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THE IMPACT OF EXCHANGE RATE FLUCTUATION IN INTERNATIONAL TRADE IN NIGERIA

ABSTRACT

The impact of exchange rate fluctuations on international trade in Nigeria is a topic chosen from exchange rate on international trade field. The research was conducted mainly to examine the exchange rate fluctuation on international trade in Nigeria for effective research on this topic; both primary and secondary data were sued to elicit Information from sample studied, the primary source of data were responses from personal in ferried while secondary source were from periodic journals and newspapers. Two hundred persons were interviewed as the sample of exporters with exchange rate fluctuation and data analysis were based on oral interview and the major findings are as follows; that exchange rate fluctuation has a negative effect on agricultural exports thus the more the exchange rate changes, the lower the income earnings in output production and a reduction in export trade. That an appreciation of the local currency decreases export earnings, while an increase in export price influences the level of exports positively. The appreciation of exchange rate reduces import while its volatility has a positive effect.

CHAPTER ONE

INTRODUCTION

AN OVERVIEW OF THE STUDY

In the early 1960s in Nigeria, there was little concern. For exchange rate policy, as it had almost on significance in economic management between 1960 and 1967, the Nigeria currency was adjusted in relation to the British pound with one to one relationship between them. Between 1967 and 1974, another fixed parity was maintained with the American dollar. The system was abandoned between 1974 and late 1976 when an independent exchange rate management policy was ushered in that pagged the naira to either the U. S. dollar or the british pound sterling which ever currency was stronger in the foreiga exchange market. Because of the huge earnings from crude petroleum exports over the period, Nigeria persistently cans appreciable externel surpluses in the balance of payments, which supported the appreciation of the naira. This practice ied to considerable stability in the naira exchange rate. Late in 1976 as aresult of the changing fortunes of Nigerias economic circumstances a policy reversal was effected in the management of the naira exchange rate. There was a deliberate depreciation of the naira, thought thiswas notsystematic. In an effort to realign the naira exchange rate the monefarists were convinced that a more appropriate way to ensure stability on the naira was to peg it to a basket of currencies. 

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