Problems And Prospects Of The Foreign Exchange Market In A Developed Economy

Project and Seminar Material for Purchasing and Supply PS

Problems And Prospects Of The Foreign Exchange Market In A Developed Economy


This project work is designed to evaluate the problems and prospects of the foreign exchange market in a developed economy with particular emphasis on United Bank of Africa and intercontinental Bank, plc both in Owerri Imo State, Nigeria.

This project will be designed to show in details how these problems affect operation in the market. This work is achieved after evaluating my five chapters aimed at looking at the problems and prospects of the foreign exchange market in a developed economy.

Chapter one deals on the general introduction of the research work which includes the statement of the problems, the research questions, hypothesis and purpose of the study. The significance of the study, the scope limitation and operational definition of terms were also treated in this chapter.

Chapter two centers on the review of related literature and opinions of professionals and experts on the subject matter which include the following headings: foreign exchange, the objective of the market, an overview of the Nigeria foreign exchange market, sources of found in the market, the market instruments and operations, the regulatory institutions and their functions management of the Nigeria foreign exchange market, sources of the foreign exchange in Nigeria, problem and causes prospects of the market.

Chapter One


1.1 General Overview

The foreign exchange market is en extricable linked with both segments of the markets. This is particularly striking in the money market where the determination of foreign exchange and money markets rates are linked through interest rates.

Dealing in the foreign exchange market in Nigeria were centralized in the central bank of Nigeria. When it was established, and the determination of the exchange rate was based on local market conditions and the performance of the naira vis-à-vis the weight basket of Nigeria major trading partner currencies. Since the deregulation of the market in 1986, the exchange rate of the domestic currency has been determined mainly by market forces, except for few episodes of visible hand of administrative management of the exchange rate currently the market consist of the central bark and authorized foreign exchange dealers and the burean de change operators.

In general there is need to do an in-depth study of the foreign exchange market so as to assess the problems and prospects of the market using a survey of UNITED bank of Africa and the intercontinental bank.

1.2 Statement Of The Problem

The problems associated with the foreign exchange market in a developed economy have caused a lot of harms and impediments to the economic growth and developed of the market. The problems associated with the market can be analyzed under two subheadings, internal and external problems. The internal problems are as follows;

Organizational structure: This has to do with a situation whereby one without the experience needed is made to head the foreign operations unit of the banks.

Lack of modern facility and equipments: This is a situation whereby the modern facility and equipment needed to facilitate the operations of the banks in the market is lacking.
Economic instability or problem: This has to do with the dividing nature of the economy that effects the activities of the market .

Unreliable communication network: this has to do with the communication between the banks and the market that is likely to trip off at anytime. Thereby causing system breakdown. This could also be traced to poor infrastructural facilities in the country.

The external problems are as follows

  1. Excess demand pressure on the market making demand more than supply.
  2. Round tripping that is diverting the foreign exchange to the parallel (black) market.
  3. Unethical practices and sharp practice of official and authorized dealers.
  4. Exchange rate volatility

1.3 Objective Of The Study

  1. To find out the problems and prospects of the foreign exchange market
  2. To find out how these problems have limited the operations of the foreign exchange market.
  3. To sought ways of eliminating or reducing these problems
  4. To find out if the prospects of the market would lead to the development of the market and also help in reducing the problems of the market.
  5. To make recommendation on how to solve the problems associated with the market and ensuring that the prospect of the market are attained.

1.4 Significance Of The Study


This study or research work would enable the researcher in the partial fulfillment of the requirement for the award of the higher national diploma (HND) in purchasing and supply also acquire basic knowledge and experience needed in research study.

Other Students:

This research work would serve as a data bank for other students who are studying international purchasing and other related courses to have an in-depth knowledge of the foreign exchange market.

The Firm:

This work would create a kind of awareness in the problems which are encountered in the foreign exchange market also recommend ways of reducing or eliminating them.

The Market:

This work would create a kind of awareness in the market at large and also point out the problems in the market, notifying the market of the causes and the prospect of the market.

1.5 Research Questions

  1. What are the causes of the problems in the foreign exchange market?
  2. How can improvement in the infrastructural such as information or telecommunication networking led to efficiency of operations in the foreign exchange market?
  3. To what extent can reduced dependency on importation reduce excessive demand pressure on the foreign exchange market?
  4. How can rate stability affect the foreign exchange market?
  5. To what extent can harmonization of monetary and fiscal policy enhance the operations of the foreign exchange market?

1.6 Formulation Of Hypothesis

Giving direction to the study, the following hypothesis have been formulated.

  1. Ho: There are no problems in the foreign exchange market in a developed economy
    Hi: There are problems in the foreign exchange market in a developed economy.
  2. Ho: There are no means of resolving these problems
    Hi: There are means of resolving these problems
  3. Ho: The foreign exchange market has no prospects
    Ho: The foreign exchange market has prospects

1.7 Scope Of The Study

The research study focuses its attention on the foreign operations units and international transactions staff and head of unit of the united bank of Africa and the intercontinental bank plc as a survey. This research work is supposed to cover the entire foreign exchange market but due to some constraint, it is limited to the two above mentioned banks.

The researcher work would look into the general problem and prospect that hinder the operations of these banks in the foreign exchange market. It will use a statistical tool to seek for this research choosing a time dimension of twenty years between 1985-2005.

1.8 Limitation Of The Study

Financial Constraints:

This here to do with the unavailability of finance to carryout the researcher this made the success of the research study to be quiet difficult.

Time Factor:

This is the required time and available time to carryout this study on a wider scope.


This is an agreement between the countries enables companies to repatriate their profit.


This is a process of bring in goods secretly and illegally into or out of a country e.g. drug smuggling.


A situation whereby things, behaviour are not done well or not morally accepted.


To give lower value to something like money etc.


Not able or not willing to see, to meet up once responsibility.

Lack of Basic Materials:

A research study to this nature requires a lot of materials to carryout the research but as a result of the absence of these materials, the researcher was restricted to only these available.

Non-Cooperation of Personnel:

Some of the personnel where not eager to give out information that would enrich the research study.


These have to do with the inconveniencies of traveling to the location of the case study.

1.9 Operational Definition Of Terms


To agree to a demand after disagreeing


Connected with the work of managing or organizing a company.


Having two sides that all of different shapes


To give official or legal permission


Type of money that a particular country uses


To decrease in value or price.


To remove government rules and controls from some business activities.


To gradually become less.


Giving one thing for another


To become known

Financial market:

A forum for the exchange of financial products


Two things working well together


The skill of directing

Money market:

A market where long and shorter terms fund are bought and sold


To use and control something


A possibility that something or chances of future success of something


Incorrect piece of information or result.


Having a lot of experience on the world and knowing about fashion culture and other things that people think are socially important.

Promissory Note:

It is a way or promise to pay issued and drawn up by a buyer (i.e. the author of the document) in favour of the seller (i.e. the payee or beneficiary .


This is process of bringing in a product, a service, an idea etc into one country from another.

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