THE EFFECT OF EXCHANGE RATE DEVALUATION ON THE NIGERIAN BALANCE OF PAYMENTS
ABSTRACT
This work sets out to examine the relationship between balance of payment and exchange rate. The work is divided into five chapters; chapter 1 gives a general introduction to the subject matter, chapter two gives the general review of literature in the subject matter, chapter 3 gives or states the methodology and specifies the model used for testing. Chapter four runs the required test and provides the result as well as the interpretation and chapter five concludes the findings and recommends policy for the government based on the findings in the test.
The ordinary least square regression (ols) method is used to test for R-squared test (explanatory power of the variables), T-test for the reliability, F-test for the overall significance of the exponentials and D.W test which is the econometric criterion for testing for presence of auto regressive scheme.
From the result gotten, a 3013% change in balance of payment is caused by a unit change in exchange rate, a 120% change in balance of payment is caused by a unit change in foreign direct investment, and 865821% change in balance of payment is caused by a unit change in trade openness.
The result shows a negative relationship between balance of payment and the explanatory variables (exchange rate, foreign direct investment, and trade openness). Since exchange rate devaluation has a negative impact on the balance of payment it is recommended that the government should not consider it a policy for economic development.
CHAPTER ONE
General Introduction
1.1 Background Of Study
Right from the immemorial that would be called a country’s exchange rate and balance of payment as usually regarded as the sum of indices by which a nation’s strength can be measured especially economic strength. Although the economic power of a nation is not a criterion for measuring the strength of the nation on its own, it is also seen that economic strength can clearly be seen as a measure of the rate of growth and development of a nation and the well being of its citizens. Paul (1996) defines balance of payments as an accounting record to all monetary transactions between a country and the rest of the world.
These transactions include payments for the country’s exports and imports of goods, service and financial capital, as well as financial transfer. It summarizes the international transaction for a specific period usually one year is prepared in single currency for the country concerned. Nzotta (2004) defines foreign exchange as the value of foreign nation’s currency interims of the home nation currency. In finance the exchange rates (as also known as the foreign exchange rate or forex rate) between two currencies specify how much one currency is worth in terms of the other.
Devaluation is a tall in a fixed exchange rate, which reduces the value of a currency in terms of other currencies. So what we are trying to do in this study is to determine how the reduction the value of a currency with respect to the currency of another country affect the record of all monetary transactions between a country and another, whether visible or invisible in a period of time. This is very important because no nation ca exist on its own no mater how independent on self-sufficient it must necessary have relation with other nations which can be characterized by goods and services going one way and foreign exchange going the other way access the boundary of the nation concerned and naturally a record of that was gained or what was lost will be kept by both. As such a nation’s foreign exchange and balance of payments can either help slowdown. Accelerate or decelerate walking growth progress and development this will also naturally have a positive or negative effect on the citizens since it deals mainly will economic relations which in one way or the other the citizens will benefits from.
Our nation Nigeria is currently facing serious problems regards its foreign exchange rating (which is very low in comparison to other countries) and its balance are payment which is clearly in disequilibrium and in a deficit. As a result of this the government is retrogressing and the citizens clearly sufficing.
It has also been discovered and it is clearly seen that as a result of these factors other factors are also yielding negative dividends and also affecting the nations and citizen adversely. It is in a bid to discover why this is so and how this can be solved that this study as pertinent.
1.2 Statement Of The Research Problem
Foreign exchange and balance of payment are the key factor of a nations live. They are also factors to look into when comparing a country’s relationship with other nations. These factors directly or indirectly affect a host of other factors which are of severe nation importance in any nation. Consequently these factors can be seen as essential to the growth and development of the nation.
Currently these two factors can be said to have crippled the Nigeria economy and made live uncomfortable and unbearable for it citizens. These factors have brought the country to a level were growth and development appear to be an illusion.
Currently the nation’s exchange rate has fallen so low due to unfavorable nature of the competing power of the nation’s currency with foreign currencies of the world. Our economy has been trying to resolve the problem of external and internal balance, which has manifested in disequilibrium in our balance of payment and causing us a balance of payment deficit.
Much controversy had also been degenerated by the devaluation of our Naira (the national currency). Relevant literature and opinion on this issue are of the view that exchange rate policy plays an important role in including maintenance of internal and external balance, on the other hands, other writers argued that devaluation is not the best policy for the less developed country because of many diverse results it is capable of including these arguments with the deteriorating nature of the economy have made the study of this nation imperative.
1.3 Objectives Of The Study
The general objective of this study is to examine the effect of exchange rate devaluation on the balance of payment of a nation with special reference to Nigeria. The specific objective are
- Give a through insight of exchange rate and its devaluation
- Give a through insight of balance of payment.
- Identify the effect of devaluation and other factors on the nation’s external account.
- Evaluate the impact exchange rat variation has on the Nigeria balance of payment.
- Identify all problems affecting the Nigeria balance of payment and its exchange rating.
- Suggest ways of resolving this problem
- Proffer some policy prescriptions correct the in balance in the internal and external sectors of the Nigeria economy that will pave the way for the resumption of sustainable grown.
- Give an insight into exchange rate and balance of payment and their effect on the nations economy, its and development and its citizens.
- Give an insight into how the exchange rate and balance of payment of the nation affect its relations other nations.
- To determine and explore any existing relationship between exchange rate and balance of payments.
1.4 Research Hypotheses
Hypotheses will be tested in other to allow success of this work some of them include;
- There is no significant relationship between exchange rate and balance of payment (Bop) in Nigeria.
- There is no significant relationship between open economy(X-m) and balance of payments in Nigeria
- There is no significant relationship between foreign direct investment (FDI) and balance payment (Bop) in Nigeria.
1.5 Scope Of Study
This study is limited to exchange rate and its devaluation effect on balance of payment with reference to the Nigeria economy. Since the subject matter is very wide, any attempt to go future than this will involve going into limitless research with a limitless scope.
Therefore it is necessary to limit our study to the exchange rate and its devaluation and its effect on the balance of payment of Nigeria economy.
1.6 Significance Of Study
The exchange rate and balance of payments of any nation are the heart and foundation of any governments’ development. Currently these are very controversial factors that are not doing well on Nigeria. Naturally, since our economy is import dependent and as such dependent on other nations this affects us greatly especially since foreign involvement and foreign exchange is involved in every sector of the economy.
It is the significance of this study therefore; to create awareness on the relationship between exchange rate, its devaluation and balance of payments, policy implications and recommendations which will be of immerse help of policy makers and balance of payments, and government especially as it regards the transaction of the exchange rate and balance of payment in Nigeria and other less developed countries. It is also of importance to students and lectures and the entire public who is interested in the subject matter and its utilization in which ever way.
1.7 Organization Of Study
This study is organized in five chapters,
- Chapter one deals with the introduction consisting of background of the study statement of the problem, objectives of the study, significance of study, scope of study, research hypothesis, and the organization of study.
- Chapter two gives theoretical frame work and literature review.
- Chapter three consist the methodology model specification, associated data source and the technique for analysis of data source.
- Chapter four contains the empirical results and analysis.
- Chapter five finally, concludes the study with the summary of the result, recommendations and fins conclusion.
CHAPTER TWO
2.0 Literature Review
2.1 Introduction
The review of relevant literature is the main topic of this chapter. A literature review covers theoretical and methodological contributions to a certain issue in addition to the state of knowledge at the time of writing. It provides information about the state of the art in relation to the subject you are writing about. It examines the body of work on the chosen subject. The literature evaluation in this study comprises the …
Procedure for Downloading the PDF (Docx) Material
The Effect of Exchange Rate Devaluation on the Nigerian Balance of Payments can be downloaded by requesting the full set of materials at the project or seminar cost. The document will be sent via Microsoft Word (MS-Word) format via WhatsApp (e-mail) following payment confirmation.
| Seminar Material Cost ₦3,000 | Project Material Cost ₦5,000 |
Request Complete Material
 | Click here to request the Complete Material via WhatsApp including;
|
Disclaimer for Complete Material Utilization
The displayed research work titled "The Effect of Exchange Rate Devaluation on the Nigerian Balance of Payments" is stated as a research guideline towards accomplishing your assigned project / seminar research work. All the research materials on this website are ONLY for research purposes and should be used as a guideline in developing your research work. For no reason should you copy word for word as projectlist.com.ng will not be liable for any who copied the material. By ordering the complete research guideline, it signifies that you've accepted our terms of service.
Frequently Asked Questions (FAQ)
Can the material for “Design and Implementation of Cash Receipt Generating System for a Supermarket” be used as a guide for Computer Science (CS) Project?
Yes it can be used — Cash receipt is a written acknowledgment that a specified article or payment has been received. It records the sale of goods or provision of a service. The aim of the study is to Design and Implement a Cash Receipt Generating System for a Supermarket. In achieving this aim the following objectives were laid out to develop an application software that will keep track of the files can at any operates the organization and client’s financial report and design a software that will generate accurate customer’s cash receipt for goods/item sold. The motivation that led to the implementation of the proposed system is that the speed of generating receipt for goods sold and processing data manually is slow and prone to …
Is the topic “Cooperation Networking” recommended for Computer Science Education Project?
Yes it is highly recommended — Cooperation Networking is a network consisting of a variety of entities that are largely autonomous, geographically distributed, and heterogeneous in terms of their operating environment, culture, social capital and goals, but that collaborate to better achieve common or compatible goals, and whose interactions are supported by computer networks. The objective of the study is to design and implement a Network Cooperation System that will Monitor the daily activities of every user in a network in real time, Detect active users, and provide accurate evidence on corporate fraud when investigation is being carried out in an organization. The research design used in this report is descriptive design, utilizing questionnaire method to obtain information from the respondents for this project. A total …
Can the material for “Techniques for Marketing Insurance Products in Nigeria” be used as a guide for Insurance Project?
Yes it can be used — The purpose of this study was to determine the techniques for marketing insurance products in Nigeria using selected insurance companies in the insurance industry. The techniques considered include sales promotion, market intelligence and product development and innovation. Organizational performance comprises the actual output or results of an organization as measured against its intended outputs (or goals and objectives). Organizational performance is the concept of measuring the output of a particular process or procedure, then modifying the process or procedure to increase the output, increase efficiency, or increase the effectiveness of the process or procedure. For purposes of this study the output of the insurance were market share, sales volume, development index, penetration levels, innovation and creativity, cost management, pre-tax profits …
Can the material for “Economic Impact of Teaching Methods on Academic Performance of Students” be used as a guide for Education Project?
Yes it can be used — Teaching Method is a teaching device or strategy adopted by a teacher to teach a lesson, this includes the use of games, text books etc. that stimulates learning. The study was carried out to examine the Economic Impact of Teaching Methods on Academic Performance of Students. In achieving this aim, the following specific objectives were laid out to assess the relationship between the use of discussion method of teaching and academic performance of students and examine the relationship between the use of demonstration method of teaching and academic performance of students. Since teachers lack adoption of educational methods will be inevitable, if a teacher does not have content pedagogical knowledge of some subjects, it tends to contribute to the poor …
Can the material for “The Role of Internal Auditors on the Effectiveness of Internal Control System” be used as a guide for Accountancy / Accounting Project?
Yes it can be used — There is high record of business failure in the entire world today. This problem has ruined the economy of some country (both developed and developing) and is still eating deep in some till now. In most cases, business failure is usually traced to the non-functionality or the internal control system (lCS) put in place by the business management due to the absence/failure or the deficiencies in internal audit functions, which has even made most of the external auditors to lose confidence in the work of the internal auditors. As a result of this, this documented research work is centered on the role of internal auditors on the effectiveness of internal control system in order to look into internal audit role …
Is the topic “The Impact of Improved Capitalization on Nigerian Banks Lending Rate” recommended for Accountancy / Accounting Project?
Yes it is highly recommended — Capitalization or capitalisation is writing a word with its first letter as a capital letter (upper-case letter) and the remaining letters in lower case in writing systems with a case distinction. The term is also used for the choice of case in text. Conventional writing systems (orthographies) for different languages have different conventions for capitalization. The systematic use of capitalized and uncapitalized words in running text is called “mixed case”. Conventions for the capitalization of titles and other classes of words vary between languages and, to a lesser extent, between different style guides. In some written languages, it is not obvious what is meant by the “first letter”: for example, the South-Slavic digraph “nj” is considered as a single letter for the purpose …
Can this topic “Effect of Tax Policy and Administration on Revenue Development” be used for Taxation Project?
Yes it can be utilized for research — Tax policy and administration is the framework upon which Nigeria tax system is based. It deals with the powers and duties of relevant tax authorities as contained in the tax laws, it involves the procedures, principles and strategies adopted by any government in order to achieve effective tax planning, compulsory levying of tax, easy collection and proper accounting and utilization of the revenue collected. The study investigates the Effect of Tax Policy and Administration on Revenue Development. In achieving this aim, the following specific objectives were laid out to examine if the use of mechanical and outdated system in recording and keeping accounts affect tax administration on revenue generation, ascertain whether lack of adequate staff in the SBIR affect tax …
Can the material for “Investigation of Anaerobic Processes in Septic Tank as a Wastewater Treatment Option” be used as a guide for Civil Engineering Project?
Yes it can be used — The septic tank is pivotal to wastewater treatment as well as public health especially in developing countries where central treatment plants are not affordable. This study was conducted to investigate the anaerobic processes in septic tank as a waste water treatment option using waste water from septic tank and Soakaway as sample A and B respectively. It was observed that after the analysis, sample A (septic tank which has fresh waste water) has higher value in conductivity =1708us/ cm3, Total slid = 17490mg/l, Dissolved solid (16420mg/l), COD = (106mg/l), DO = (0.6883mg/l) and BOD = (106.6883mg/l) compared to sample B (Soakaway which contains waste water that has under gone anaerobic treatment) with values in conductivity =1170us/cm3, total solid = 14870mg/l …
Can the material for “Effect of Value Added Tax on Consumer Behavior in Maiduguri” be used as a guide for Taxation Project?
Yes it can be used — Value Added Tax (VAT) is a broad based business tax imposed at each stage of production and distribution process typically designed to tax final household consumption. The study was carried out to investigate the Effect of Value Added Tax on Consumer Behavior in Maiduguri. In achieving this aim, the following specific objectives were laid out to assess the effect of VAT on consumption behavior of goods and services and identify the impacts of Consumption Value Added Tax on Income Tax in Maiduguri. Investigation revealed that poor VAT administration is one of the problems confronting VAT in Nigeria. Tax authorities perform only the technical functions without performing the needed management functions, considered the complexity of tax administration, there are bound to …
Is the topic “The Impact of Training and Development on Workers Performance” recommended for Public Administration (PA) Project?
Yes it is highly recommended — This study is an analysis of the impact of training and development on worker performance. This is the extent to which training and workers performance has been able to increase the performance of the work force in particular, and the organization in general like any organization in Nigeria training and workers performance are yet to receive the blessing of the Nigeria industrial training fund (N.I.T.F) when workers training and development. They are better place of facing challenge in their work or assigned jobs both present and future, they acquire skills, knowledge, competence, experience and self confidence in their work activities. Therefore, the research project aimed at finding out the apparent problems militating against the workers training and performance and suggesting …