The Persistent Depreciation Of Naira (Causes And Possible Solution)

The Persistent Depreciation Of Naira (Causes And Possible Solution)

Chapter One

Preface

During the pre – Babangida administration times, the Nigerian currency was above the bone and at par with the pound, but now, the naira seems to be tumbling down the ocean. swapping for# 44 to the United States bone and# 120 to the pound sterling in the resemblant request as at October 1994 and despite the sanctioned rate for the pound sterling at 336 to one bone and# 68 to one pound in the sanctioned request. The question is how did we get to this present stage? What happed between 1995 and now?

When General Ibrahim Babangida mounted the seat, naira was overrated, especially as bills from crude – oil painting – Nigerian main foreign exchange earner had been decline over the times. So some thing was to be done about the naira. Government manufacturers and other observers came into a agreement that the naira exchange rate should be more realistic.

On the other hand, lawyers of devaluation had a relief on 26th September, 1986 when government introduced the alternate league foreign exchange request( SFEM) in line with the ideal of SAP. As explained by victor odozi, the CBN director of foreign currency operations “ the move was to enable education I the pressure on balance of payment ”.

Background Of The Study

Naira has lost its value? Cried a house woman who went to the request with some bottomless of naira and came home with many particulars in her handbasket and had no balance from the plutocrat she went to request with.

moment, nothing wants to use naira as medium of exchange, no body wants to counts his wealth in naira.

Some ministers in the civil capital home admit their hires I bones . In same tone, numerous Nigerian, if given the occasion would n’t want to be paid with naira yet there’s this obligation to every Nigerian to serve and love his father’s land. Indeed some of the so – called fathers have no respect for the land. Now the fact is that their children will come up hereafter and would want to be paid with bone . Naira, which is their father’s land currency keep going down.

Hard currency is the order of the day. Every Nigerian want to fly to America or Europe in pursuit of hard currency. To them naira has lost its value and it seems to be a simple verity because what naira was suitable to buy in 10 times ago has dropped to a great range if compare to what it can buy moment.

Naira, of a verity has lest its value and it’s constantly going down hence, my interest in this design.

Statement Of Problem

This study embraces or covers the area of persisted deprecation of naira in Nigerian.

For Nigerian, utmost of them have been living in surprise of thunderbolt and the painful effect of a sledge hammer blew, stipend have been condemning and affectation adding in hops and bounds. Eating good food has come a tough task while financing other intermittent design like children’s academy freights, sanitarium bills, appareletc. effects that people should comfortably do without getting worries has come delicate task.

These problem enumerated over have ruinous impact on the frugality in general as it pertains to the naira exchange rate this study will go a long way in chancing their causes and give possible continuing result.

Purpose Of The Study

Some of the major functions of plutocrat are, it serves as a medium of exchange, services as store of value and serves as a unit of account. moment nothing wants to use the naira as a medium of exchange, nothing wants to count his wealth in naira, and nothing wants to store it( naira) because of fear of lost of value as a result of its patient deprecation. It’s also proven fact that naira is shrinking of its value as the substantiation is in the fast and steady increase in the price of goods and services.

This study is designed to find the extent of the part played by( FEM) on the general and steady deprecation of the nation’s currency with its associated increase in the price of goods and services in order to find some lasting possible result to them. The exploration study will also expose the causes of this patient deprecation of naira and advice on the colorful avenues through which they can be soothed.

Significance Of Th Study

A country’s worth is dependent on it’s currency because the transnational worth of a country is measured by the performance of its currency in the foreign exchange request. This shows that the currency of a nation is its symbol of personality.

The value of a country’s currency can be traced from the GNP of its frugality. In other words, a country’s currency is its symbol of strength. The beginning strength in the currency is the gross public product which include husbandry mining, manufacturingetc. the sum aggregate of what this country product and hold come out to show in a strong currency. therefore a sound operation of the Nigerian foreign exchange request( FEM) will induce a dependable and stable naira rate of exchange that will encourage manufacturers and agronomist to invest and will in turn leads to profitable development and growth and inversely brings about a strong currency. It’s a known fact, that a country runs the threat of balance of payments unless the policy frame and operation of its ’ scarce coffers as regard foreign currency other wise known as foreign exchange.

Description Of Terms

Fem) foreign exchange request – this is a request where bank are allowed to reference their foreign exchange from any source and vend to and stoner at request determined rates.

G.D.P). gross domestic product – this is the total value of the goods and service produced in a country in a time plus the net income from abroad and it’s measured in financial term.

Letter of credit – this is a guarantee that foreign importers would get their plutocrat from the importer though the importers bank pressman abroad.

Forex simply means “ foreign exchange ”.