ABSTRACT
The research work was set out to appraise the Assessment
of the relationship between money supply and inflation in Nigeria, that is,
price of the domestic currency in terms of another currency. The objective of
this study is to examine the effect of exchange rate on inflation on the Nigerian
economy and also determine the relationship between exchange rate policy and
their effect on the Nigerian economy.
The study
adopted the use of econometric
statistical tools in estimating the relationship between inflation rate and
exchange rate in Nigerian economy. Regression was employed using multiple
regression analysis in obtaining the numerical estimates of the coefficients in
the model formulated. Data were collected from secondary source spanning from
1990 to 2009. The source of data is Central Bank of Nigeria (CBN). The result that
there is a negative relationship between inflation rate and exchange rate in
Nigeria with F = 6.536. Also, it was revealed that there is a positive
relationship between gross domestic product, inflation rate and exchange rate
in Nigeria with F = 10.327. Finally, the research found that there is a
positive relationship between gross domestic product, inflation rate, exchange
rate and money supply in Nigeria with F = 6.544. Based on the empirical
findings, the study suggest that The monetary authorities need to continuous
monitor the exchange rate to ensure that it is within a competitive level that
would ensure that simultaneous attainment of internal and external balance.
Inflation rate should be manage and kept within levels at which the external
sector remains competitive in the local economy.
TABLE
OF CONTENT
Title
Page i
Certification
ii
Dedication
iii
Acknowledgement
iv
Abstract v
Table
of contents vi
CHAPTER
ONE
INTRODUCTION
1.0 Background of Study 1
– 4
1.1 Problem Analysis 4
1.2 Objectives of The
Study 5
1.3 Research Questions 5
1.4 Statement of
Hypothesis 6
1.5 Significance of Study 6
1.6 Scope of Study 7
1.7 Definition of Terms /
Concepts 7
– 8
References 9
CHAPTER
TWO
LITERATURE
REVIEW AND THEORETICAL FRAMEWORK
2.0 Introduction 10
2.1 Exchange Rate Concept 10
– 14
2.2 Foreign Exchange
Policy And Management 14 – 17
2.3 Determinants of
Exchange Rates 17
2.3.1 Demand and Supply of Foreign Exchange 17– 18
2.3.2 Central Bank Intervention 18
2.3.3 Changes in Imports and Exports 18 – 19
2.3.4 Changes in Relatives Prices 19
2.3.5 Interest Rate 19
2.4 Types of Exchange
Rate Regimes 20
– 21
2.4.1 Advantages of Floating Exchange Rate 22
2.5 Theories of Exchange
Rate 23
– 26
2.6 Review of Nigeria’s
Exchange Rate 27
– 31
2.7 Historical Background
of The Foreign Exchange Market 32 – 33
2.7.1 Current Structure of
the Nigeria’ Foreign Exchange Market 34
2.7.2 Trends in the Foreign
Exchange Market 34 – 35
2.7.3 Analysis of the Trend
in Foreign exchange Inflows and Disbursement 35 - 40
2.8 Implication of
Exchange Rate Management of
an Economy 40
– 41
2.9 Major Challenges of
Foreign Exchange Management
in Nigeria 41
– 43
2.10 The way Forward 43
– 44
2.11 Exchange Rate Policy
in Nigeria 44
– 49
2.12 The Role of Central
Bank of Nigeria in Exchange Rate Management 49 – 51
2.12.1 CBN Initiatives in Managing the Exchange
Rate 51
– 52
2.13 Inflation 52
– 53
2.13.1 The Meaning of Inflation 53
– 54
2.14 Theories of Inflation 54
– 56
2.14.1 Keynesian Theories of Inflation 56
– 58
2.15 Causes of Inflation 59 - 61
2.16 Types of Inflation 61
– 62
2.17 Effects of Inflation 63
– 64
2.17.2 Factors Affecting Supply 64
- 65
2.18 Control of Inflation 65
– 67
2.19 Review of Exchange
Rate and Inflation 67
– 69
References 70
CHAPTER THREE
RESEARCH METHODOLOGY
3.0 Introduction 71
3.1 Research Design 71 – 72
3.2 Re-statement of
hypothesis 72
3.3 Data Analysis Method 73
3.4 Model Specification 73
– 76
3.5 Sources of Data 76
3.6 Limitation of Data 76
References 77
CHAPTER
FOUR
DATA ANALYSIS AND INTERPRETATION
4.0 Introduction 78
4.1 The Empirical Result s 78
– 80
CHAPTER
FIVE
SUMMARY,
CONCLUSION AND RECOMMENDATIONS
5.0 Introduction 88
– 89
5.1 Summary of Findings 89 – 90
5.2 Recommendations 90-
91
5.3 Conclusion 92
Bibliography 93
– 96
Appendix