IMPLICATION OF FOREIGN EXCHANGE MANAGEMENT AND GLOBAL ECONOMY DOWN TURN ON THE ECONOMY
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1.0 INTRODUCTION AND BACKGROUND OF
The need for foreign currency policy management arises only within the frame-work of countries engaged in international trade in contract to a closed economy, whose scope does not transcend its intra country trade transactions.
Foreign exchange is the means or ways of effecting payment for international transaction it can be acquired by a country through the export of goods and services, direct investment inflow drawn down on external loans aid or grants and it can also be expanded on settling international obligations.
It is made up of convertible currencies that are generally accepted for the settlements of international trade and other external obligations. Such currencies include those of the group of seven (G7) industrialized countries made up of united state Dollar, British pound sterling, deutsche mark, Japanese yen, French, Italian and Canadian dollar.
Foreign exchange market is the medium of interaction between the sellers and buyers of foreign exchange in a bid to negotiate a mutually acceptable price for the settlement of international transactions. The objectives of the market include the provision of an avenue for the exchange of national currencies and the creation of an effective mechanism for the allocation of foreign exchange.
The foreign exchange market consist of the seller (supply) and buyer (demand) of foreign exchange. The major participant in foreign exchange market are the monetary authorities (Central Bank of Nigeria) authorized dealers (Bank) agents of the public sector, and the private sector as well as correspondent banks abroad.
The supply of foreign exchange is derived from oil and non oil exports, capital by receipts include draw down on loans, expenditure of foreign tourist in Nigeria, repatriation of capital by Nigeria resident abroad as well as invisible receipt by the private sector.
On the other hand the demand of foreign exchange consist of payments for important external debt service obligations personal home remittances (PHR) by foreign nations resident in the country, financial commitment of international organization and the country’s embassies abroad as well as other invisible out payment by the private sector.
1.1 STATEMENT OF THE PROBLEM
An important threat to effective foreign exchange policies and management in Nigeria, is the accumulation of foreign debt whose servicing have been conceiving a greater proportion of the dividing inflow at the detriment of developed programmes which require foreign for exclition.
In consisting in policy formulation and implementation is another major problem. Frequent changes minister/secretariat witnessed change in policies and his affect performance and result.
Lack of monetary and fiscal policy on the part of government from 1970 to date, Nigeria has witnessed grass mis-management of respondences and budget indiscipline. A situation where budget is surplus and ends up in billion of naira deficit.
Narrow export based and low elasticity of export goods protectionist policies of the industrialized nation against export goods and development of syntheties (fibers) seem to have jointly conspired to frustrate the efforts to increase earning from export.
1.2 AIMS AND OBJECTIVES OF THE STUDY
The primary objectives of this research is to analyze the source of the foreign exchange and prefer solution on how it can be managed effectively to achieve the set of goals.
To achieve the set of goals or objectives, the following objectives have been specified:
- To review the existing literature, collect and collate information on sources of foreign exchange.
- To identify the sources of foreign exchange
- To identify the review loopholes and malpractice in foreign exchange management
- To analyze the ways that foreign exchange gets to the ultimate users.
- To determine the effects of foreign exchange mis-management
- To recommend measure to take to improve the foreign exchange management.
1.3 SIGNIFICANCE OF THE STUDY
The worsening balance of payment(B O P )accumulated external debt continued commitment of greater parts of the declining exchange earning to debt servicing alongside domestic inflation and management of the country foreign exchange resources.
This, a research into this topic is a better understanding of the issues involve in forex policy and management and offer useful proposal for the benefit makers, scholars and individual or corporate in or using forex.
1.4 SCOPE AND LIMITATION OF THE STUDY
The study focused on the implication of foreign exchange management and global economic down turn on Nigeria economy. The problems encountered in the study were multidimensional in native
Although through the help of some personnel, we were able to get most of the material needed for the project but some staff refused to co-operate to give necessary assistance.
The rate of response from people outside the central bank especially the bureau the change and the black market used in this project was strictly negligible because of their unco-operative attitude and inability to understand the purpose of the project by black market operators.
Some black market operators believe we were trying to gather information for the government on how to curb and refried the of them while staff of bureau change believed that we were being used by some people in the central bank as a result of which they are not prepared to have any discussion with us.
1.5 DEFINITION OF KEY TERMS
- Trade: the buying and selling of goods and service.
- Stock Market: it is also called equity market which is a public market (a loose stock network of economic transaction not a physical facility for stock brokers and traders to trade stock and other securities.
- Equities: Common and preferred stocks, which represent share in the ownership of a company.
- Exchange Rate: The giving of money for its equivalent in another currency.
- Bonds: promissory note issued by a corporation or government to its lenders usually with a specified amount of interest for a specified length of time.
- Certificate : The physical document that shows ownership of a bonds stock or other security.
- Fiscal Year: This is also the same as a budgeting year which is usually one year.
- Recession: A temporary decline in the economic activity of a particular country
1.6 PLAN OF THE STUDY
For the understanding and easy presentation, this research work is divided in to five chapter.
Chapter one usually contain the introduction, the objective of the study, significance of the study the plan of the study itself, and problem of the study used by the writers.
Chapter two treats literature review, theoretical review, conceptual review, empirical review, introduction to foreign exchange in context, role of C. B. N in foreign exchange management, policy tool for foreign exchange management and the down turn of global financial crisis on Nigeria economy.
Chapter three contains research methodology, introduction, population of the study, data collection, sample and sampling techniques and limitation of the methodology.
Chapter four introduction, data analysis and interpretation of result.
Chapter five summary, conclusion, recommendation and reference.