Exchange Rate Fluctuation In Nigeria

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CHAPTER ONE INTRODUCTION 1.1 Background of the study Today’s globalised world is a world of interdependence, self dependence even when desired is difficult to achieve; some countries in the past have adopted autarkical policies to try to live in isolation alas, measures like that are difficult to achieve due to variations in endowment placed on countries by Mother Nature, they could not provide all their needs, in fact, they ended up with welfare losses (e.g. Spain under Franco). Also, it is as a result of the direct and indirect linkage between assets and/or goods market (Umar and Soliu, 2009). This has made countries to realize that they cannot be economically rara-avis among their peers, interdependence has become a natural order for a…show more content…
In spite of the fact that Nigeria embarked on the devaluation of the naira and adopted the Structural Adjustment Program (SAP) in 1986 the goal was not realised. The failure to realise this goal subjected the Nigerian manufacturing as well as other sectors to the challenges of a constantly fluctuating exchange rate. A fluctuating exchange rate may not augur well with a country’s growth; manufacturers tend to postpone job creation due to the uncertainty brought about by the volatility of exchange rate. It is argued that although this concept concerns investment projects, hiring workers represents an investment in the sense that there are high costs to reversing this decision, particularly if dismissal regulation is strict. Studies have shown that the volatility of exchange rate has impact on a country’s employment level, as stated by Oladipupo & Onotaniyohuwo (2011), 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…show more content…
With unemployment at historically high levels in many countries, there has never been a greater need to put employment generation at the centre of economic and social policies (Oloni, 2013). Reducing unemployment still remains elusive for the Nigerian economy. Over the years, employment has been falling. The trend of unemployment in Nigeria has shown that its rate is still high as in the 1980s. According to the National Bureau of Statistics, unemployment rate declined in response to the various measures put in place to 5.3 percent in 1981 from the height of 6.4 percent in 1980. It however, increased to 3.4 in 1996 and slightly decreased to 3.2 in 1997 and 1998 but peaked to 6.4 percent in 2005. Unemployment in the first quarter of 2006 was 13.6 percent while the corresponding rate in 2007 was 14.6 percent, this figure increased to 19.1 percent in 2010 and the CBN 2013 annual report put unemployment at 23.9 percent in 2011. The erratic movement in the rate of unemployment in the country is not unconnected with the various short-run policies put in place to curb unemployment from time to
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