THE ROLE OF FOREIGN EXCHANGE MARKET IN ACHIEVING A REALISTIC EXCHANGE RATE FOR NAIRA. A RESEARCH PROJECT MATERIAL ON BANKING AND FINANCE
The remote cause of the problem that necessitated this study in perhaps, the chronic balance of payment deficit which the country has been experiencing since independent. An attempt to solve the problem through the use of exchange control measure ha not been quite successful rather, it has succeeded in bringing about on over valued naira the foreign exchange market as an implementation strategy of the structural adjustment programme introduced bid, the study seeks to investigate the role which the foreign exchange market has played in achieving a realistic exchange rate for naira, quite elaborately, there optima supported by existing literature are if the officials to the equibrium rate, if exchange rate adjustment are not accomplished by proportionate improvement in balance of trade cum-payment.
Some statistical tests are employed in the study this is the market equilibrum model used to date the equilibrium exchange rate out to be.
At the end of study, it was found out that the foreign exchange market failed to fulfill any of the above condition meaning that so far. It has not achieved a realistic exchange rate for naira.
1.1 BACKGROUND OF STUDY
Foreign exchange is an important economic variable as its appreciate or depreciation the performance of other macroeconomic variables in any economy. Also, its real value can be used to assess the strength and the overall performance of any economy for these the viability of a nation’s economy is measured by its ability to achieve certain macro-economy objectives. These include:
(a) High level of employment
(b) Stability in the exchange rate
(c) Satisfactory balances of payment situation and maintenance of the external value of the domestic currency.
(d) A reasonable level of economic growth and rising living standards.
(e) Avoidance of inflation.
(f) Distribution of income
Soon after the attainment of independence, Nigeria like most sovereign nations directed its economy exchange earnings could not remedy the situation. At this period when agriculture was regulated to the background , Nigeria depended on oil, nevertheless, oil boom did not survive for long addition, stringent measure in foreign exchange to banks on global sect oral and monthly basis, import-licensing matching with the foreign exchange budget for import to enhance budget discipline alighted and blue print to economic buoyancy, made the structural adjustment programme (SAP) inevitable. As designed by the federal government, SAP focuses in four areas; they are: