SSESSING THE MANAGEMENT OF FOREIGN EXCHANGE RISK AND CORPORATE PERFORMANCE IN AN ECONOMY
|BANKING AND FINANCE|
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International trade and capital flows require foreign exchange market because common despite increase in economy interdependence in the world, each country maintain its own national medium of exchange.
The official foreign exchange market in Nigeria s made up of the federal ministry of finance and the central bank of Nigeria as the apex institution, authorized dealers including commercial and merchant bank, development bank and bureau de exchange.
The federal ministry of finance and the central bank are jointly responsible for the formulation of exchange control policies and procedure, while the banking system and d bureau d exchange services as a channel for implementing official policy operation side by side with the official foreign exchanges, marketing is the parallel or black market (agene 1991).
Since 1985 the central bank of Nigeria (CBN) as attempted to evolve an optional exchange rate for local currency at the same sought to achieve a system that preferentially allocates the available of foreign exchange to the productive sector that agriculture and manufacturing.
It as been reluctant to allow the inter play of forces of demand and supply to determine exchange rate and allocation of scare foreign exchange to the productive sector that is agriculture and manufacturing. it has been reluctant to allow the into play force of demand and supply to determine exchange rate and allocation of scarce foreign exchange, this subsidy combined with the private biding system has create service pressure on the domestic money market, as over #35 billion in subsidized foreign exchange in 1955.
However, against the background that foreign exchange market(fem) s faced with problem, the federal government of Nigeria (FGN) took two economic emergency in October 1985 and adopted structural adjustment programmed(sap) in July 1986.
The programmed give birth to second tier foreign exchange market (SFEM) this legislation exchange regime in Nigeria since independence in terms of the dismantling of the restriction and bureaucracies which plagued previous regime (agene 1991).
Structural adjustment programmed (sap) refers to a set of comprehensive economic reform measure designed to correct imbalance in the economy arising from unfavorable external factors s well as in appropriate domestic policies.
The objective of (sap) was to effectively restructure the consumption and production pattern of the Nigeria economy to eliminate price distortion heavy foreign exchange earns and imports of consumption and producer goods.
The major thrust of structural adjustment programmed (SAP) include following
A. Achieve fiscal land balance on payment viable over the period
B. Restricting and diversity the productive base of the economy in others to reduce dependency on a single major foreign exchange earns and imports.
C. Lay the basic for a sustainable non inflationary economic growth.
D. Lesson the dominance or an production investment in the public sector efficiency and encourage the growth potential of the private sector.
The overvalued naira led to a fight of capital, it thus aided that naira was converted to harder currencies at the rate that decided to give more value to the naira than it was work now in the regime of foreign exchange market (fem) and banking business carried on in Nigeria in 1949 by the British and the France bank for wise man and woman strong representative in the co operate and wholesales market.
UBA also has a large and established retail franchise and two foreign branches in New York and Grand Cayman Island.
UBA group is known for its initiative and creativity some of the key milestone in its history includes:
I. First among international to be registered under Nigeria Laws.
II. First Nigeria bank to offer its share to the public following its listing on the Nigeria stock exchange in 1970.
III. First Nigeria bank to introduce a cheque guarantee scheme knows as UBA card in 1986.
IV. Won the euro money 2000 award for excellence, as the best domestic bank in Nigeria.
V. First Nigeria bank/company to gain recognition of the international financial community through the establishment of global depository receipt (gob) programmed.
VI. Consistent and solid financial performance over the past year.
1.2 STATEMENT OF THE HISTORY
The Britton woods conference (1944) established a fixed exchange rate system whereby each currency had a fixed parity (value) in relation to the dollar.
In Nigeria, the manufacturing or better still corporate sector depends heavily on imported raw materials machineries, spare part and services. However foreign exchange did not pose any problem on them simply because of the exchange rate.
However with dereligation of the foreign exchange market, this has resulted in high foreign exchange rate.
Research in the past have neglected some specific issue that are capable of setting the whole economic system, one such issue and to its research will address in the impact of foreign exchange policy on the Nigeria co operate depend on foreign input for their production.
1.3 OBJECTIVE OF THE STUDY
This research work focused on the risk associated with fluctuation in foreign exchange rate and its effect the performance on co operate organization in Nigeria. The specific objectives of the study are as follow
I. To exchange the risk fluctuation in exchange rate ac control association with currency management in the multi currency settings.
II. To investigate on the policies one government cc operations have and how effective this policies have been.
III. To appraise the impact of the policy tools on the growth and development of the nation economy
IV. To prefer recommendation based on research finding
1.4 RESEARCH QUESTIONS
I. Does the various exchange policies help their organization in its corporate performance?
II. Does fluctuation in the foreign exchange rate affect your net income?
III. Does profitability of the organization depend of the defendant between the naira and other major currency?
IV. Do you feel the impact of competition in the faces of the development?
V. Does your unit lost fluctuate?
1.5 STATEMENT OF HYPOTHESIS
Base on the research question and objective of study. The following hypothesis stated will be tested.
HO: Change in exchange rate and control have dramatic impact on profitability
HI: Fluctuation exchange rate control is not determine by the manager
H0: Fluctuating exchange rate control does not associate with management of currency in multi currency setting.