EFFECT OF EXCHANGE RATE VARIATION ON SOME SELECTED NIGERIAN AGRICULTURAL EXPORT COMMODITIES (1986-2002)
EFFECT OF EXCHANGE RATE VARIATION ON SOME SELECTED NIGERIAN AGRICULTURAL EXPORT COMMODITIES (1986-2002)
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Date
2006-09
Authors
AKILU, MUSA KUTA
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Abstract
There has been controversy among economists on
whether or not exchange rate variability since the breakdown
of the fixed exchange rate has had a negative effect on trade.
The most common assertion has been that the risk associated
with such exchange rate variation has reduced the level of
exports. This is countered by the argument that the use of
forward markets could ameliorate risk in the short to medium
term effect. Based on the aforementioned, there have been
several empirical studies on this issue. Despite this renewed
interest, however, the studies have concentrated on aggregated
trade flows and short run effect with little emphasis on
particular crops. In a similar vein, other factors like interest
rate and weather condition were not taken into consideration.
The focus of this study therefore, is to examine the effect of
exchange rate variation on some selected Nigerian agricultural
export commodities (i.e. Cocoa, Rubber, Cotton and Cocoa
butter).
In studying the effect of exchange rate variation, it is
important to look at the short, medium and long run effects
with particular emphasis on some crops. Therefore, in this
study, the long run effect of exchange rate variation on the
above mentioned Nigerian agricultural export commodities
were examined. The work was within the context of recent
econometric work most especially the pioneering model
discussed and applied by Nerlove (1958), and later Philip
viii
(1989, 1996) in which various measures of some selected
export crops production were regressed on suitable variables
for farmers’ expected commodity prices.
The results obtained suggest that exchange rates are
significant in determining Nigerian agricultural exports. Based
on this, the study recommends that the monetary authority
should adopt a mechanism that will lead to the stability of the
exchange rate. Erratic changes in the exchange rate have a
long term negative effect on production of agricultural exports
Description
A THESIS SUBMITTED TO THE POSTGRADUATE SCHOOL
IN
AHMADU BELLO UNIVERSITY,
ZARIA NIGERIA
IN PARTIAL FULFILMENT FOR THE AWARD OF MASTER
OF SCIENCE (M.SC) DEGREE IN ECONOMICS
DEPARTMENT OF ECONOMICS
AHMADU BELLO UNIVERSITY,
ZARIA NIGERIA.
SEPTEMBER, 2006
Keywords
EFFECT,, EXCHANGE RATE VARIATION,, SELECTED NIGERIAN AGRICULTURAL EXPORT,, COMMODITIES (1986-2002).