CHAPTER ONE

Effects of exchange rate functions in developing countries like Nigeria has received considerable attention and generated much debate. The debate focuses on the degree of functions in the exchange rate had generated internal and external shock in Nigerian Economy. Exchange rate of a country plays a key role in international economic transactions because no nation can remain self-sufficient due to varying factor endowments. Oladipupo & Onotaniyohuwo (2011) states that movements in the exchange rate have ripple effects on other economic variables such as interest rate, inflation rate, unemployment, money supply, etc. These facts underscore the importance of exchange rate to the economic well-being of every country that opens its doors to international trade in goods and services. The importance of exchange rate derives from the fact that it connects the price systems of two different countries making it possible for international trade to make direct comparison of traded goods. In other words, it links domestic prices with international prices. Opaluwa, et al (2010) opines that following the functions of the naira in 1986, a policy induced by the structural adjustment programme (SAP), the subject of exchange rate fluctuation has become a topical issue in Nigeria. This is because it is the goal of every economy to have a stable rate of exchange with its trading partners. In Nigeria, this goal was not reached in spite of the fact that the country embarked on devaluation to promote export and stabilize the rate of exchange. The failure to realize this goal subjected the Nigerian manufacturing sector to the challenge of a constantly functioning exchange rate. Exchange rate policies in developing countries are often sensitive and controversial, mainly because of the kind of structural transformation required, such as reducing imports or expanding non-oil exports, invariably imply a depreciation of the nominal exchange rate. Such domestic adjustments, due to their short-run impact on prices and demand, are perceived as damaging to the economy. Ironically, the distortions inherent in an overvalued exchange rate regime are hardly a subject of debate in developing economics that are dependent on imports for production and consumption (Dada & Oyeranti, 2012). It is an avenue for increasing productivity in relation to import substitution and export expansion, creating foreign exchange earning capacity, raising employment, promoting the growth of investment at a faster rate than any other sector of the economy, as well as wider and more efficient linkage among different sectors (Fakiyesi, 2005). Despite various efforts by the government of Nigeria to maintain a stable exchange rate, the naira has continue to depreciate from N4.54 in 1988 to N17.30 in 1993, N21.89 in 1997, all against the one US dollar. The policy of guided or managed deregulation pegged the naira at N99 in 2001, N128.50 in 2006 and N158.76 in 2011. Thereafter, the exchange rate appreciated to N157.58 in 2012 and later N232.40 in 2015. Towards the end of the year, the naira depreciated to N415.36 in 2016 and current in 2nd August, 2017 the exchange rate of one US dollar to naira is N362.21. Against this backdrop, this research study seeks to examine effects of exchange rate functions on manufacturing sector in Nigeria over a period of 25 years (1993 – 2017).

1. 1. This material content is developed to serve as a GUIDE for students to conduct academic research work
2. 2. As a source for additional understanding of the subject.
3. 3. As a source for ideas for your own research work (if properly referenced).
4. 4. For PROPER paraphrasing (see your university definition of plagiarism and acceptable paraphrase)
5. 5. Direct citing (if referenced properly)
Thank you so much for your respect to the authors copyright.