ONLINE PROJECT RESOURCE

ECONOMICS

ACCOUNTANCY

BUSINESS ADMINISTRATION

BANKING & FINANCE

POLITICAL SCIENCE

MARKETING

SOCIOLOGY

INSURANCE

SECRETARIAL STUDIES

INDUSTRIAL RELATIONS & PERSONNEL MANAGEMENT

MANAGEMENT SCIENCE EDUCATION

 

 

MSc/MBA THESES

 

 

USEFUL RESOURCE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

YOU ARE EXPECTED TO USE THIS PROJECT AS A GUIDE; HOWEVER, IF YOU WISH TO USE IT WHOLLY, YOU WILL BE RESPONSIBLE FOR ANY ADJUSTMENT YOUR SUPERVISOR MAY REQUIRE

IT WILL BE SENT TO YOUR E-MAIL AFTER PAYMENT SAME DAY

 

PROJECT TOPIC  : EXCHANGE RATE REGIMES AND INFLATION PERSISTENCE IN NIGERIA (1970-2014)

PROJECT PROPOSAL

BACKGROUND TO THE STUDY
The relationship between exchange rate regime and inflation is an important issue in international finance. Whether fixed or floating, exchange rate affects macroeconomic variables such as import, export, output, interest rate, and predominantly inflation rate etc. Each exchange rate regime has its own strengths and weaknesses regarding economic output (Lohi, 2014). Toulaboe and Terry (2013) investigate the link between exchange rate regimes and inflation performance in developing countries and found that differences in inflation rates across developing countries correspond to differences in the exchange rate regimes adopted by those countries and that foreign inflation, and the extent of openness to foreign trade, contribute to inflationary pressures in the domestic economy. Ogundipe and Egbetokun (2013) also investigate the exchange rate pass-through to consumer prices for Nigeria on the background of the import dependence nature and the role of foreign exchange inflows in the conduct of monetary policy and found that exchange rate has been more important in explaining Nigeria’s rising inflation phenomenon than actual money supply.

However, contrary to the findings and assertions of other authors, one of the findings of Mordi et al (2007) shows that the evolution of exchange rate is not very important in explaining inflation in Nigeria as evident by the low degree of pass through that was recorded for all types of inflation in the country. Therefore, Mordi et al (2007) argue that rapid disinflation may be less responsive to exchange rate stabilisation policy in the short-run. This implies that aggressive combat of inflation can not be achieved through exchange rate stabilisation in Nigeria. Meanwhile, subsequent studies have mixed results and give rise to empirical puzzlement

Like in other developing countries, the study of the relationship between exchange rate regime and inflation in Nigeria cannot be over emphasized. This is because Nigerian economy is external sector driven and shocks from global commodity market have implications on inflation in the country. For example, an increase in price of foreign raw materials or scarcity of key foreign import of the production sector will immediately reflect in the exchange rate pass-through to the manufacturer. Similarly, distortions in supply of consumer goods particularly stable food items or household items in the foreign market are a signal of high exchange rate pass-through to the country’s consumers.

In the bid to combat inflation and achieve other macroeconomic stability, Nigeria’s monetary authorities have adopted various exchange rate arrangements over the years (Inyiama and Ekwe, 2014). It shifted from a fixed regime in the 1960s to a pegged arrangement between the 1970s and the mid-1980s, and finally, to the various types of the floating regime since 1986 (Dada and Oyeranti, 2012; Usman and Adegbite, 2014), following the adoption of the Structural Adjustment Programme (SAP). The fixed exchange rate regime induced an overvaluation of the naira and was supported by exchange control regulations that engendered significant distortions in the economy. That gave vent to massive importation of finished goods with the adverse consequences for domestic production, balance of payments position and the nation’s external reserves level (Akonji, 2013). Moreover, the period was bedevilled by sharp practices perpetrated by dealers and end-users of foreign exchange (Adelowokan, 2012). These and many other problems informed the adoption of a more flexible exchange rate regime in the context of the SAP, adopted in 1986. A regime of managed float has been the predominant characteristic of the floating regime in Nigeria since 1986.

STATEMENT OF THE PROBLEM
According to Mohanty and Bhanumurthy (2014) exchange rate stability is crucial for inflation management as a stable rate is expected to reduce domestic inflation pressures through a ‘policy discipline effect’ - restricting money supply growth, and a ‘credibility effect’ - inducing higher money demand and reduced velocity of money. However, they note that the impossibility trillema predicts that in the presence of an open capital account, a stable exchange rate may lead to lack of control on monetary policy and, hence, higher inflation. The effects of high inflation on the economy are generally considered to be harmful. For an open economy like Nigeria, inflation comes from both domestic factors (internal pressures) and oversea’s factors (external pressures). The external factors results from increase in the world prices of commodities or fluctuation in the real exchange rate. However, the influence of exchange rate on inflation is a function of the exchange rate regime in the country. In a system of flexible exchange rate as practiced in Nigeria, fluctuations in the real exchange rate have a major impact on output and prices through the aggregate demand and supply channels. On the supply side, depreciation or devaluation of domestic currencies affects the price level and output directly through the importation of goods in which case the country is an international price taker. Indirect effect of depreciation or devaluation is transmitted through the price of capital goods imported by the manufacturers as inputs in the production process. Since the 1970s policy makers have been saddled with the responsibility of reducing and stabilizing the inflation rate.

Exchange rate arrangements over the years in Nigeria have undergone significant changes over the past four decades making exchange rate policy one of the major macroeconomic issues of our time. According to Rutasitara (2004), exchange rate policy emerged as one of the controversial policy instruments in developing countries in the 1980s, with vehement opposition to devaluation for fear of its inflationary impact, among other effects. Although, the findings of Aboagye and Chakraborty (2010) revealed that the relationship between relative prices and exchange rates is short-term and is unidirectional and runs only from the former to the latter (Adesoye, 2012), available data from the Central Bank of Nigeria show that inflation is persistent under various exchange rate arrangement in Nigeria (CBN, 2013).

Nigeria’s exchange rate has been more volatile in the post-SAP period due to its excessive exposure to external shocks. The effect of the recent global economic meltdown on Nigerian exchange rate was phenomenon as the Naira exchange rate vis-à-vis the Dollar rose astronomically from about N120/$ to more than N180/$ (about 50% increase) between 2008 and 2009. This is attributable to the sharp drop in foreign earnings of Nigeria as a result of the persistent fall of crude oil price, which plunged from an all time high of US$147 per barrel in July 2007 to a low of US$45 per barrel in December 2008 (CBN, 2008).

Although various factors have been adduced to the persistence of inflation in Nigeria, it is necessary to examine inflationary trend under the various exchange regimes that had been adopted in the country, and that is the main thrust of this study.

OBJECTIVES OF THE STUDY
The broad objective of this study is to examine the relationship between exchange regimes and inflationary trend in Nigeria. The specific objectives of the study are as follows:
1. to investigate the effects of fixed exchange rate regime on inflation rate in Nigeria;
2. to examine the effects of floating exchange rate regime on inflation rate in Nigeria;
3. to identify the real cause(s) of inflation in Nigeria.

RESEARCH QUESTIONS
According to the objectives stated above, the research questions that would be examined in the course of the study are as follows:
1. Did fixed exchange rate regime contributed to inflation persistence in Nigeria?
2. Is floating exchange rate regime responsible for inflation persistence in Nigeria?
3. What are the real causes of inflation persistence in Nigeria?

RESEARCH HYPOTHESES
Based on the research questions stated above, the hypotheses to be tested in the course of this research are stated below:
HYPOTHESIS (1)
H0 - That fixed exchange rate regime did not contribute to inflation persistence in Nigeria.
H1 - That fixed exchange rate regime contributed to inflation persistence in Nigeria?
HYPOTHESIS (2)
H0 - That floating exchange rate regime does not contribute to inflation persistence in Nigeria.
H1 - That fixed exchange rate regime contributes to inflation persistence in Nigeria?
HYPOTHESIS (3)
H0 - That inflation is not a monetary phenomenon in Nigeria
H1 - That inflation is a monetary phenomenon in Nigeria

RESEARCH METHODOLOGY
The analysis that would be made in this study is based on time series data for the Nigerian exchange rates, inflation rate and macroeconomic data. Due to the linearity nature of the model formulation, Least Square (LS) estimation method shall be employed in obtaining the numerical estimates of the coefficients in the model using SPSS statistical software.

One multiple regression model shall be used in the estimation. The model seeks to investigate the effect of exchange rates on inflation rate under the fixed exchange rate regime and the floating exchange rate regime. The estimation period is restricted to the period between 1970 and 2014 due to non-availability of needed data. Besides the regression analysis, tables and charts analysis will be used to examine the trend of exchange rate and inflation rate under the various exchanges rate regimes.

SIGNIFICANCE OF THE STUDY
The effects of the recent global economic crisis on Nigeria’s exchange rate have reaffirmed the urgent need for protection of the economy from exchange rate risk. Although, no country is immune to such global crisis, the over-reliance on oil export revenue by Nigeria exposes her exchange rate and economy excessively to external shocks. Therefore, there is the need to conduct a research of this nature to examine the effect of exchange rate variability under different exchange rate regimes on Nigeria’s inflation rate.

This study would further provide an econometric assessment of the impact of exchange rate fluctuations on inflationary trend in Nigeria with the view of ascertaining its exposure to exchange rate risk. This would go a long way in helping to design policies and measures to combat menace of inflation persistence in the country.

SCOPE OF THE STUDY
This project focuses on the effect of exchange rate regimes on inflationary trend in Nigeria as necessitated by the inflationary pressure generated by recent global economic crisis through the exchange rate sensitivity. Despite the liberalization of the exchange rate in Nigeria since the introduction Structural Adjustment Programme (SAP) in 1986, no meaningful progress has been made in the combat of inflation. Therefore, this study would examine the inflationary trend in Nigeria under various exchange rate regimes with the view of identifying the real cause of inflation persistence in the country. The relationship between exchange rate regimes and inflationary in Nigeria would be investigate empirically with the data spanning from 1970 to 2014 due to non-availability of data.

CHAPTERISATION OF THE STUDY
This project is divided into five chapters. The first chapter provides the background of the subject matter justifying the need for the study. Chapter two shall present related literature concerning exchange rate regimes and inflation. The chapter shall also discuss causes of inflation in Nigerian among other issues. Opinions on exchange rate regimes and management shall also be reviewed. The research methodology, which includes the research design, sources of data, model formulation and estimation techniques, shall be stated in chapter three while data presentation and analysis shall be made in chapter four. Concluding comments in chapter five shall reflect on the summary, conclusion and recommendations based on the findings of the study.

REFERENCES
Aboagye, H. S. and Chakraborty, C. (2010) “Monetary Commitment and the Relationship between Exchange Rates and Relative Prices: Evidence from a Panel of Emerging Countries”. International Research Journal of Finance and Economics. Issue 39, pp. 97-104.
Adelowokan, O. A. (2012) “Exchange Rate Pass-Through in Nigeria: A Dynamic Evidence”. European Journal of Humanities and Social Sciences. Vol. 16, no. 1, pp. 785 – 801.
Adesoye, A. B. (2012) “Exchange Rate Policy and Price Determination in Nigeria: Testing the Long-Run Relevance of PPP Model”. European Journal of Humanities and Social Sciences. Vol. 14, no. 1, pp. 667-683.
Akonji, D. R. (2013) “The Impact of Exchange Rate Volatility on the Macro Economic Variables in Nigeria”. European Scientific Journal. Vol. 9, no. 7, pp. 152-165.
Central Bank of Nigeria (2008) Annual Report and Statement of Accounts. Abuja: Central Bank of Nigeria.
Central Bank of Nigeria (2013) Annual Report and Statement of Accounts. Abuja: Central Bank of Nigeria.
Dada, E. A. and Oyeranti, O. A. (2012) “Exchange Rate and Macroeconomic Aggregates in Nigeria”. Journal of Economics and Sustainable Development. Vol. 3, no. 2, pp. 93 – 101.
Inyiama, O. I. and Ekwe, M. C. (2014) “Exchange Rate and Inflationary Rate: Do They Interact? Evidence from Nigeria”. International Journal of Economics and Finance. Vol. 6, no. 3, pp. 80-87.
Lohi, J. (2014) “Exchange Rate Regimes and Inflation in Sub-Saharan African”. Journal of Economics and International Finance. Vol. 6, no. 8, pp. 173-189.
Mohanty, B. and Bhanumurthy, N. R. (2014) “Exchange Rate Regimes and Inflation: Evidence from India”. National Institute of Public Finance and Policy, New Delhi Working Paper. No. 2014-130, pp. 1-24.
Mordi, C. N. O., Essien, E. A., Adenuga, A. O., Omanukwue, P. N., Ononugbo, M. C., Oguntade, A. A., Abeng, M. O. and Ajao, O. M. (2007) “The Dynamics of Inflation in Nigeria”. Central Bank of Nigeria Occasional Paper. No. 32, pp. 1-90.
Ogundipe, A. A. and Egbetokun, S. (2013) “Exchange Rate Pass-Through to Consumer Prices in Nigeria”. European Scientific Journal. Vol. 9, no. 25, pp. 110-123.
Rutasitara, L. (2004) “Exchange rate regimes and inflation in Tanzania”. African Economic Research Consortium (AERC) Research Paper. No. 138, pp. 1-34.
Toulaboe, D. and Terry, R. (2013) “Exchange Rate Regime: Does it Matter for Inflation?” Journal of Applied Business and Economics. Vol. 14, no. 1, pp. 56-71.
Usman, O. A. and Adegbite, T. A. (2014) “Money Supply, Foreign Exchange Regimes and Economic Growth in Nigeria”. Research Journal of Finance and Accounting. Vol. 5, no. 8, pp. 121-129.

PROJECT PROPERTIES
Project Status
Available
Number of Chapters
5
Number of Pages
93
Number of Words
14,647
Number of References
84
Project Level
B.Sc.
Price
N10,000 - Ten Thousand Naira (Non-Negotiable)
Abstract, Regression Data and Results are included
How to Pay for this Project . . . .CLICK HERE

Keywords: exchage rate, exchange rate regime, fixed exchange rate, floating exchange rate, exchange rate risk, inflation, foreign inflation, inflationary trend in Nigeria

 

 

 

CONTACT CHANNELS

 E-mail: projectfaculty@yahoo.com OR projectfaculty@gmail.com OR mail us here

 

FRAUD ALERT
BEWARE OF FRAUDULENT PROJECT SITES!
Anyone that claims to be our agent/representative is a fraudster. Pay directly to ONLY our company's accounts NOT TO ANY INDIVIDUAL!
If we fail to send this project to you after payment, report to the bank you paid to, the Police and the EFCC with our Account Name and Account Number.