The Influence Of The Reduction In Oil Price And The Devaluation Of Naira On The Nigeria Economic Growth
Chapter One
Preface
Background To The Study
Nigeria, the most vibrant black nation positioned in western Africa is popularly known for her dominant source of profit; Crude oil painting. therefore, Nigeria came decreasingly dependent on oil painting profit, which in the last many decades has endured fall in its price per barrel and product. With oil painting profit as the main stay of the Nigerian frugality, variation in oil painting prices are surely of high interest to economists in order to prognosticate the goods of a drastic change- drop in oil painting price, on the Nigerian frugality as a whole. oil painting fall can be described as a unforeseen, unanticipated reduction in oil painting price or product which has inescapably affected the value of naira( Ozumba, 2009). This study, still, focuses on the influence of the reduction in oil painting price and the devaluation of naira on profitable growth in Nigeria.
The naira devaluation will lead to a chain of responses, numerous of which may not have the applicable results, because the Nigerian frugality substantially depends on oil painting. The devaluated naira will drive import of original products, which don’t live in the needed volume for now, but will produce an fresh burden on the crowd, the reason being that the cost of consumables, across the board, will escalate. As the direct consequence of the rise in the base lending rate the cost of loanable finances would have risen. In similar case the development will be ineffective, and against the thrust of the government’s touted plan to produce jobs( Cooper, 1999).
There’s the anticipation that the government’s profit, in terms of naira will move over, because of the wide exchange rate difference between the bone and the original currency. But the point must be made that this anticipation may be unrealisable of two variables – the falling oil painting prices and lower crude product total. In the advanced nation’s when currencies are devaluated, it’s to encourage exports, because the prices of original products serve as an incitement and a toast for foreign buyers. In the process, they earn foreign exchange, increase product and produce fresh jobs. Unfortunately, that isn’t the position with Nigeria.
Devaluation is a reduction in the value of a currency with respect to those goods, services or other financial units with which that currency can be changed. It also means sanctioned lowering of the value of a country’s currency within a fixed exchange rate system, by which the financial authority formally sets a new fixed rate with respect to a foreign reference currency( Dornbusch et al, 2011). Devaluation is a financial policy tool of countries that have a fixed exchange rate orsemi-fixed exchange rate. This description is by no means total of the term. A conception which is nearly related to devaluation and which is occasionally confused with devaluation of a currency is deprecation. deprecation and devaluation are occasionally inaptly used interchangeably although they both relate to values in terms of other currencies. More lately, the Monetary Policy Committee( MPC) of the Central Bank of Nigeria( CBN) took a decision to cheapen the Naira to N198 from N160 to the American Dollar.
still due to the ongoing global fall in oil painting price, crude oil painting prices in the transnational request fell significantly from the each- time high at$ 141 per barrel by the end of July2008 to$ 45 per barrel by the end of January 2009. This has forced the civil government to review the budget bench mark down ward from$ 65 to$ 45. This will reduced government expenditure and in turn affect the vittles of goods and services in the time 2015. But considering that a soaring oil painting price in the last sixteen times made no perceptible impact on the frugality, some suppose that a fall in the price of crude oil painting could be a blessing in disguise to Nigeria. Government would be forced to look inwards and be more judicious in spending. As we operate a bubble frugality, which can not repel pressure.
Statement Of The Problem
Crude oil painting accounts for about 95 of Nigeria’s foreign exchange bills. The hardest hit has been countries whose husbandry depend largely on oil painting for perceptible chance of their foreign exchange earnings. The International Monetary Fund(I.M.F.) allows countries to cheapen their currency in order to correct” abecedarian disequilibrium” in their balance of payments to stimulate profitable growth. Great Britain devaluated her currency in 1967. TheU.S. devaluated in 1973 and France did same in 1969 followed by her 14 Francophone African countries. Devaluation therefore isn’t a new conception and shouldn’t be seen as an fantastic and terrible act; it’s a admissible system of fixing the exchange value of a currency in light of new force and demand reality. While downgrading a currency due to fall in oil painting price can feel like an seductive option, it can have negative consequences. By making significances more precious, it protects domestic diligence who may also come less effective without the pressure of competition. Advanced exports relative to significances can also increase aggregate demand, which can lead to affectation. Whether deliberate or as a result of fall in oil painting price, currency devaluation reduces the price of a country’s domestic affair. This has the implicit to profit the profitable growth by helping to increase its import volume.
Objects Of The Study
The following are the objects of this study
1. To examine the influence of oil painting price reduction on Nigeria profitable growth.
2. To examine the influence of devaluation of naira on Nigeria profitable growth.
3. To identify factors that can stimulate profitable growth in Nigeria.
Exploration Questions
1. What’s the influence of oil painting price reduction on Nigeria profitable growth?
2. What’s the influence of devaluation of naira on Nigeria profitable growth?
3. What are the factors that can stimulate profitable growth in Nigeria?
Significance Of The Study
The following are the significance of this study
1. The outgrowth of this study will educate the general public and the stakeholders in the fiscal sector the influence of fall on oil painting price and deprecation of naira on the Nigeria profitable growth.
2. The findings from this study will be a useful companion for the government of Nigeria and policy makers on the relationship between the oil painting price fall, deprecation of naira and profitable growth with the view of icing their effective operation.
3. This exploration will also serve as a resource base to other scholars and experimenters interested in carrying out further exploration in this field latterly, if applied will go to an extent to give new explanation to the content
Compass/ Limitations Of The Study
This study will cover the issue of reduction in oil painting price, deprecation of naira and profitable development of Nigeria.
Limitation Of Study
fiscal constraint-inadequate fund tends to stymie the effectiveness of the experimenter in sourcing for the applicable accoutrements , literature or information and in the process of data collection( internet, questionnaire and interview).
Time constraint- The experimenter will contemporaneously engage in this study with other academic work. This accordingly will cut down on the time devoted for the exploration work.
References
Cooper,R.N.( 1999). International Finance. Penguin Publishers.pp. 25 – 37.
Dornbusch, Rüdiger; Fisher, Stanley; Startz, Richard( 2011). Macroeconomics( Eleventhed.). New York McGraw- Hill/ Irwin. ISBN 978-0-07-337592-2.
Journal of Economic and Sustainable Development ISSN 2222 – 1700( Paper) ISSN,Vol. 3,No. 2, 2002. penetrated onwww.iiste.org
OzumbaC.C.” Devaluation and Balance of payments in ECOWAS countries A study of Nigeria’, Exchange Rate Policy” Central Bank of Nigeria, Economic and Final Review Vol16,No.2008
www.sunnewsonline.com penetrated on December 8, 2014
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