Management Of Foreign Exchange In Nigeria By CBN
This thesis deals with foreign exchange management in Nigeria by the Central Bank of Nigeria (CBN) from 1959 to July 2004. the need to manage foreign exchange became imperative as a result of dis equilibrium in the foreign exchange market caused by inadequate supply of foreign exchange management is a conscious attempt to harnesses foreign exchange resources deploy them to service the economy so as to prevent the economy from experiencing shocks due to foreign exchange volatility.
The central focus of thesis is to examine how CBN through its policy measures manages foreign exchange in the country. To carryout this thesis, the respondent makes use of both primary and secondary data. Questionnaires were in line with the objective of the study.
Based on the objective of the study the findings reveal that the role of CBN in managing foreign exchange is not impressive. The impact of exchange rate policy in managing foreign exchange is not encouraging, the activities of panel market operators negatively affect the effective operation of the foreign exchange management . conclusion and recommendations were made in line with the findings.
This thesis deals on the management of foreign exchange in Nigeria by central Bank of Nigeria; (CBN) from 1959 to July 2004.
In carrying out this thesis the researcher examine how CBN through the policy measures manages foreign exchange in the country.
That is why this thesis is divided into five chapters,
- Chapter one introduce the , the background, the problems, the objectives, significance if the study and limitation.
- Chapter two is a direct attempt to review the related literature, elimination of foreign exchange.
- Chapter three deals with the research methodology and design adopted for presentation of information.
- Chapter four is concerned with the presentation of data, data analysis techniques and test of hypothesis to enable one provide answers to related questions
- Chapter five summarizes the findings makes conclusion and recommends solutions to the problem under study.
1.1 Background of the Study
It has already been stated that money is a common denomination in which the rate relative value of goods and services can be expressed.
Throughout history any community which form itself into a nation for the purpose of self-government immediately introduce its own distinctive unit of account –monetary unit of account (Legal tender)
In the words or (Obaseki 1991:15) “ in the international reaches no legal tender exists value must be measured, accounts kept and payments made by conversion process is known as foreign exchange.
Foreign currency, otherwise known as foreign exchange, is one of the scare resources particularly in developing economy. Unless the management of this scarce resources is properly articulated in terms of its revenue generation and expenditure, or unknown and out now a country runs the risks of balance of trade or balance of payment problems. Moreover, in order that a country may optimize the advantages of international trade, it become imperative for that country to institute appropriate foreign exchange management.
The practice of managing the foreign exchange resources has, therefore evolved broadly in line with the globalization and liberization of economics and financial markets” (Anfourose 1997:19)
1.2 Statement of the Problem
The primary objective of foreign exchange management is to reduce foreign exchange instability and its adverse effect on the economy. Despite government effects to achieve this objective though the Central Bank of Nigeria (CBN), foreign exchange (Monitoring and miscellaneous provisions) decree No.17 promulgated in 1995 and the introduction of the use of forms A and M, a handled problems are still identified with foreign exchange operation in Nigeria.
There problem include
- Inadequate inflow of foreign exchange
- Balance of payments problems
- Debt services burden
- Continuous depreciation in the value of the naira.
- Problem of funding sectorial allocation of foreign exchange in the foreign exchange market.
1.3 Objective of the Study
The objective of the study are
- To examine the roles of the Central Bank of Nigeria in managing the countries foreign exchange.
- To examine the impact of foreign exchange rate policy in the foreign exchange management.
- To examine the effect of the activities of parallel market on the foreign exchange management.
- Examine the problems facing foreign exchange management in Nigeria.
1.4 Research Question
- How can we determine the role of the central bank of Nigeria in managing the country’s foreign exchange?
- Is the impact of foreign exchange rate policy been encouraging?
- Is the activities of the parallel market operators negatively affect the effective operation of the foreign exchange management in Nigeria?
1.5 Research Hypothesis
- Ho: The role of Central bank of Nigeria in managing the countries foreign exchange is not impression.
Hi: The role of the CBN in managing the countries foreign exchange
- Ho: The impact of exchange rate policy in the management of foreign exchange in Nigeria not admirable
Hi: The impact of exchange rate policy in the management of foreign exchange in Nigeria is admirable
- Ho: The activities of parallel market operators negatively affect the effective operation of the foreign exchange management in Nigeria.
Hi: The activities of parallel market operators positively affect the effective operation of the foreign exchange management in Nigeria
1.6 Significance of the Study
- This work is in partial fulfillment of the requirement for the award of higher National Diploma (HND) in Banking and finance.
- The work will be of immense help to future researchers who will make their own investigation into this subject area.
- The work will CBN regulate the activities of the bank with their in getting them to find foreign exchange market adequately, increase foreign exchange inflow and balance of payment, determine a realistic exchange rate, and adequate foreign exchange control system.
1.7 Scope and Limitations
The area of this thesis is Enugu. The research is to determine how foreign exchange could be effectively managed in Nigeria by CBN. The period under the study is 1959- to July 2004.
in the process of carrying out this study. The researcher encountered some problems which include finance – the cost of transportation to areas where data are to be collected was high.
The negatives attitude of CBN officials towards disclosure of information was a limiting factor.
Finally, there for data collection and attending lectures was a limiting factor.
1.8 Definition of Terms
Foreign Exchange Market:
Is an arrangement which exists to assist buyers and sellers of foreign exchange to enter into contract of buying and selling, unlike other markets where money exchange for good and services, in the foreign exchange market, money exchange for money; one currency is being exchanged for another.
This the number of units of one currency which exchange for a given number of unit of another.
Foreign Exchange Reserve:
These are foreign currencies had by the control Bank of Nigeria (CBN).
5.0 Summary of Findings, Recommendation and Conclusion
5.1 Summary of Findings
This study has made some interesting, which were revealed through the test of hypothesis formulated from the objective of the study.
These finding are summarized as follows.
- First and foremost, the research discovered that the role of the central bank of Nigeria in managing the country’s foreign exchange is not admirable.
- Secondly, the researcher also discovered that the exchange rate policy measures adopted or introduced to enhance efficiency in the management of foreign exchange in Nigeria has not been encouraging.
- Thirdly, it was also discovered that activities of the parallel market operation negatively affect the effective operation of the foreign exchange management in Nigeria.
- Finally, redirection of funds obtained from the official market to parallel market by banks militate against effective foreign exchange management.
based on the findings of this study the following recommendations are made.
- CBN should redefine its reserve management strategy. The requirement of a good external reserves management strategy usually a country to maintain realistic exchange rate. In order to maintain an adequate level of reserves the exchange rate has to be an over- valued exchange rate. Puts pressure on the reserves.
- For effective exchange system, the federal government should discourage the importation of foreign goods through high risk which the boarders should be monitored effectively to reduce dumping which, could defeat the objective of encouraging the patronage of locally produced goods.
- Parallel market rate should be promptly raised to investigate their operations and give them a competitive edge that would drive the unlicensed black market out of business.
- To discourage redirection of funds obtained from the officials markets to parallel market, CBN should always investigate the use of dollars bought from it by banks customers this would enable it to know those that are buying dollars to procure raw materials for local production and those engaged in round hipping for resale in the parallel market.
- To have an effective and impressive exchange control, foreign exchange budgeting should be adopted to ensure that adequate foreign exchange are cancelled to the priority sectors at the economy.
This project has discussed a number of conceptual issues for proper understanding of foreign exchange management in Nigeria.
The researcher wish to conclude that although at various ways, this topic has been discussed, it will continue to be a topical issues because of the macro economic impact of foreign exchange in an economy such Nigeria’s. to this effect, the central bank of Nigeria cannot afford to take a seat and not move with the trend of events.
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