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Exchange Rate Fluctuation And Export Performance In Nigeria (1961-2011)
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1.1 STATEMENT OF THE PROBLEM
Despite the existence of literature on
the influence of exchange rate fluctuations on exports in Nigeria,
theoretical and empirical works on the subject are yet to produce a
consensus. The two major trends in the literature review indicate thus;
the first argues that exchange rate fluctuations represent uncertainty
and will impose costs on risk- adverse economic agents which as a result
respond by favoring domestic- foreign trade just at the margin. In
other words, it might hamper the growth of international trade
(Chowdhury, 1993, Cushiman, 1983, 1988 Kenen and Rodrik, 1986). The
second strand of literature argues that if the economic agents are
sufficiently risk lovers, an increase in exchange rate raises the
expected marginal utility of export revenue and thus induces them to
increase their exports in order to maximize their revenue. Therefore,
exchange rate fluctuations may actually catalyze trade flows (De Grauwe:
1988, IMF: 1984, Klein: 1990 and Chambers, R. G. and Just, R. E.
(1991). Only few attempts have been made to examine them for developing
countries, Nigeria inclusive because of the lack of reliable time
–series data. The available instances include Vergil (2002) for turkey
and Bah and AMUSA (2003) and Takendesa, (2005) for South Africa, Ajayi
(1988), Adubi, A. A. and Okunmadewa, F. (1999), Osagie (1985) for
Nigeria.
The research will differ from the existing ones as it will
carefully examine exchange rate fluctuations and export for both the oil
sector and non-oil sectors. Previous studies assessed only the
influence of exchange rate fluctuation on either oil export, neglecting
the non-oil export or on non-oil export alone excluding the oil export.
They failed to ascertain its effect on both the oil and non-oil (like
agricultural and manufacturing) sectors export. Analyzing only oil
exports or non-oil exports exclusively may not really give a value
judgment and conclusion on the effect of exchange rate fluctuations and
export performances in Nigeria. Furthermore, the study will provide deep
insight into the relationship existing between exchange rate
fluctuations and exports by adopting a popular econometric methodology
for a measure of fluctuations which is Generalized Autoregressive
Conditional Heteroscedasticity (GARCH) modeling technique, which was not
used by some of the previous studies.
In view of the above problem, the following research questions are raised:
1. How does oil export respond to exchange rate fluctuation?
2. How does manufacturing export respond to exchange rate fluctuation?
3. How does agricultural export respond to exchange rate fluctuation?
1.2 OBJECTIVES OF THE STUDY
The
broad objective of the study is to determine impact of exchange rate
fluctuations on export performance in Nigeria. Specifically, the study
addresses the following objectives:
1. To trace how oil export respond to exchange rate fluctuation.
2. To trace how manufacturing export respond to exchange rate fluctuations.
3. To trace how agricultural export respond to exchange rate fluctuation.
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ABSRACT - [ Total Page(s): 1 ]This paper “exchange rate fluctuation and export performances in Nigeria†aim to determine the effect of foreign exchange dynamism on the country’s export performance from 1961-2011. Research results from the economic tool of regression analysis obtained shows that fluctuations in the naira exchange rate affect manufacturing and agricultural exports more than it affects oil export. To reduce the impact of this fluctuations on these export, monetary authorities in Nigeria shoul ... Continue reading---
