THE IMPACT OF EXCHANGE RATE VARIATIONS ON AGGREGATE DEMANDS IN NIGERIA (1979 – 2008)

ABSTRACT

The study is a critical Evaluation of the impact of Exchange rate variation on Aggregate Demand in Nigeria. These study made use of the ordinary least square (OLS) regression technique in analyzing the impact of Exchange Rate Variation On Aggregate Demand in Nigeria. There are also other variables that determine the impact of Exchange Rate Variations on Aggregate Demand in Nigeria: 1979 -2008. Findings from the paper show that  all the variables included in the models contributes in explaining the role of exchange rate on aggregate demand in Nigeria. These massive contributions of these variables may strongly depend on the circumstances in Nigerian economic environment. The starting point in reclaiming and re-inventing project in Nigeria is to squarely admit that oil and the manner we have designed to utilize it have constituted a stumbling block in Nigeria’s progress. Accordingly, there is need to pay specific attention to the contest of action and the production relations in the various sections of the economy.

CHAPTER ONE

INTROUDCTION

1.1BACKGROUND OF THE STUDY

All over the world, policy makers have always been on the move to ensure that there is sustainable growth rate in the economies of the world.  As a result, a lot of economic factors have been brought to the fore to examine and investigate how they could be relevant in the achievement of their economic objectives.

In Nigeria, several government regimes have experimented on many economic factors (macroeconomic aggregates) to determine how economic growth could both be attained and sustained. Prior to the introduction of the structural adjustment programme (SAP) of 1986, that had exchange rate devaluation as  one of its policy measures, the economy of Nigeria ‘headed for the rocks’ and was highly distressed. This led to a decline in the country’s external reserves at a disturbing rate. The country’s debt stool was accumulated to an unfavorable level among others. In spite of this the naira exchange rate was overvalued leading to dexterous effect on the economy. It was opinioned  that exchange rate policy embarked upon by the Nigeria government, in August 1986,was to eliminate the observed distortions in the economy and bring about a sustainable growth in the economy.

Since exchange influences the interaction of household, business firms, private financial institutions and the central bank, it implies that it could also affect aggregate demand in Nigeria. Knowing fully well that exchange rate is a real phenomenon; variations in relative prices affect both economic performance and aggregate demand. Hence, exchange rate is a relative price between domestic currency. For instance, if the exchange rate between British Pounds sterling and Nigeria Naira is N250 per Pound, it follows that one pound exchange for N250 in the world foreign (currency) exchange market.

 THE IMPACT OF EXCHANGE RATE VARIATIONS ON AGGREGATE DEMANDS IN NIGERIA (1979 – 2008) (ECONOMICS PROJECT TOPICS AND MATERIALS)