ABSTRACT
The foreign exchange management policy of an economy serves as one of the major factor that contributes to the economic development of such nation. To the federal government, FOREX is a very crucial resource for conducting international transaction; therefore, the government felt once earned should be judiciously managed.
The extent of the effective management of exchange rate on import and export is what the project really examined. There came different era of, changes of foreign exchange management policies ranging from pre SAP period, SAP period and post SAP period with each having different effects on import and export trade. The project tends to answer how these different policies really affected the import and export trade of the Nigerian economy. The procedure for analyzing the collected data was transformed into a linear regression equation using the least square method and other hypothesis were carried out, in order to achieve the objective of the study.
Following the outcome of the analysis and hypothesis tested, it shows that there is a direct relationship between foreign exchange rate policies and net export; it also shows that import and export trade of a developing economy depended greatly on the foreign exchange management policies at any particular period of focus.
However, the conclusion reached was that, at any point, in time, increase in the export as a result of foreign exchange rate management policies has been able to promote economic growth and development, reduce inflation and also stabilize the exchange rate in the economy.
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
Economies are confronted with one problem or the other, and governments are constantly locked in effort and actions to alleviate them from the economic point of view, there is the gap between the potential Gross Domestic Product (GDP) and the actual, which is referred to as the employment gap, or the GDP gap. This gap has to be reduced to the minimum. In order to achieve this, the government or its agencies take various actions, referred technically as policies.
The natures of economic problems differ from a recession/depression with high levels of unemployment or at the extreme rampaging inflation, currency, depreciation and balance of payments deficits. Since the 1970’s, it has been recognized that rather than the existence of a trade-off between inflation and unemployment, a country could be experiencing stagflation- a combination, of stagnating outputs as well as high levels of inflation at the same time (Samuelson and Nordhaus 1989: 204: 206). This situation calls for a combination of policies to address them.
Policies available to any government in managing its economy by tackling the problems identified above exist in. a menu; from monetary and exchange rate through fiscal, trade, commercial, Income among others. Consequently, the government often uses these in combination or singly, depending on the problem at hand and the philosophy of the regime in power. A rightist philosophy is inherently anti-policy activists and when necessary will prefer monetary to fiscal policies. However, he reality of economic malaise confronting an economy. These policies are used in packages.
1.2 DEFINITION OF FOREIGN EXCHANGE
Foreign exchange has been variously, defined by different works of study but all tending towards the same meaning. Foreign exchange is a means of effecting payments for international transactions. It can be acquired by a country through, the export-of goods and services, direct investment in-flow, draw down on external loans, aids and grants and it can be expended to settle international.
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