exchange rate fluctuation, imports, nigeria
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PROJECT TOPIC  : IMPACT OF EXCHANGE RATE FLUCTUATION ON VOLUME OF IMPORTS TO NIGERIA (1981 - 2010)

PROJECT PROPOSAL

BACKGROUND TO THE STUDY
After several years of exchange rate floating among countries there is yet to emerge a consensus among academic economists regarding the impact of exchange fluctuations on economic variables like import. The traditional view is that fluctuations in exchange rates affect relative domestic and foreign prices, causing expenditures to shift between domestic and foreign goods (Obstfeld, 2002). The new view is that relative prices are not much affected by exchange rate fluctuations in the short-run (Obstfeld, 2002, and Engel, 2002).

In contrast to this debate among academic economists, businesspeople appear convinced that exchange rate fluctuations have real effects. Executives, especially of import firms, agonize over declining imports when their home currency depreciates in nominal terms. This was pointed out by a Nigerian importer during one of the economic forums held in Abuja.

Importers expend much time and resources planning hedging strategies, to lessen the impact of exchange rate fluctuations on their imports. They also expend much time and resources lobbying policymakers, to persuade them to stabilize currencies, either by intervening in foreign exchange markets, or by more extreme measures such as fixing exchange rates.

Available evidence generally suggests that most developing countries registered a persistent decline in their foreign exchange earnings from the early 1980s. This is attributed largely to the collapse of commodity prices in the world market. Combined with this, there are two principal factors. First, is reduced foreign lending and second is the increased cost of external borrowing.

This triggered a series of developments in most developing countries. It is a statement of fact that external trade dominates government revenue in these countries. Both imports and exports of developing countries are subject to periodic fluctuations in the world market as evidence in the 2008 global economic meltdown, and revenue from this source tends to fluctuate accordingly. Thus, it was not surprising that the collapse of commodity export prices in the early 1980s engendered fiscal crises in most African countries, as reflected in their huge budget deficits. In part, this led to the adoption of economic reform programmes.

However, there is little systematic research, examining whether exchange rates affect Nigerian import. This study fills the gap by examining the impact of exchange rate fluctuations affects the volume of imports to Nigeria.

STATEMENT OF THE PROBLEM
The importance of foreign trade in the development process has been of interest to development economists and policy makers alike. Imports are a key part of international trade and the import of capital goods in particular is vital to economic growth. This is so because imported capital goods directly affect investment, which in turn constitutes the motor of economic expansion. Economic reform is expected to affect imports as part of the strategy to restore external balance. However, unless policy makers know the major factors that affect exchange rate and how it affects imports, such a policy decision can be harmful to investment and output if domestic production relies on imports. This study seeks to examine the effects of exchange rate fluctuations on the volume of imports in Nigeria.

OBJECTIVES OF THE STUDY
The main objective of this study is to examine the relationship between exchange rate and the volume of imports to Nigeria.
Specifically, the study aims to:
(i) To examine the trend of exchange rate of Nigeria over the years;
(ii) To investigate empirically, the effect of exchange rate fluctuations on Nigeria’s import;
(iii) To identify the macro-economic factors that influence exchange rate in Nigeria.

RESEARCH QUESTIONS
This research work shall be guided by the following research questions:
1. What has been the trend and pattern of Nigeria’s major exchange rates over the years?
2. To what extent does exchange rate fluctuations impacts on the volume of Nigeria’s imports?
3. What are the macro-economic factors that influence exchange rate in Nigeria?

RESEARCH HYPOTHESES
From the research questions stated above, the core hypotheses to be investigated empirically are stated below:

(1) H0 : That exchange rate fluctuations does not affect the volume of imports to Nigeria.
H1 : That exchange rate fluctuations affect the volume of imports to Nigeria.

(2) H0 : That inflation rate, interest rate, volume of foreign direct investment do not determine the exchange rate of Nigeria.
H1 : That inflation rate, interest rate, volume of foreign direct investment determine the exchange rate of Nigeria.

SIGNIFICANCE OF THE STUDY
In the light of the stated objectives which this study is set to achieve, the following are the significance of the study:
(a) It would present an empirical prove of the relationship between the exchange rate fluctuations and Nigeria’s volume of import.
(b) It would provide a yardstick to assess the exchange rate policies of Nigerian government.
(c) The study would also contribute to knowledge by suggesting how imports could be exchange rate responsive.

SCOPE OF THE STUDY
The scope of this study covers Nigeria’s exchange rate policies over the years to date. The general overview of the profile of Nigeria’s exchange rate over the years shall also be discussed. The empirical investigation of the relationship between exchange rate and Nigeria’s volume of imports are restricted to the period between 1981 and 2010 due to non-availability of data. Furthermore, the study shall seek to identify the macroeconomic factors that are responsible for exchange rate fluctuations in Nigeria

RESEARCH METHODOLOGY
Secondary data shall be the basis for this study. The relevant data to be used would be sourced from the Central Bank of Nigeria’s statistical reports, annual reports and statement of accounts for the years under review. The data to be collected include: exchange rate, volume of imports, inflation rate, interest rate and foreign direct investment.

The empirical investigation of the effect of exchange rate on Nigerian volume of imports would be conducted using the Ordinary Least Square (OLS) method. The hypothesis testing would be conducted at 5% level of significance. The method would be applied with the use of Statistical package for social science (SPSS).

PLAN OF THE STUDY
The presentation of this study takes the following form: The first chapter is introductory. The second part deals with the literature review and related issues on exchange rate. Recent developments in Nigerian exchange rate movement shall also be discussed in the chapter. The third chapter shall focus on the research methodology and shall entail the specification of the models. Chapter four of the study would present the analysis of data and discussion of empirical results of the estimations. Chapter five shall conclude the study, stating the findings and recommendations.


REFERENCES
Engel, C. (2002) “Expenditure Switching and Exchange Policy”. NBER Working Paper, No. 9016.
Obstfeld, M. (2002) “Exchange Rates and Adjustment: Perspectives from the New Open Economy Macroeconomics”. Manuscript, University of California, Berkeley.

 

 

PROJECT PROPERTIES
Number of Chapters
5
Number of Pages
81
Number of Words
13,609
Number of References
39
Project Level
B.Sc.
Price
N10,000 (Non-Negotiable)
Abstract, Regression Data and Results are included
How to Pay for this Project . . . .CLICK HERE

Keywords: exchange rate fluctuations, causes of exchange rate fluctuations, foreign exchange rate fluctuations, imports to nigeria

 

 

 

 

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