CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF STUDY
Over the years Nigeria has participated actively in stock exchange; the continuous growth in terms of international trading as regards stock exchange has being on the increase. However the continuous movement of goods and services across most of the national frontiers of business in one direction tend to involve the movement of the negative movement of foreign exchange; according to Nzotta, 2004, stated that the continuous negative trends brought about the need for exchange rate between various currencies of two or more trading colleagues or partners in business to settle indebtedness coming from trade that link them.
The word exchange rate could mean the price at which a currency is regulated and monitored in the market, although it varies from time to time. There are some basic factors that are responsible for the variation in price rate; the major factor here is the government policy, the communication between demand and supply. These factors could also be as a result of the activities of the Nigerian stock exchange (NSE), it could be the international trade oil; its glut and recession.
As at the year 1970s and the 1980s, some of the agricultural products in Nigeria like cocoa, palm oil, groundnut and rubber have significantly contributed to the foreign incomes in Nigeria.
The Nigerian foreign exchange has had some fluctuation and inadequacies, this fluctuation led to the introduction of the second-tier foreign exchange market (SFEM) in Nigeria as at the year 1986.
SFEM as market in Nigeria was established by law for ideal buying and selling of good foreign exchange at the rate that is determined by the market.
Adekanye (2010) in his works stated that the main objective of the SFEM was mainly to evolve a realistic market-oriented exchange rate for the Nigerian currency (naira) in order to reduce the demand of for foreign exchange to the available supply, he also stated that the objectives aimed at reducing the pressure on the balance of payment so as to stop or minimize the continuous accumulation of trade debts, reduce import rate, and to promote export rate in order to make way for a sustainable growth and development. To this regard to researcher wishes to find out the major causes of exchange fluctuation in the Nigeria stock market.
1.2 STATEMENT OF PROBLEM
The Nigeria stock market has had so many declines due to the negative relationship between the demand and supply, and accumulation of trade debt. So many factors are responsible for the exchange rate fluctuation; chief amongst them is the issue of naira devaluation. The devaluation of naira has negatively affected the stock prices and stock sales. This has led to the poor performance of Nigerian stock and has greatly reduced the level of foreign direct investment into the country which should have improved the economy of Nigeria.
1.3. AIMS AND OBJECTIVES OF THE STUDY
The major aim of this study is the study the impact of exchange rate fluctuations on the Nigeria stock exchange. Other specific objectives of the study include;
1.4.RESEARCH QUESTIONS
The following are the major research questions that would guide this study;
1.5. RESEARCH HYPOTHESES
H0: There is no significant impact of exchange rate fluctuation on the Nigeria stock exchange (NSE)
H1: There is a significant impact of exchange rate fluctuation on the Nigeria stock exchange(NSE)
1.6. SIGNIFICANCE OF THE STUDY
This study would be immense importance to government and economic policy makers in drafting in policies that would reduce the level of exchange rate fluctuations while the same time consolidating the Nigerian stock exchange so as to enhance economic development. The study would also benefit students, researchers and scholars who are interested in engaging in further research or study on this subject matter.
1.7. SCOPE OF THE STUDY
The study is restricted to the impact of exchange rate fluctuations on the Nigeria stock exchange.
1.8. LIMITATION OF THE STUDY
Financial constraint- Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).
Time constraint- The researcher will simultaneously engage in this study with other academic work. This consequently will cut down on the time devoted for the research work.
1.9. DEFINITION OF TERMS
STOCK:A stock is a general term used to describe the ownership certificates of any company. A share, on the other hand, refers to the stock certificate of a particular company. Holding a particular company's share makes you a shareholder.
NSE:Nigerian stock exchange
FLUCTUATE:can simply be referred to as the regular rise and fall in number or amount.
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