TABLE OF CONTENTS
Table of contents
Lists of tables
1.1 Background of the study
1.2 Statement of the problem
1.3 Purpose of the study
1.4 Significance of the study
1.5 Research questions
1.6 Formation of Hypothesis
1.7 Scope of the study
1.8 Definition of terms
2.2 Review of related literature
2.3 Excellent rate policies in Nigeria from (2010-2012)
2.4 The policies Government
External Trade and Financial in Nigeria
2.5 Exchange Rate Fluctuation and the Dollar Problem – Its Effect on Imported Goods
2.6 Summary of Literature
3.1 Design of the study
3.2 Area of the study
3.3 Population of the study
3.4 Sample of the study
3.5 Instrument for data collection
3.6 Validation of the instrument
3.7 Distribution and retrieval of instrument
3.8 Method of data analysis
4.1 Data presentation and analysis
4.3 Discussion of the findings
5.4 Limitation of the study
5.5 Suggestions for further research
List of tables
4.1 Is upward movement of the pricing of goods in Nigeria due to exchange rate fluctuations? – 80
4.2 Do over dependency in importation in Nigeria due to lack of economics of scale – 81
4.3 Does the steady rise in prices of imported goods in Nigeria due to the exchange rate of naira to dollar? – 82
4.4 Did the prices of made in Nigeria goods fluctuate with prices of imported goods? – 83.
The major aim of this research work is to know the effect of exchange rate fluctuation in imported goods in Nigeria, it is also aimed at ascertaining the level of relationship between the depreciation value of naira and the pricing of imported gods in Nigeria. The fluctuation nature of exchange rate appears to be responsible for the exploitative pricing of imported goods in Nigeria. The objective of the researcher is to address the following; to know the reason of this upward movement of the pricing of goods in Nigeria. To discover only Nigeria dependable on importation. To x-ray why there is steady rise in the price of imported goods. These issues were addressed through theoretical and empirical approach with heap of secondary and primary data collection method, related literature were reviewed to ascertain what various authors have to say on the topic. The primary data was collected through questionnaire administered on the financial institution, importers and retailers of various imported goods in Asaba metropolis. The question, is upward movement of pricing of goods in Nigeria doom to exchange rate in Nigeria. The researcher made the following recommendation; Government should work tirelessly with its monetary agencies to fix of the naria, for no country of the world leaves its currency afloat to the pros and cons of forces of demand and supply.
1.1 Background of the study
The Nigeria economy has witnessed a great degree of instability ever since the end of civil war. This got worst after the gold content of the local currency had reduced from 2.48824 to 1.24414 grams of fine gold following the changes of the Nigerian pound to naira in1973; fixed exchange rate were established for both pound starling and US dollar at 0.5833 and $ 1.5200 respectively to N100. This has caused havoc to the Nigerian economy in the exchange rate of naira to both dollar and pound starling has been in the download trend.
It has also been observed that the economy has been eroded and has witnessed the highest degree of inflation. The result is that Nigeria as a country has lost its financial credibility in the outside world. At the home front, because the exchange rate is not to our favour, the country has witnessed the greatest degree of brain drain. The exchange rate fluctuation has affected most of our industrial that import whole or part of their raw materials and the result is that production is below capacity utilization, resulting in unemployment. Again because of the high exchange rate, most local / home made goods are expensive thereby pricing themselves out of the market.
No one will write on the effect of exchange rate fluctuation on imported goods without bringing into focus our peoples colonial orientation and perception of imported goods. During the colonial era, our colonial masters were interested in certain way our raw materials and producing these goods in their country without our knowledge if production only to bring down the finished goods at an exploiting price.
Based on this, our people started with patronage of every high quality product and are now finding it difficult to adjust to locally produced goods. There is no gain saying that our product were no match to the foreign goods and this has made an average. Nigerian to always prefer foreign goods to local ones that are lower in quality. However it is advisable that the local manufacturers will increase the quality of their product to create basis for our locally produced goods to complete adequately with foreign goods. By doing so, the price of imported goods can be brought with reach.
An exchange rate denotes numerical expression of the value of the currency of one country at any given time. It can also be defined as the price of the currency in terms of another currency. Like other economy variables which include interest rate, inflation rate unemployment rate, money supply, price of imported goods etc.
Exchange rate is a strong economic indicator for assessing the overall of the micro-economic variables that reflects the strength or weakness of an economy. A persistently strong currency is a reflection of strong and vibrant economy, while a persistently weak currency is a reflection of a weak and vulnerable economy. Exchange rate is also a potent monetary policy tool used in achieving certain economic objective of a country including the balance of payment equilibrium. (Olukole 1992, p. 38).
This brings us to the issue of international trade, which is the exchange of goods and services beyond the boundaries of a sovereign political authorities, which does not have a common currency. The main vehicle of exchange is therefore, effective demand is defined as demand seek up by purchasing power that is willingness on both parties to part with the cash and physical goods (Ifezue 1990, p.03) that the country has efficiency over others.
In this way, specialization is encourage amongst countries to continue in the production of these goods they have comparative advantage and export to other countries and import those goods they cannot produce themselves (Samuelson et al 1985:54).
Since countries in international trade do not have a common currency as unit of value and medium of exchange and the era of better is over, the only solution is fixing a realistic rate of exchange for each country’s currency. The exchange rate is the yardstick for which each country’s exchange of goods and services are based on. Secondly, the terms of trade measures the ratios at which the exports of one country exchange for those of its trading partner. The continous flow of goods in and out of a country and the dependency of every nation upon foreign sources for many offices especially those of special importance have made the world and integrated economy. Countries engage in trading because they have a comparative advantage in technology or relative factor abundant or because different countries specialize in providing different brand where economies of scale exist. The basis for exchange of these goods is exchange rate. It is obvious that the exchange rate affect prices of these goods and services.
The rate of which naira exchange for dollar determines the rate at which goods are sold in the market. Therefore the exchange rate fluctuation affect the process of imported goods upwards or downwards as the case may be. At the same time, it affect the prices of locally produced goods that most of the raw materials and machines are reported and prices at which the currency of exchange are secured affect the price positively or negatively.
The control of exchange rate fluctuation in the money market has posed problem to both the government and individuals (corporate and individual forms). This has led to the continued search for a viable economic order for the country which led to the introduction of FEM under SAP.
The main objective of FEM were:
a. Determination of realistic exchange rate for the naira.
b. Using this topic mechanism to channel resources to the most deserving sector of the economy when exchange rate is high, importation of goods will decrease except for necessities, which have a negligible reaction to exchange rate. Exchange rate has a direct influence on price of imported goods positively. However, in practice, import respond more quickly to change in domestic income than to change in the real exchange rate. Again, if sustained, a change in the real exchange rate will eventually have significant effect on the level of imports as well as exports. In contrast, imports have been on the increase since 1985. When there is depreciation of the naira, the exchange rate fluctuates downwards and this makes import very casting, conversing, when the naira appreciates, it favours imports.
Adverse fluctuation rate makes for loosed or lower profit due to increases in the prices of inputs used in production process. Nigeria is highly dependents on imported input and raw materials to keep the numerous manufacturing industries going consequently, with every depreciation of the naira, the price of imported input soar in term of naira and this is transmitted to the whole economy in the form of higher prices of goods and services and intolerable inflation.
Since a fall in the international value of naira makes Nigerian goods cheaper in foreing currencies and foreign goods more expensive in naria, this change in the naira exchange rate tend to increase the quality of goods Nigeria export and reduce the quality of goods imported to Nigeria. During the period under review, 2000:2012, Nigeria had the highest inflation rate that most of its trading partners. Whether Nigerian goods become more or less competitive in the world market depends on whether the increase in Nigeria’s competitiveness arising from fall in normal or actual exchange rate was longer than the reduction in Nigeria’s international competitiveness because of the domestic prices of Nigerian goods were rising faster than price in other countries.
Sometimes these change in a country’s degree of international competitiveness are justified by relevant in the economy such as technological progress, changes in external terms of trade, change in taxation etc. adverse change in exchange rate gives producer distinct advantage in cost competitiveness.
The major negative affect of the fall in exchange rate of naira is that, it is made planning very difficult. Near accurate plans cannot be made because exchange rate continous jumble thereby making business projections inaccurate. Marketing exports and managers are therefore face with the problem of setting accurate strategies marketing plan and operations.
1.2 STATEMENT OF THE PROBLEMS
Fluctuation of exchange rate:
i. Affect the price of imported goods in Nigeria.
ii. Posed by challenge to financial institution in the country.
iii. Posed big challenge to importer of various goods
It is on the view that the researcher was prompted to engage in further exploration with a view to ascertain; the effect which exchange rate fluctuation have an imported goods in Nigeria. Hence this study focused on the effect of exchange rate fluctuation on the imported goods in Nigeria.
1.3 PURPOSE OF THE STUDY
The objective of this study is to ascertain the effect of exchange rate fluctuation on the imported goods in Nigeria. The objective can be broken down as follows:
i. To know the reason of this upward movement of privacy of goods in Nigeria.
ii. To discover why Nigeria depends solely on imported industrial inputs for its industrial use
iii. To x-ray why the steady rise in exchange rate of the naira over other currencies.
1.4 SIGNIFICANCE OF THE STUDY
The findings of this study will form a benchmark on which the marketing exports and monetary authorities will appraise and if necessary modify the ensuring policies.
This study will give a clear perception through the highlight of the strength and weakness of foreign exchange management. A great percentage of the Nigerian populace have not yet come to terms with the fact that the foreign exchange market is part of the economic recovery programme.
1.5 RESEARCH QUESTION
The following questions will guide the study:
1. Does upward movement of the pricing of goods in Nigeria due to exchange rate fluctuation?
2. Does over dependence on importation of industrial equipment in Nigeria due to economic of scale?
3. How does the steady rise in prices of imported goods in Nigeria affects the exchange rate of naira to dollar?
1.6 FORMATION OF HYPOTHESIS
The following hypothesis are posted as tentative guide for the study.
Ho1: There is no upward movement of the pricing of goods in Nigeria
Hi1: There is upward movement of the pricing of goods in Nigeria
Ho2: Nigeria did not depend solely on imported goods for their industrial uses.
Ho2: Nigeria depends solely on imported goods for their industrial uses.
1.7 SCOPE OF THE STUDY
The study sets out to x-ray the effect of exchange of fluctuation of the prices of imported goods in Nigeria. The period covered by the study is 2000-2012 and limited to some financial establishment and importers within Asaba Metropolis, because the researcher believes that the general position in Nigeria would be same from the result of the Asaba metropolis since the exchange rate function previous through out the country.
The other areas of the study peered into through availability of some secondary data, including x-raying the annual average exchange rate of the naira, retail price of some locally manufactured package goods, pre SAP and post SAP rates process increase of some selected goods, imports and annual rate of the naira.
1.8 DEFINITION OF TERMS
1. Exchange rate: An exchange rate if the price of one currency terms of another. More accurately an exchange rate is the number of units of domestic currency required to obtain one unit of foreign currency and vice versa. This, a reciprocal relationship among exchange ratio:
For example, suppose N70 = $1
= N 1 = $1 = 0.0111
This is a characteristics, number or quality that increase or decrease our time or rate different value in different situation.
This involving the systematic observation of similarities or disseminations between two or more branch of science or object of study.
This is of or relating to number of the nature of a number
5. INTERNATIONAL TRADE
This is the exchange of goods or science along international border. This trade of trade allows for a greater competition of more competitive price in the market.
6. EFFECTIVE DEMAND
This can be defined as the quantity of a good or services that consumers are actually buying at a current market price.
This can be seen as the activity of acquiring goods and services to accomplish the goals of an acquisition.
This is the quality of being believed or trusted.
This refers to a group of economics, there are many different industry classification with a typically grouped into large categories actual sector.
10. RAW MATERIAL
This refers to as the basic material from which a product is made. It is also a material or substance used in the primary production or manufacturers of goods.
This is a person. An enterprise or an entity that manufactured something. In other words, a person or business concerns that manufactures goods and services.
This is the quality or the state of being unstable, lack of stability or firms.
It is defined as the rate at which the general level of price. For goods and services is rising and subsequently. Purchasing power is falling.
14. imported goods
These are goods which add to the stock of material resources or a country by entering its economic territory.
15. finished goods
There can be defined as material or product which have received the final increment or value through manufacturing or processing operation and which are being hold in inventory for delivery, sale or use.
This is to put to use, especially to find a profitable or practical use for.
A value that will purchase a finite quality weight or other measure of a good service.
This is to utilize, especially to profit form to practical account. It is also to use selfishly for one’s own ends.
Production is the process of making harvest or creating something or the amount of something that was or harvested.
20. BALANCE OF PAYMENT.
It shows a countries transaction with the rest of the world. It noted inflows and outflows of money and categories them into different section.
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