the officials and lecturers displayed amazing ignorance over the subject matter.
In other cases, they were not just willing to co-operate and for these reasons, official publications were extensively used.
1.8 DEFINITION OF TERMS
For the purpose of this
research work, al terms and expressions used shall be attributed their
ordinary interpretations unless otherwise stated.
However, the following terms shall mean:
BALANCE OF PAYMENT: A systematic record of economic transaction for a given period between residents of an economy and non-residents.
These
transactions include the provision and receipts of real resources –
goods services and income and changes in claim on and liabilities tot he
rest of the world.
MONETARY POLICY: The management of the expansion and
contraction of the volume of money in circulation for the specific
purpose of achieving certain declared national objectives.
EXCHANGE RATE POLICY: Exchange
rate policy involves choosing a foreign exchange management system and
determining the particular rate which foreign exchange transactions will
take place.
EFFECTIVENESS: It is defined as the attainment of pre-determined goals.