The Depreciation Of Naira On Nigerian Economy: Causes, Effects And Remedy

The Depreciation Of Naira On Nigerian Economy: Causes, Effects And Remedy

Abstract

The study delved the effect of deprecation of naira on Nigeria frugality, causes effect and remedy using time series analysis and periodic data from 1990- 2009. The retrogression analysis model were used to capture both the long- run and short- run dynamics of the variables in the model. The empirical results indicate that deprecation of naira have significant effect on profitable growth. There also exists a unique long- run relationship between profitable growth and its determinants, including exchange rate, affectation rate and interest rate. It’s applicable that Nigeria as a nation should critically look at her profitable programs and exchange rate administrations to check the insecurity in the naira exchange rate as well as boost her external balance.

Chapter One

Background Of The Study

Preface

In economics, deprecation is the drop in the profitable value of the capital stock of affirm, nation or other reality, either through physical deprecation, fustiness or changes in the demand for the services of the capital. deprecation refers to two veritably different but affiliated generalities which are decline means to ages in which the means are used.

Soludo said the drop in the value of the original currency was a government- supported devaluation in the face of falling oil painting prices. oil painting profit account for 90 percent of Nigerian’s import profit. oil painting has drooped further than 60 percent from a time ago. The naira has dropped further than 23 percent since November when the central bank limiting the force of bones to defend its foreign exchange reserves.

The central bank’s deprecation policy has been blamed by some judges who say it could have grave counteraccusations for import­-dependent Nigerian frugality. Mike Obadan( 2005); stated that” each time the naira depreciates in relation to the bone and pound sterling, it adds to the inflationary problems in the frugality”, Obadan( 2004); also stated that the reason for it’s that the product structure of the Nigerian frugality is heavily dependent on the importation of inputs in the form of outfit, transport for product and indeed raw material. thus, each time the naira depreciates it makes the cost of importing all these inputs veritably high and the cost of product jacks up and the directors reflect the advanced costs in advanced prices”.

The naira dropped to a record low of 153 perU.S. bone Monday, from 146 naira on January 9. Central Bank Governor Soludo says the government is committed to a stable, request- determined exchange rate. Judges prognosticate a farther decaying of the naira in the face of widening demand for foreign currency and enterprise about the health of the Nigerian frugality.

The future of the Nigerian frugality looks precarious, indeed the country’s frugality is under severe trouble as crude petroleum, as the dependence of the frugality since the early 1970s has constantly headed south from last November. Just as utmost experts have noted that forces that rained naira’s value corrosion over this ages are largely visible in the crash of the nation main foreign exchange earner which has fallen from an each- time high of about$ 140 in July, 2008 to less than$ 40 per barrel early January, 2009. What maybe is making the script veritably disturbing is the fact that President UmarYar’Adua had formerly rested his 2009 Appropriate Act on an exchange rate of N 117-8 per bone , on the understanding that crude oil painting earnings would not fall below the$ 45 standard.

But moment, several effects feel to. have fallen piecemeal and the biggest challenge for the Central Bank of Nigeria, which had before this time assured Nigerian’s that the global profitable meltdown would not affect Nigerian and her frugality, remains how to save the naira from nose- diving further.

Frugality experts have since argued that government’s concurrence to the deprecation of naira at this time may not be unconnected with its attempt to incompletely finance the budget with proceeds from the request, since prospects of doing so through oil painting profit is fast fading down with the crash in the price 0’£ crude petroleum at the London spot request.

Statement Of The Problem

The deprecation of the naira has generated enough heat to the country that the frugality of the country is now shaky or rather in shambles. The problem of this disquisition is to identify the major causes of the devaluation of the naira with a view to proffering results to appreciate the naira using Lagos State as a case study.

It’s a veritably serious matter at this point in time when our frugality is deregulated that the naira is downgrading further. Every commodity in the country moment is veritably precious as regard the deprecation of naira. It’s like too important plutocrat are pursuing many particulars thereby sky- soaring the prices. thus, a reduction in the degree ofover-valuation of the naira was to be brought about in an trouble to borrow a realistic exchange rate policy.

Aim And Objects Of The Study

The end of this study is to examine” The deprecation of Naira on Nigerian Frugality Causes, goods and Remedy( A Case Study of Lagos State}”. The following are the specific objects of the study

To examine the impact of deprecation of naira on Nigerian frugality.

ii. To examine the causes of deprecation of naira on Nigerian frugality.

iii. To examine the goods of deprecation of naira on Nigerian frugality.

iv. Eventually, to examine the remedy to profitable growth of Nigeria.

Exploration Questions

thus, the statement of problems is stated below by chancing answers to the following questions

a. What are the impacts of deprecation of naira to Nigeria frugality?

b. What are the causes of deprecation of naira?

c. What are the results to profitable growth of Nigeria?

d. What are the blights of deprecation of naira to frugality of Nigeria?

Significance Of The Study

The tendency is that through this study the millions will be suitable to understand the real nature of the frugality, hence the ways to forestall farther circumstance.

If one could critically read this design work he or she’ll find out that numerous questions on how to revitalize the frugality were answered. This diving of some hard nuts problems thereby will help to arrest the problem of the deprecation of the naira to Nigerian frugality, the causes and the remedy and also suggestions entered from individualities and civil society as a whole.

It would encourage individualities on how to depend solely on locally produced goods and uses of original raw accoutrements and it also helps government to insure internal and external balance for the frugality, but there’s palpable fear among Nigerians as to how far the policy can go in stabilizing the frugality in the face of the current profitable meltdown.

Exploration Thesis

Grounded on the exploration problems and objects of the study, the following suppositions have been formulated

thesis 1

H0 There’s no significant relationship between deprecation of naira and profitable growth.

HA There’s significant relationship between deprecation of naira and profitable growth.

thesis 2

Ho There’s no significant relationship between deprecation of naira and exchange rate.

HA There’s significant relationship between deprecation of naira and exchange rate.

thesis 3

Ho There’s no significant relationship between deprecation of naira and affectation.

HA There’s significant relationship between deprecation of naira and affectation.

Exploration Methodology

In order to achieve the ideal of methodology for this exploration, data for this purpose will be substantially secondary data from colorful sources will be made use of. The source of similar secondary data will include the entourages Central Bank of Nigeria( CBN) National Bureau for Statistics, Nigeria National Petroleum Cooperation Statistics Bulletin, Applicable Journal, Articles handbooks and other applicable material to the pursuit of the ideal of this study.

logical fashion

Retrogression analysis ways will be employed using the ordinary least square system. The variables to be used are stated below

Y = F( DN, INT, ER0

Where Y = Gross Domestic Product( GDP)

F = Function

DN = deprecation of Naira

INT = Interest Rate

ER = Exchange Rate

Y = βo β1 β2 X2 β2X1 U

Where Y = Dependent Variables

βo = Constant Term

β1, β2 = Measure of Independent Variables

X1, X2 = Independent or explicatory Variable

U = Error Term( Stochastic Variable)

Compass Of The Study

This study assessed the deprecation of Naira on Nigerian frugality, causes, goods and remedy( A Case Study of Lagos State between 1994- 2009).

Limitation Of The Study

In the course of this exploration work, some problems were encouraged. These problems are principally of time, finance and lack of cooperation among group’s members. examination of all, the exploration work was carried out successfully.

Description Of Terms

Affectation Means patient change in prices of goods and services.

Frugality plutocrat, wealth, goods and other coffers which a community or society and existent has.

Naira Unit of Nigerian currency.

Deprecation Lose in value or standard.

Association OF THE STUDY

Chapter one consists of the introductory chapter, which gives us an sapience into the preface, statement of problem, exploration question, aims and objects, significance of the study thesis, methodology, compass of the study, limitation of the study, delineations of terms, plan of the study and the references. Chapter two also focuses on the review of ferocious, which is rent to review former workshop that are related to the content under study. Chapter three consists of structural composition of the study. Chapter four also consists of exploration methodology, data analysis, interpretation and donation of the results while chapter five consists of the summary, findings, recommendations, conclusion, also followed by the references.