An assessment of the impact of exchange rate fluctuations on economic growth in nigeria

Thesis Overview

<p> </p><p><strong>1.0 &nbsp; &nbsp; &nbsp;</strong><strong>INTRODUCTION</strong></p><p><strong>1.1 &nbsp; &nbsp; &nbsp;</strong><strong>BACKGROUND OF THE STUDY</strong></p><p>Globalization is soaring by the day since the end of the World War II. According to Samuelson (2002), “Most of the world economies have been enjoying growing economic cooperation, widening trade linkages, increasing integrated financial market and rapid economic growth”. We are therefore faced with the stark reality that no nation is an Island unto herself.</p><p>International trade provides the important economic links among nations. Thus, as nations trade with other nations, there is exchange of currencies since every country uses a unique currency for domestic transactions.</p><p>An exchange rate means the price of one currency in terms of another. It is the rate at which one currency is exchanged for the other (Anyanwokoro, 1999:109). A fall in exchange rate denotes depreciation while a rise signifies appreciation. As domestic currency depreciates, that of the foreign appreciates and vice-versa.</p><p>However, this study focuses only on the appreciation and depreciation of the naira vis-à-vis the U.S Dollar.</p><p>Therefore, exchange rate is an important macroeconomic variable which every government looks up to as they push for macroeconomic stability and economic progress.</p><p>The historical statistics surrounding the Nigeria exchange rate vis-à-vis the U.S Dollar obtained from the Central Bank of Nigeria (CBN) statistical Bulletin (2005) showed that the exchange rate was 0.72 = US 1.00 in 1970 and appreciated therefore until 1980 when N0.55 was exchanged per US dollar. A turning point was made hence forth as the exchange rate began to depreciate from 1980 to 2005. During this paid; N061, N0.02 and N7.39 per dollar were exchanged in 1981, 1986 and 1989 respectively. The trend kept on, as N8.03,N17.29 and N22.05 were exchanged per US dollar in 1990, 1992 and 1993 respectively.</p> <br><p></p>