THE IMPACT OF MONETARY POLICY ON BALANCE OF PAYMENT IN NIGERIA


THE IMPACT OF MONETARY POLICY ON BALANCE OF PAYMENT IN NIGERIA  

ABSTRACT

This research work is centered on the impact of Monetary Policy on the Balance of Payment in Nigeria with the scope being from 1970 to 2006. The Central Bank of Nigeria (CBN) monetary policy instruments were discussed and the IS-LM framework of an open economy was also discussed including the CBN monetary policy guideline from 1970 to date which is the major channel through which the Central Bank’s activities are based on.  The ordinary least square estimator (OLS) was the analysis adopted and from the analysis and result obtained it indicates a negative impact of monetary policy on the balance of payment.  However, recommendations were made with respect to the CBN’s to adopt the Charles Soludo new exchange rate proposal 2007 and to shift emphasis to non-oil sectors of the economy in order to have a viable balance of payment. 

 

 CHAPTER ONE

INTRODUCTION

1.1 Background of the Study 

Various classifications have been made on Foreign Direct Investment (FDI). For instance, FDI has been described as investment made so as to acquire a lasting management interest (for example, 10 percent of voting stock) and at least 10 percent of equity shares in an enterprise operating in another country other than that of the investor’s country (Mwillima, 2003). Policy makers believe that FDI produces positive effects on host economies. Some of these benefits are in the form of externalities and the adoption of foreign technology (Alfaro et. al, 2006). According Alfaro et. al, 2006, multinational enterprises (MNEs) diffuse technology and management know-how to domestic firms. When FDI is undertaken in high risk areas or new industries, economic rents are created accruing to old technologies and additional management styles. It has been theorized by development economists that the integration of developing countries with the global economy increased sharply in the 1990s with changes in their economic policies and lowering of barriers to trade and investment. Most countries strive to attract foreign direct investment (FDI) because of its acknowledged advantages as a tool of economic development. Africa and Nigeria in particular joined the rest of the world in seeking FDI as evidenced by the formation of the New Partnership for Africa’s Development (NEPAD), which ahs the attraction of foreign investment to Africa as a major component. FDI is assumed to benefit a poor country like Nigeria, not only by supplementary domestic investment, but also in terms of employment creation, transfer of technology, increased domestic competition and other positive externalities (Ayanwale, 2007). 

Nigeria is one of the economies with great demand for goods and services and has attracted some FDI over the years. The amount of FDI inflow into Nigeria was estimated at US$2.23 billion in 2003 and the rose to US$5.31 billion in 2004 representing an increase of 138 percent. The figure rose again to US$9.92 billion or 87 percent increase in 2005. The figure, however, slightly declined to US$9.44 billion in 2010/11. The question that comes to mind is, does FDI actually contribute to economic growth in Nigeria? If FDI actually contributes to growth, then the sustainability of FDI is a worthwhile activity, and a way of achieving its sustainability is by identifying the factors contributing to its growth with a view to ensuring its enhancement. 

This is even more so as Africa and indeed Nigeria is undoubtedly facing an economic crisis situation featured by inadequate resources for long-term development, low capacity utilization, high level of unemployment, high poverty rate, high state of insecurity and Millennium Development Goals (MDGs) increasingly becoming difficult to achieve by 2020. 

In fact, one of the pillars on which the New Partnership for Africa’s Development (NEPAD) was launched was to increase available capital to US$64 billion through a combination of reforms, resource mobilization and a conducive environment for FDI (Funke and Nsouli, 2003). Nigeria as a country, given her natural resource base and large market size, qualifies to be a major recipient of FDI in Africa and indeed is one of the top three leading African countries that consistently received FDI in the past decade. Despite in the enormous amount of literature in this field of study, the empirical linkage between FDI and economic growth in Nigeria is yet unclear (Akinlo, 2004). The results of studies carried out on the linkage between FDI and economic growth in Nigeria are not unanimous in their submissions. A closer examination of these previous studies revealed that conscious effort was not made to take care of the fact that more than 60 percent of the FDI inflows into Nigeria is made into the extractive industry (oil). Hence this study actually modeled the influence of natural resources on Nigeria’s economic growth. There is also the problem of endogeneity, which has not been consciously tackled in previous studies in Nigeria. Again, most of the studies on FDI and growth are cross-country studies, however; FDI and growth debates are country specific. Earlier studies, for example, Otepola (2002), Oyejide (2005) etc, examine the impacts of FDI on growth and the channels through which it may be benefiting the economy. The concerned of this study, therefore, is to examine the long run impact of FDI on Nigeria’s economic growth, hence addressing the country’s specific dimension to the FDI growth debate.Foreign Direct Investment in Nigeria increased by 673.95 USD Million in the second quarter of 2016. Foreign Direct Investment in Nigeria averaged 1348.23 USD Million from 2007 until 2016, reaching an all-time high of 3084.90 USD Million in the fourth quarter of 2012 and a record low of 501.83 USD Million in the fourth quarter of 2015. 

 The study is different from previous studies, even as the effect of the major components of FDI on economic growth will be examined thereby offering the opportunity to assess the differential impact of oil FDI and non-oil FDI on Nigeria’s economic growth. 

1.2 Statement of the Problem   

In view of our weak economy structure, unemployment, budget deficit, weak currency, high taste for foreign goods and consistence unfavorable balance of trade, foreign direct investment, thus, became imperative for Nigeria to sustain her economy and remain relevant in the committee of nations. 

Unlike Ghana, South Africa, Benin Republic and some other African countries that enjoy and felt the impact of foreign direct investment steady, Nigeria is not, due to her socio-political challenges which in-turns affected her economic policies. Hence the need for this study is to ascertain the impact of FDI in the Nigerian economy and its obstacles. 

1.3 Objectives of the Study

The general objective of this is to assess the impact of FDI on the economic growth of Nigeria. Other specific objectives are: 

1. To ascertain the impact of FDI on sector of Nigerian economy. 

2. To determine the impact of FDI on non-oil sector in the economy. 

3. To suggest measures for facilitating the steady flow of FDI into the Nigerian economy. 

1.4 Research Questions

The research intends to ask the following questions: 

1. What is the impact of FDI on oil sector in the economy? 

2. What is the influence of FDI on non-oil sector in the economy?

3. What are the measures that could facilitate the steady flow of FDI into the Nigerian economy? 

1.5 Statement of Hypothesis 

Hypothesis is a tentative statement put forward to test the validity of a given phenomenon, (Osuala 2007). Thus, our hypotheses for this study are:

HO1: FDI does not have impact on Nigerian economy sector 

H11 :  FDI has an impact on the nigerian economy sector

HO2 : FDI does not have any significant impact on non-oil sector

H12: FDI has a significant impact on non oil sector

1.6 Significance of the Study

The study will broaden the knowledge of the researcher as well contribute to the existing literature on the subject matter by providing an expository analysis of the pattern of FDI in the Nigerian economy. This would enhance policy formulation in the economic policy and as well address our economic challenges in general. 

It would also be an invaluable tool for students, academic, institutions and individuals that want to know more about the link between FDI and economic growth. 

1.7    Scope of the study

The scope of the study is to assess the impact of FDI in the economic growth of Nigeria (1980-2015). Thus, the research is limited to the above stated title alone.

       The study will review useful literature and theoretical framework that are directly and indirectly related to the subject matter.

1.8  Structure of the study

.

THE IMPACT OF MONETARY POLICY ON BALANCE OF PAYMENT IN NIGERIA



TYPE IN YOUR TOPIC AND CLICK SEARCH.






RESEARCHWAP.ORG

Researchwap.org is an online repository for free project topics and research materials, articles and custom writing of research works. We’re an online resource centre that provides a vast database for students to access numerous research project topics and materials. Researchwap.org guides and assist Postgraduate, Undergraduate and Final Year Students with well researched and quality project topics, topic ideas, research guides and project materials. We’re reliable and trustworthy, and we really understand what is called “time factor”, that is why we’ve simplified the process so that students can get their research projects ready on time. Our platform provides more educational services, such as hiring a writer, research analysis, and software for computer science research and we also seriously adhere to a timely delivery.

TESTIMONIES FROM OUR CLIENTS


Please feel free to carefully review some written and captured responses from our satisfied clients.

  • "Exceptionally outstanding. Highly recommend for all who wish to have effective and excellent project defence. Easily Accessable, Affordable, Effective and effective."

    Debby Henry George, Massachusetts Institute of Technology (MIT), Cambridge, USA.
  • "I saw this website on facebook page and I did not even bother since I was in a hurry to complete my project. But I am totally amazed that when I visited the website and saw the topic I was looking for and I decided to give a try and now I have received it within an hour after ordering the material. Am grateful guys!"

    Hilary Yusuf, United States International University Africa, Nairobi, Kenya.
  • "Researchwap.org is a website I recommend to all student and researchers within and outside the country. The web owners are doing great job and I appreciate them for that. Once again, thank you very much "researchwap.org" and God bless you and your business! ."

    Debby Henry George, Massachusetts Institute of Technology (MIT), Cambridge, USA.
  • "Great User Experience, Nice flows and Superb functionalities.The app is indeed a great tech innovation for greasing the wheels of final year, research and other pedagogical related project works. A trial would definitely convince you."

    Lamilare Valentine, Kwame Nkrumah University, Kumasi, Ghana.
  • "I love what you guys are doing, your material guided me well through my research. Thank you for helping me achieve academic success."

    Sampson, University of Nigeria, Nsukka.
  • "researchwap.com is God-sent! I got good grades in my seminar and project with the help of your service, thank you soooooo much."

    Cynthia, Akwa Ibom State University .
  • "Sorry, it was in my spam folder all along, I should have looked it up properly first. Please keep up the good work, your team is quite commited. Am grateful...I will certainly refer my friends too."

    Elizabeth, Obafemi Awolowo University
  • "Am happy the defense went well, thanks to your articles. I may not be able to express how grateful I am for all your assistance, but on my honour, I owe you guys a good number of referrals. Thank you once again."

    Ali Olanrewaju, Lagos State University.
  • "My Dear Researchwap, initially I never believed one can actually do honest business transactions with Nigerians online until i stumbled into your website. You have broken a new legacy of record as far as am concerned. Keep up the good work!"

    Willie Ekereobong, University of Port Harcourt.
  • "WOW, SO IT'S TRUE??!! I can't believe I got this quality work for just 3k...I thought it was scam ooo. I wouldn't mind if it goes for over 5k, its worth it. Thank you!"

    Theressa, Igbinedion University.
  • "I did not see my project topic on your website so I decided to call your customer care number, the attention I got was epic! I got help from the beginning to the end of my project in just 3 days, they even taught me how to defend my project and I got a 'B' at the end. Thank you so much researchwap.com, infact, I owe my graduating well today to you guys...."

    Joseph, Abia state Polytechnic.
  • "My friend told me about ResearchWap website, I doubted her until I saw her receive her full project in less than 15 miniutes, I tried mine too and got it same, right now, am telling everyone in my school about researchwap.com, no one has to suffer any more writing their project. Thank you for making life easy for me and my fellow students... Keep up the good work"

    Christiana, Landmark University .
  • "I wish I knew you guys when I wrote my first degree project, it took so much time and effort then. Now, with just a click of a button, I got my complete project in less than 15 minutes. You guys are too amazing!."

    Musa, Federal University of Technology Minna
  • "I was scared at first when I saw your website but I decided to risk my last 3k and surprisingly I got my complete project in my email box instantly. This is so nice!!!."

    Ali Obafemi, Ibrahim Badamasi Babangida University, Niger State.
  • To contribute to our success story, send us a feedback or please kindly call 2348037664978.
    Then your comment and contact will be published here also with your consent.

    Thank you for choosing researchwap.com.