THE EFFECT OF THE CURRENT EXCHANGE RATE POLICY ON THE MANUFACTURING A CASE STUDY OF ANAMMCO MANUFACTURING COMPANY

THE EFFECT OF THE CURRENT EXCHANGE RATE POLICY ON THE MANUFACTURING A CASE STUDY OF ANAMMCO MANUFACTURING COMPANY

ABSTRACT

This work is intended to critically examine the effect of the current exchange rate policy on the manufacturing sector. Anammco Manufacturing Company was used as the case study.  The exchange rate regime is a very crucial monetary tool for shaping the thrust and direction of a national’s economy. In 1995 a dual exchange rate policy was introduced and this policy was still maintained in 1996-2003.

Review of related literature highlighted the evolution of exchange rate and the various mechanisms and institutions that have come to be referred to as part of the international monetary system (IMS).  It also pointed to the fact that various exchange control measure had been used before the SAP. And how the current exchange rate policy have affected the manufacturing sector.

The research method adopted was the survey method and the sample company was Anammco, Manufacturing Company.

Questionnaire was used to collect data while percentages were calculated for the responses given to the questionnaire. The study found out that the current exchange rate policy was an important factor in increasing the unit cost of production.  It also discovered that it encouraged local sourcing of hitherto imported inputs and findings alternative inputs locally and that low capacity utilisation during this period of the current exchange rate was caused by the inadequacy of supply of forex to the manufacturing sector.

Finally, it recommended that government should correct the perceived deficiencies of the programme, adequate incentives should be provided to the local manufacturing firms that are engaged in the production of import- substitutes of industrial inputs. It also recommended that banks and other financial institutions should be encouraged to give more financial assistance to the manufacturing sector, and the publics, and private sector should step up financial allocation to research and development activities.

CHAPTER ONE

1.         INTRODUCTION

1.1       GENERAL BACKGROUND TO THE SUBJECT MATTER:

Exchange rate is the price of domestic currency in terms of foreign currency. There exist various forms of exchange rate; i.e those determined by the market forces of demand and supply.

No matter the type of exchange rate adopted by a country, it has an effect on the manufacturing sector of that particular country and in this research an attempt is made to examine the current exchange rate policies adopted by the Nigeria  government and its effect on the manufacturing sector, this effects may be positive or Negative.

Since independence, the Nigerian government has been engaged in activities to boast the performance of its manufacturing sector because the manufacturing sector it inherited from the colonialist government of great Britain was virtually non existent. This was because the colonialist encouraged product of primary products such as cocoa, rubber, groundnut, palm kernel and other cash crops for export to their mother country and for use as imports in their industries instead of using them in  Nigeria’s industries and the finished products are exported back to Nigeria for sale to thee citizens.

Foreign exchange is an important aspect of the development of the manufacturing sector.  This is because foreign exchange is needed to source for import from abroad, such import take the source for import from abroad, such imports take the from of capital goods (like heavy machinery and equipment) and raw materials that are needed in order for production of manufactured goods to commence with this in mind the government introduced sectorial location whereby foreign exchange would be accessible to different sectors of the economy especially the manufacturing at rate at which the cost of production would not be too high as to push prices of finished goods above the reach of average citizens. The manufacturers were encouraged to produce goods above the reach of average citizens. The manufactures were encouraged to produce goods especially those that could be exported in order for them to source their own foreign exchange.

THE EFFECT OF THE CURRENT EXCHANGE RATE POLICY ON THE MANUFACTURING A CASE STUDY OF ANAMMCO MANUFACTURING COMPANY