CHAPTER ONE
INTRODUCTION
1.1. BACKGROUND OF THE STUDY
Nowadays in Nigeria, exchange rates and its constant movement are of great importance to the overall public as a result of a technique or the other its fluctuation has an effect on the competence of the economy to attain optimal productive capacity. This is appalling given its macro-economic importance specifically in a high import dependent country like Nigeria (Olisadebe, 1991). The rate of exchange reflects the quantitative relation at that one currency may be exchanged with another currency, specifically the magnitude relation of currency costs. It is the worth of a remote nation’s currency in terms of the house nation’s currency. It additionally specifies what quantity one currency is value in terms of the other. A correct or more acceptable exchange rate has been one amongst the most vital factors for economic growth in the economies of most developed countries, whereas regular fluctuations or inappropriate exchange rate has been a major obstacle to economic growth of many African countries of which Nigeria is inclusive. Exchange rate is an important macroeconomic policy instrument. Changes in exchange rates have powerful effects on tradable and non-tradable of countries concerned through effects of relative prices of goods and services (Bobai, Ubangida & Umar, 2013). More particularly, there has been an ongoing debate on the appropriate exchange rate policy in developing countries (Kandil, 2004). In other word, in an export-led growth country, a major concern will be to make its export sector open to external shocks, especially in regards to exchange rates volatility. With the Nigerian economy in a state of exchange rate fluctuation, especially with the fluctuations in the currency of her major trading partners, question arises as to whether trade can continue to be a reliable source of economic growth for Nigeria. This major problem which this study is designed to solve is whether the exchange rate has any bearing on export growth. The present contribution is expected to rekindle research interest in this direction for purpose of achieving greater stability and sustainability in foreign exchange management in Nigeria through internationally competitive productivity in Nigeria. It is hypothesized that there is no causal relationship between exchange rate (EXR) and export growth (EXP) in Nigeria. In judging the desirability of exchange rate fluctuations, it becomes, therefore, necessary to evaluate their effects on the performances of macroeconomic variables in Nigeria .