Exchange rate regime in nigeria pdf

Currencypeg regime was determined as the nominal anchor in the stabilization program in 2000. The exchangerate regime is often seen as constrained by the monetary policy trilemma, which imposes a stark tradeoff among exchange stability, monetary independence, and capital market openness. Analysts at financial derivatives company limited have made a strong case for a unified exchange rate regime, saying this is critical to jump starting the nations economy. Pdf on jan 2, 2018, okechukwu utazi and others published the choice of exchange rate regime in nigeria find, read and cite all the research you need on researchgate.

Nigeria has witnessed several exchange rate policies and regimes. It involves understanding the role played by the exchange rate as shock absorbers. The exchange rate regime is often seen as constrained by the monetary policy trilemma, which imposes a stark tradeoff among exchange stability, monetary independence, and capital market openness. Pdf the impact of exchange rate regimes on economic growth. The relation between the exchange rate regime and output volatility is also a channel with a long tradition in international finance, and one of the key links underlying the debate on optimal currency areas. The exchange rate between two currencies may be determined in international foreign exchange markets or in a government office. It is 1 foreign exchange rate1 1 contributors to this series are. Obafemi department of economics university of calabar p. Exchange rate misalignment under different exchange rate. Nigerian exchange rate policy dilemma by bismarck rewane. Nigerian naira 19952020 data 20212022 forecast quote. Apr 09, 2019 a floating exchange rate is a regime where the currency price of a nation is set by the forex market based on supply and demand relative to other currencies. The result showed that real exchange rate has a positive effect on the economic growth.

The problem of endogeneity of the exchange rate regime points to a possibility of twoway causality between inflation and. Exchange rate regimes in turkey the ministry of economy 4. All in all, the findings suggest that fi xed exchange rates constrai n the performance of. List of countries by exchange rate regime wikipedia. Foreign exchange rate management in nigeria exchange rate management policy in nigeria has passed through four major stages, which are. Over the year the nigerian government has undergo different exchange rate policies either. However, the fixed exchange rate policy was implemented using different systems depending on the. It is a type of fixed regime that has special legal and procedural rules designed to make the peg harderthat is, more durable. The pegged exchange rate system was the first exchange rate regime adopted in nigeria. Exchange rate behaviour and trade balances in nigeria.

Nigeria has followed in the footsteps of south africa by opting for a freefloating exchange rate regime. This indicates that the floating exchange rate has been a better economic regime for sustainable economic growth in. Determinants of choice of exchange rate regimes in nigeria. The exchange rate is the price of one currency in terms of another currency, that is, the current market price for which one national currency can be exchanged for another. This paper examined the impact of floating exchange rate regime on economic growth in nigeria. Exchange rate depreciation and nigeria economic performance after structural adjustment programmes saps. When the demand for foreign exchange exceeds supply, the value of the naira will go up. B 1115, calabar nigeria abstract the study estimated the effect of exchange rate on the balance of trade of nigeria for the period 19702012 using annual data. How a unified exchange rate regime will impact nigerias. Over a decade, after the establishment of cbn, nigerias pound was used as the medium of exchange with easy convertibility to british pounds egwaikhide et al, 2015. Section i describes the process of adjustment to an oil boom. Impact of exchange rate on the nigeria economic growth. Modeling and forecasting naira usd exchange rate in nigeria. Section ii presents data on nigeria and indonesia and compares their policies.

It can be said that one of the factors determining the way exchange rate fluctuations affect economic growth is the development level of each countrys financial markets. Quantitative analysis of the impact of exchange rate. In nigeria, the management of the exchange rate is carried out by the central bank of nigeria. According to kinggeorge 20, the effect of exchange rate fluctuations on the nigeria manufacturing sector was set to find out the effect of exchange rate on the nigeria manufacturing sector.

The impact of floating exchange rate regime on economic. Exchange rate misalignment under different exchange. Period between 19962000 rate of increase in foreign exchange basket was targeted in order to minimize the volatility of the real exchange rate for the years between 19961999. Exchange rate policy is the process used to determine an exchange rate fixed exchange rate managed floating exchange rate types of exchange rate policy regimes. Nevertheless, he left the exchange rate regime err aside.

Foreign exchange rate central bank of nigeria home. In a similar study, akpan 2008 investigated foreign exchange. Effect of exchange rate fluctuations on manufacturing. The nigerian pound was fixed by the 195 a central bank ordinance at par with the pound sterling obaseki, 1991 and the cbn was responsible for buying and selling foreign.

The usdngn spot exchange rate specifies how much one currency, the usd, is currently worth in terms of the other, the ngn. The official exchange rate is determined by the monetary authoritycentral bank, while the market exchange rate is basically determined by market forces of demand and supply. Right now, the currency is converging naturally at about 360 naira to the dollar. Effects of exchange rate fluctuations on economic growth of.

Under the current external pressures from low commodity prices and tighter external financing conditions, growthfriendly fiscal adjustment can help contain inflationary pressures associated with exchange rate depreciations. The pertinence of the floating exchange rate in addressing foreign exchange risk, especially under extant economic circumstances of the country, was instantly validated in the equity market. The study analyzed the impact of exchange rate on economic growth using nigerian gross domestic product gdp as dependent variable in relation to her exchange rate, interest rate and inflation rate as independent variables. Cbn, pwc estimates with the outlook on the oil price and level of reserves accretion usd40. Currency board is an exchange rate regime in which a countrys exchange rate maintain a fixed exchange rate with a foreign currency, based on an explicit legislative commitment. Standby agreement with imf in 2000 liquidity crisis in november 2000 new agreement with imf on december 18, 2000 no change on the exchange rate policy. This study has kept its focus on the economic growth of a set of developing countries during the years 19742006. Apr 23, 2019 according to focus economics in march, president buharis reelection means that a move towards a freefloating exchangerate regime is unlikely. The impact of exchange rate regimes on economic growth with. Jun 30, 2016 nigeria has followed in the footsteps of south africa by opting for a freefloating exchange rate regime. Exchange rate depreciation the structure of sectoral prices in nigeria under an. Following the adoption of structural adjustment policy sap in 1986, the country has moved from a peg regime to a flexible exchange rate regime. Exchange rate depreciation and the structure of sectoral prices in nigeria under an alternative pricing regime, 198689 by olu ajakaiye and ode ojowu, research paper 25.

Nigerias move from a fixed to a floating exchangerate policy editions. Exchange rate regime an overview sciencedirect topics. Moyinoluwa, damilola eluyela, impact of exchange rate on the manufacturing sector in nigeria, international journal of mechanical engineering and technology 102, 2019, pp. Furthermore, the result revealed that the currency was undervalued during 2004 2006 given the surge in oil prices and. Countries following the flexible exchange rates are facing scarcity for the existence of advanced financial systems, which deprives them of enjoying the benefits of flexible regime.

And the volume of such transactions and the speed at which they are growing highlight the crucial role of the exchange rate in todays world, thereby making the exchange rate regime a central piece of any national economic policy framework. Exchange rate depreciation, budget deficit and inflation the nigerian experience b fy. So far, exchange rate has always been a key economic indicator for nigeria. Specific content for the schematic asset price model of the exchange rate is provided in sec. Annual report on exchange arrangements and exchange restrictions 2014.

Asher 2012 examined the impact of exchange rate fluctuation on the nigeria economic growth for period of 1980 2010. Pdf the choice and management of an exchange rate regime is a critical. In contrast with previous findings, ours study strongly suggest that exchange rate regimes indeed matter in terms of real economic performance in nigeria as the results reveal that deregulated exchange rate regime spur economic growth in nigeria as against the whole period and fixed exchange rate regime. Exchange rates in the 18th and 19th centuries the dominant monetary arrangement in the 18th and 19th centuries was a spicie standard e. The effect of exchange rate fluctuations on economic growth varies in different countries. The results indicated that as compared to flexible exchange regime, growth rate was higher by 1. Pdf the impact of exchange rate regimes on economic. There are different types of exchange rate regimes practiced all over the world. Effect of exchange rate fluctuations on manufacturing sector. Central bank balance sheets and foreign exchange rate regimes. If an exchange rate say, the yendollar rate is determined in international foreign exchange markets based on the demand for and supply of the yen, then the markets determine the exchange rate. Speaking to reuters, nigerias information minister lai mohammed said. The implications of the exchange rate regime and fiscal policy are discussed.

Emefiele con, governor, central bank of nigeria at the unveiling of the framework for reintroduction of managed float exchange rate system 15 th june 2016 good afternoon ladies and gentlemen and welcome to the central bank of nigeria cbn. Effect of foreign exchange rate fluctuations on nigerian. According to focus economics in march, president buharis reelection means that a move towards a freefloating exchangerate regime is unlikely. To examine the relationship between exchange rate regimes and economic growth. The choice and design of exchange rate regimes mar gudmundsson introduction this paper discusses the design and management of exchange rate regimes in africa.

Central bank balance sheets and foreign exchange rate. Effects of exchange rate fluctuations on economic growth. The impact of exchange rate regimes on economic growth in. The floating exchange period has outperformed the fixed exchange rate in terms of contribution inflation, money supply and oil revenue to economic growth. The cbn and the floating exchange rate financial nigeria. Over the years, nigeria has adopted various exchange rate regime ranging research work is centered on the impact of exchange rate on the nigeria economic growth with special emphasis on the purchasing power of the average nigeria and the level of international trade transaction. Nigeria exchange rate naira depreciates drastically following scrapping of currency peg in june. The main objectives of exchange rate policy in nigeria are to preserve the value of the domestic currency, maintain a favourable external reserves position and ensure external balance without compromising the need for internal balance and the overall goal of macroeconomic stability. The nigerian pound was fixed by the 195 a central bank ordinance at par with the pound sterling obaseki, 1991 and the cbn was responsible for buying and selling foreign currency in nigeria. Since independence, the exchange rate system in india has transited from a fixed exchange rate regime where the indian rupee was pegged to the pound sterling on account of historic links with. Exchange rate intermediate regimes are unable to continue under conditions of capital movement. A positive impact has been identified in exchange rate regimes upon economic growth of the. A positive impact has been identified in exchange rate regimes upon economic growth of the developing countries.

Nigerias dual exchangerate system may be ending the. The impact of exchange rate fluctuation on the nigerian. After one year of standstill, the central bank of nigeria cbn has effectively abandoned its muchcriticised fixed exchange rate. Government and monetary authorities in nigeria, over the. This is a list of countries by their exchange rate regime. While the usdngn spot exchange rate is quoted and exchanged in the same day, the usdngn forward rate is quoted today but for delivery and payment on a specific future date. Nigeria abstract exchange rate policy in nigeria has oscillated from a fixed exchange rate regime in 1960, and to a pegged regime between 1970s and mid 1980s and finally to various variants of the floating regime from 1986 with the introduction of the structural adjustment programme sap. The impact of exchange rate regimes on economic growth. Original research article foreign exchange management in. Nigerias exchange rate changes have been a subject of debate among policy makers, concerned monetary authorities and academics because of the recognition of the vital role exchange rate regime plays in the achievement of sustainable growth.

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