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PROJECT TOPIC  : IMPACT OF REAL EXCHANGE RATE ON NIGERIA'S EXPORT (1970 – 2010)

PROJECT PROPOSAL

BACKGROUND OF THE STUDY
Exchange rate is an important economy metric as it reflects underlying strength and competitiveness with world economies. Whether fixed or floating, exchange rate affects macroeconomic variables such as import, export, output, etc. Chong and Tan, (2008) empirical analysis revealed that the exchange rate is responsible for changes in macroeconomic fundamentals for the developing economies. Exchange rate fluctuations influence domestic prices through their effects on aggregate supply and demand (Engel, 2002). In general, when a currency depreciates it will result in higher import prices if the country is an international price taker, while lower import prices result from appreciation. The potentially higher cost of imported inputs associated with an exchange rate depreciation increases marginal costs and leads to higher prices of domestically produced goods (Kandil, 2004). Also, import-competing firms might increase prices in response to foreign competitor price increases to improve profit margins.

Available evidence generally suggests that most developing countries registered a persistent decline in their foreign exchange earnings from the early 1980s. This is attributed largely to the collapse of commodity prices in the world market. Combined with this are two principal factors. First, is reduced foreign lending and second is the increased cost of external borrowing.

This triggered a series of developments in most developing countries. It is a statement of fact that external trade dominates government revenue in these countries. Both exports and imports of developing countries are subject to periodic fluctuations in the world market, and revenue from this source tends to fluctuate accordingly. Thus, it was not surprising that the collapse of commodity export prices in the early 1980s engendered fiscal crises in most African countries, as reflected in their huge budget deficits. In part, this led to the adoption of economic reform programmes.

However, there is little systematic research, examining whether exchange rates affect Nigerian export. This study fills the void by examining whether real exchange rate influence the export volume of Nigeria.

STATEMENT OF PROBLEM
Exports are a key part of international trade and the proceeds from exported goods in particular is vital to economic growth. These proceeds directly contribute to investment, which in turn constitutes the motor of economic expansion. This may have prompted some authors to be preoccupied with the determinants of exports especially in developing countries.

This study examines the determinants and major components of aggregate exports and its major components in Nigeria. A dynamic specification of export model shall be explored with special focus on the effect of real exchange rate.

OBJECTIVES OF STUDY
The study focuses on the following objectives:
(i) To investigate empirically, the effect of real exchange rate on Nigerian export;
(ii) To examine the exchange rate policies of Nigeria
(iii) To examine the trend of the Nigerian export sector;
(iv) To highlight and discuss the various policies and programmes used in promoting export in Nigeria.
(v) To suggest ways of making the Nigerian exports more exchange rate responsive.

RESEARCH QUESTIONS
The research questions examined in this study are as follows:
1. What impact does the real exchange rate has on Nigerian export?
2. What exchange rate policies have been adopted in Nigeria?
3. What is the trend of the Nigeria’s export over the years?
4. What efforts has the government made to promote Nigeria’s export?

RESEARCH HYPOTHESIS
From the research questions stated above, the core hypothesis to be investigated empirically are stated below:
H0 : That the real exchange rate does not affect Nigerian export.
H1 : That the real exchange rate affect Nigerian export.

RESEARCH METHODOLOGY
METHOD OF DATA COLLECTION

Secondary data shall be the basis for this study. The relevant data to be used would be sourced from the Central Bank of Nigeria’s statistical reports, annual reports and statement of accounts for the years under review. The data to be collected include: exchange rate, total export and implicit price deflator.
TECHNIQUE OF ANALYSIS
The empirical investigation of the effect of real exchange rate on Nigerian export would be conducted using the Ordinary Least Square (OLS) method. The hypothesis testing would be conducted at 5% level of significance. The method would be applied with the use of Statistical package for social science (SPSS).
MODELS SPECIFICATION
exp = b0 + b1 rexr
Where exp - Total export value
rexr - Real exchange rate
a0 and a1 - Parameters

SIGNIFICANCE OF THE STUDY
The significance of this study are as follows:
(i) It would present an empirical prove of the relationship between the real exchange rate and Nigeria export.
(ii) It would provide a yardstick to assess the exchange rate policies of Nigerian government.
(iii) The study would also contribute to knowledge by suggesting how exports could be exchange rate responsive.

SCOPE OF THE STUDY
The scope of this study covers Nigeria’s exchange rate policies over the years to date. The general overview of the profile of Nigeria’s export over the years is also discussed. The empirical investigation of the relationship between exchange rate and Nigeria’s export are restricted to the period between 1970 and 2010 due to data non-availability.

A major limitation of this study is that it focuses only on one determinant of export in the empirical investigate and that is the exchange rate. Several other factors were excluded. This is due to the focus of the study.

PLAN OF THE STUDY
Justice would be done to this study in chapters. The first chapter shall present the background of the subject matter justifying the need for the study. Chapter two will discuss a review of related literature concerning exchange rate and exportation. The research methodology, which would comprise model specification, sources of data, etc. shall be outlined in chapter three. Chapter four shall focus the presented and analysis of regression results. Other relevant data would also be discussed. Chapter five shall highlight the summary of the findings, present a conclusion and make recommendations.

REFERENCES

Chong, L. L. and Tan, H. B. (2008) “Exchange Rate Risk and Macroeconomic Fundamentals: Evidence from Four Neighbouring Southeast Asian Economies”. International Research Journal of Finance and Economics, Issue 16, pp. 88-95.
Engel, C. (2002) “Expenditure Switching and Exchange Policy”. NBER Working Paper, No. 9016.
Kandil, M. (2004) “Exchange rate fluctuations and economic activity in Developing countries: theory and evidence”. Journal of Economic Development, Vol. 29, No. 1, pp. 85-108.


 

PROJECT PROPERTIES
Project Status
Available
Number of Chapters
5
Number of Pages
68
Number of Words
10,527
Number of References
38
Project Level
B.Sc.
Price
N10,000 (Non-Negotiable)
Abstract, Regression Data and Results are included
How to Pay for this Project . . . .CLICK HERE

Keywords: exchange rate, real exchange rate, exchange risk, exchange rate fluctuations, international trade, export,

 

 

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