DEPARTMENT OF BANKING AND FINANCE, THE MANAGEMENT OF FOREIGN EXCHANGE RISK AND CORPORATE PERFORMANCE IN NIGERIAN (A CASE STUDY OF UNITED BANK FOR AFRICA PLC)
THE MANAGEMENT OF FOREIGN
EXCHANGE RISK AND CORPORATE PERFORMANCE IN NIGERIAN
(A
CASE STUDY OF UNITED BANK FOR AFRICA PLC)
TABLE CONTENT
Title page i
Certification ii
Dedication iii
Acknowledgement iv
- vi
Table of Content vii
- x
1.1 Background of the study 1 - 5
1.2 Statement of the Problem 5 - 6
1.3 Justification of the study 6
- 7
1.4 Objective of the study 8
1.5 Research Questions 8 - 9
1.6 Statement of Hypothesis 9 - 10
1.7 Scope and Limitation of the study 10 - 11
1.8 Organization of the Study 11
- 12
1.9 Definition Term 12 -
13
CHAPTER
TWO: LITERATURE REVIEW
2.1 Introduction 14
- 15
2.2 The foreign Exchange Rate 15 - 16
2.3 The Foreign Exchange Rate Risk 16 - 18
2.4 Foreign Exchange Risk Management 18 - 20
2.5 Foreign Exchange Market 20 - 24
2.6 National Monetary Policies and Exchange Rate 24 - 28
2.7 Exchange Rate Determination 29 - 33
2.8 The Nigeria Economy an Over view 33 - 37
2.9 Government Policies on Foreign Exchange 38
2.10 Historical Briefing of United Bank for
Africa Plc 40 - 43
CHAPTER
THREE: RESEARCH METHODOLOGY
3.1 Research Design 44
3.2 Type and Sources of Data 44 - 45
3.3 Sample Size of the Study 45
3.4 Sampling Techniques 45 - 46
3.5 Instrumentation 46
36 Method of Data Analysis 47 - 48
CHAPTER
FOUR: DATA PRESENTATION, ANALYSIS AND
INTERPRETATION
4. 0 Introduction 49
4.1 Data Analysis 49 - 55
4.2 Restatement of Research Hypothesis 55
4.3 Testing of Research Hypothesis 55 - 62
CHAPTER
FIVE: SUMMARY, CONCLUSION AND RECOMMENDATIONS.
5.1 Summary of the Findings 63
- 67
5.2 Conclusion 68
- 69
5.3 Recommendations 70 - 71
5.4 Limitation of the study 72
5.5 Suggestion for future Studies 72
Bibliography 73
- 76
Appendix I 77
- 78
Appendix II 79
- 80
Appendix
Ill 80
- 82
Questionnaire 83
- 86
CHAPTER ONE
1.1 BACKGROUND OF THE STUDY
International
trade and capital flows required a foreign exchange market because despite
increased economic interdependence in the world, each country maintains its own
national medium of exchange. The official foreign exchange market in Nigeria is
made up to the federal ministry of finance and the central bank of Nigeria as
the apex institutions authorized dealers including commercial and merchant
banks, development banks and bureau de change. The federal ministry of finance
and the central banks of Nigeria
are jointly responsible for the formulation of exchange control policies and
procedures while the banking system and bureau de change service as channels
for implementing official policy foreign
exchange market is the parallel or black market (Agene 1991).
Since
1985, the central bank of Nigeria (CBN) has attempted to evolve an optional
exchange rate for the local currency at the same time sought to achieve a
system that preferentially allocates, the available foreign exchange to the
productive sectors, that is agriculture and manufacturing. It has been
reluctant to allow the inter-play of the forces of demand and supply to
determine of exchange rate and allocation of scarce foreign exchange resources.
They consequently has been maintain of huge subsidy on the official foreign
exchange, this subsidy combined with the private bidding system has created
severe pressure on the domestic money market, as over N35billion I subsidized
foreign exchange market (FEM) was faced with problem, the federal government of
Nigeria (FGN) took two economic measure of declaring the national economic
emergency in October 1985 and adopted structural adjustment programme (SAP) in
July 1986 The programme gave birth the second tier foreign exchange market
(SFEM) this legislation exchange regime in Nigeria since independence in terms
of the dismantling of the restrictions and bureaucracies which played previous
regime (Agene, 1991).
Structural
adjustment programmes (SAP) refers to a set of comprehensive economic reform
measure designed to correct imbalance in the economy, arising from unfourable
external factors as well as inappropriate domestic policies The objectives d
SAP was to effectively restructure the consumption and production pattern of the
Nigeria
economy to eliminate price . consumptions and heartily foreign exchange earner
and imports of consumption and produce goods. The major thrust of structural adjustment
progrmme (SAP) includes the followings:
a.
Achieve fiscal and balances of payment
viable over the period.
b.
Restructuring and diversify the
productive base of the economy in order to reduce dependence on single major
foreign exchange earner and imports.
c.
Lay the basic for a sustainable
non-inflationary economic growth.
d
Lesson the dominance of unproductive
investment in the public sector, efficiency and encourage the growth potential
of the private sector.
The
over-valued naira led to flight of capital it thus aided that naira was
converted to harder currencies at rates that tended to give more value to the
naira than it was worth. Now in the regime of foreign exchange market (FEM) and
with more favourable exchange rate for foreign currencies would repatriate them
back into Nigeria
to benefit from the favourabIe rates now operating which earlier was possible
only through black market rates, thus official channels are
More to benefit
from a net inflow of fund held by
Nigerians abroad. The extent value of the naira is a fundamental value and one
established, all other value in the economy would take their correct shape and
deduce distortions in the economy, since distortions are divergence from
optimality once corrected optional allocation resources would be achieved.
1.2
STATEMENT OF THE PROBLEM
The
Bretton Wood conference (1944) established a fixed exchange rate’ system
whereby each currency had a fixed parity (value) in relation to the dollar. In Nigeria,
the manufacturing or better still corporate sector depended heavily on imported
raw materials, machineries, spare parts and services however foreign exchange
did not pose any problem then simply because of the cheap exchange rate.
However, with deregulation of the
foreign exchange market, this has resulted in high foreign exchange issues that
are capable of up-setting the whole economic system, one such sue and to which
this research will address is the impact of reign exchange policy on the Nigeria
corporate sector depends on foreign input for their production.
1.3
JUSTIFICATION OF THE STUDY
Monetary
authorities, authorized dealers in the foreign change market, market analysts,
and professional in both the private sectors of the nations economy agree that
effective foreign exchange management serve the need to promote a en pattern of
development, protect local industries, prevent
capital flight,
promote insurance and stimulated reinsurance transactions (Obisesan, 2002).
The
importance of foreign exchange management to economic growth development and
welfare cannot be overemphasized, as such a proper research work has been
carried on the Nigeria
foreign exchange market.
The
importance of foreign exchange market and corporation performance in Nigeria
is to checkmate the foreign exchange malpractice. This achievement is as
follows:
To
provide the mechanism for dealing in foreign exchange at market-determined
rates and utilisely achieved simple equilibrium rates for naira.
Another
is to enable Nigeria
compete effectively with the financial centre for funds to finance industrial
growth and development. To attract inflow of capital, especially funds to
finance industrial growth and development. To attract inflow of capital
especially fund held abroad by Nigeria,
to eliminate the illegal traffics in currency and commodity across the
country’s boarders, to achieve the convertibility of the naira and even the c:
mal allocation of resources.
1.4
OBJECTIVE OF THE STUDY
This
research work focuses on the risk associated with fluctuation of foreign
exchange rates and its effect on the performance of corporate organization in Nigeria.
The
specific objectives of the study are as follows:
1.
To examine the risk fluctuation in
exchange rates and control associated with currency management in a multi-
currency settings.
2.
To investigates on the policies one
government and corporation organization have put in place to manage foreign
exchange and how effective this policies have been.
3
To appraise the impact of the policy
tools on the growth and development of the nations economy
4 To prefer recommendations based on the
research findings.
1.5
RESEARCH QUESTIONS
1.
Does the various foreign exchange
policies help your organization in its corporate performance?
2.
Does fluctuation in the foreign
exchange rate affects your net income?
3.
Does profitability of your
organization depends on the difference between the naira and the other major
currency?
4.
Do you feel the impact of competition
in the faces of those development?
5 Does your unit cost fluctuate
16
STATEMENT OF HYPOTHESIS
Based
on the research questions and the objectives of the study the following
hypothesis stated will be tested.
Hypothesis
I
Ho: Change in exchange rate and control have on
dramatic impact on profitability.
Hi: Changes in exchange rate and control have on
dramatic impact on profitability.
Hypothesis
II
Ho: Variation in holding of currency is not
determined by the manager.
Hi: Fluctuating exchange rate control is not
determined by the manager.
Hypothesis Ill
Ho: fluctuating
exchange rate control does not associate with management of currency in
multi-currency setting
fluctuating exchange
rate control associate with management of currency in multi-currency setting.
1.7.
SCOPE AND LIMITATION OF THE STUDY
It
is essentially important on sate that the study focused on the general
appraisal of the foreign exchange policy in Nigeria as this involve an
assessment of how the objective have been realized and the attendants and prospect
of the policy. This will be too cumbersome within the time frame and resources
of the study.
Our
study will only covers a selected number of corporate organizations with high
off-shore activities ranging between the ‘ear 1986-2005.
18
ORGANIZATION OF THE STUDY
The
organization of the right from chapter one comprises
introduction which is
sub-divided into eight sub-sections as
follows: background
of the study, statement of the problem,
justification of the
study, objective of the study, statement of
research questions,
statement, of hypothesis and scope of the study. While chapter two dealt with
the literature review. The third chapter deals with research methodology and
the forth chapter deals with data analysis and presentation while the last
chapter comprises of the summary, conclusion and recommendation.
1.9
DEFINITION OF TERMS
Exchange
Control: A mechanism by which a country scales site harness its foreign
exchange resources and rationalization for the settlement of international
indebtedness while ensuing the same favourable development of domestic economic
activities without diminishing the value of its currency (Nwarache 1982).
Exchange
Rate: The unit price of a currency in terms of currency
of another country.
Fixed
Exchange Rate: One which is not allowed to be
determined by the forced of demand and supply.
Flexible
Exchange Rate: One which the value of a country’s
currency relative to other currencies is established by the forces of demands
and supply in the foreign exchange market.
Foreign
Exchange: A means of effecting payment for interaction
transactions.
Foreign
Exchange Market: A market established by the law for
the buying and selling of foreign currencies at an agreed rate of exchange.
Parallel
of Market: The unofficial or illegal market in foreign
exchanges, which exist and operate side by side with the official market(Agene
1981).
CHAPTER TWO
LITERATURE
REVIEW
2.1
INTRODUCTION
The
payment for export commodities involved the use of reign currencies, which are
then converted into local currencies by the exporting country. Similarly, if
commodities are imported, payment are made by the importers in the currencies
of the countries from which the good are imported on way of making payment for
imports is for the importer to buy the foreign currencies of the commercial
banks. To pay for imports is for the importer to buy the foreign currencies at
the commercial banks.
Banks
in Nigeria
provide a service to importers to allow exporters to allow exporters to convert
foreign currency receipt into naira (Salami, 2001). The selling and buying of
foreign take place in the foreign exchange market and the at which the foreign
currency exchange is either at spot rate or at a forward rate. A forwards rate
contract will allow a customers who known’s that he will have to buy and sell a
quality of foreign currency at a future date to purchase or sell the currency
at a predetermined rate. This enables the movement up to the time he wants to
buy or sell the foreign currency (Salami
2001).
2.2
THE FOREIGN EXCHANGE RATE
Exchange
rates are functions of international economic activities. It is the
quantitative expression of country’s currency in terms of two naira, fifty kobo
(Adekanye, 1984). Thus, foreign exchange rate is the rate of exchange on
foreign currencies or np1y. the price of one country’s quoted in terms of
another. that is the rate of exchange in London
is the price here, in dollars of a pound sterling draft the basic rate of
exchange is generally quoted as the price of a cables transfer. It is argued that
will adequate downward adjustment of exchange rates, countries with balance of
payments difficulties would be able to expert more, less and save some foreign
exchange.
An
appropriate exchange rate will tend to maintain equilibrium in the inflow and
outflow of foreign exchange in the economy while an inappropriate exchange rate
policy under and overvaluations of the currency will tend to create instability
in the foreign exchange market and make foreign exchange management more
difficult (Ojo, 1990).
23
THE FOREIGN EXCHANGE RISK
Risk
can be seen as an unforeseen contingency. It is the chance that the actual
return on an investment will be different from its expected return. Exchange
risk is the effect that unanticipated exchange rate changes have on the value
of the firm (Lan and Gunter, 2003). Thus, it is simple in concept, a potential
gain or less that occurs as a result of an exchange for example if an
individual owns a share in Hitachi
the Japanese company, he or she will lose if the value of the share drops.
Using
the term risk in this manner foreign exchange can be seen as the risk involved
in changing of foreign currencies, thus it is said to have a fluctuating
procedure. It might go high and tower in other time. According to steward, 2000
“foreign exchange risk can be defined as the likelihood that an unexpected
change in exchange rates will alter the home currency value of foreign currency
cash payments expected from a foreign source. Also the likelihood that an
unexpected change in exchange rates will alter the amount of home currency. In
other words, if you are expected to be paid in us dollars the risk s that the
dollar weakness against your own currency before you receive your cash.
Furthermore, there are some currency before you receive your cash.
Furthermore,
there are some factors affecting the demand and supply of foreign exchange. If
the demand for dollars for example, exceed the supply as a result of changes in
those factors, the price of dollar will rise this means that more units of
foreign currency will exchange for one dollar. Conversely, if the supply of
dollars exceed demand the price of dollar falls which means that more unit of dollars
now exchange for a given unit of foreign currency. In practice, however, the
rate of exchange between currency is not determined by the operation of free
market forces. Most government on the contrary, usually intervene in the
foreign exchange market and have fixed exchange rate for the buying or selling
currencies in order to prevent the exchanged rate from fluctuating beyond the
internationally agreed bound (Roberts, 1978).
2.4
FOREIGN EXCHANGE RISK MANAGEMENT
Many
firms refrain from active management of their foreign exchange exposure, even
through which they understand that exchange rate fluctuations can affect their
earning and value (Ian and Gunter, 2003). One of the reasons, for taking this
decision is that management tools, such as forwards futures and options as
speculative perhaps they are right to fear abuses of hedging techniques, but
refusing to use forwards and other instruments may expose the firm to
substantial speculative risks.
Modern
principles of the theory of finance suggest prima-facie that the management of
corporate foreign exchange mat neither being important of nor a legitimate
concern. Another live of reasoning suggest that foreign exchange risk
management ices not matter because of certain equilibrium conditions in international
market for both financial and real assets (Ian and 7..nter, 2003). These
conditions include the relationship between interest rates and exchange rates.
However, modern research in finance supports the importance of corporate
exchange risk management against the claim that in equity market, it is only
systematic risk that matters and foreign exchange risk being an unsystematic
risk can be diversified away, provided that investor have the same quality of
information about the form as management a condition not possible in practice.
Forward
exchange contract are the most widespread methods of reducing foreign exchange
risk (i.e avoiding exposure to losses from adverse movements in foreign
currency in say three months time to purchases goods you can avoid currency
risk by signing a contract with a bank today that entitles you to buy the
currency in three months time at a rate of exchange agreed today (the forward
rate). This removes the currency risk by fixing the exchange rate in advance.
2.5 THE FOREIGN EXCHANGE MARKET
the foreign market for any currency is made up of all finical centres in the world were the currency is traded for other currencies. Both individuals and firms by and sell foreign currencies from banks and brokers in these financial centers aboard (Odizi, 1994). The financial centres of the world with the foreign exchange markets are closely linked together by means of modern telecommunication facilities according to Agene (1991). The official foreign exchange market in Nigeria is made up of the central bank of Nigeria and the federal ministry of finance as the apex institution, authorized dealers including commercial and merchant banks, development bank and the bureaux de change. “operating side by side with the official foreign exchange market is the parallel or black market.” Foreign exchange market is therefore a market established by law for the buying and selling of foreign currencies at an agreed of exchange. (Obisesan, 2002).
the foreign market for any currency is made up of all finical centres in the world were the currency is traded for other currencies. Both individuals and firms by and sell foreign currencies from banks and brokers in these financial centers aboard (Odizi, 1994). The financial centres of the world with the foreign exchange markets are closely linked together by means of modern telecommunication facilities according to Agene (1991). The official foreign exchange market in Nigeria is made up of the central bank of Nigeria and the federal ministry of finance as the apex institution, authorized dealers including commercial and merchant banks, development bank and the bureaux de change. “operating side by side with the official foreign exchange market is the parallel or black market.” Foreign exchange market is therefore a market established by law for the buying and selling of foreign currencies at an agreed of exchange. (Obisesan, 2002).
In
the foreign exchange market, two exchange rates are usually operated for
transaction. These is the sales rate of exchange in foreign currency
transaction that calls for payment on receipt of the transaction that calls for
the payment or receipt of the foreign exchange in one, three or six months
though six months are the most popular.
The
pegged system has two essential components. One being the parity, pre-valued of
the central value and the other is a set of support limit to the deviation of
the actual exchange rate from the parity. The central is obliged either by
international agreement or self-imposed commitment, to prevent the market
exchange rate from moving beyond the support exchange market. A pegged rate
with extremely wide support limit is effectively a floating rate. A floating
rate system might seem more natural than a pegged rate system since the
currency will float unless the authorities peg the rate system. Tradition may
explain why central bank pegs their currencies.
On
the other hands, some countries permit their currencies to float because they
are uncertain about appropriate value for a new partly when the old one on
longer seem appropriate, the floating rate is review as an interim arrangement.
Monetary
authorities, especially of large countries favour a floating exchange rate
system because they believe that they have greater scope to follow desired
monetary and fiscal policies, they are not obliged to designed their own
financial policies to maintain the foreign exchange value of their currencies
of particular values as under a pegged rate system.
Exchanged
controls course the effective price of foreign exchange to differ from the
parity rate. In effect changes in their controls are in indirect way to change
the exchange rate. Such controls almost always lead to the development of a
black or illegal market in foreign exchange, since some traders and investors
find it in their interest to evade the controls. The spread between the block
market rate and the parity become one indication of the severity of controls.
The most frequently a country change parity, the more nearly pegged rate system
approaches a floating rate system and this could be described as a crawling peg
rate system.
Several
factors stand out in apprising developments in exchange market arrangement and
these factors reflect the impact of national monetary policies divergent
inflation rates in causing the established structure of parity rate to become
absolute.
2.6
NATIONAL MONETARY POLICIES AND EXCHANGE RATES
The
monetary policies followed in different countries can be grouped by the rate
targets followed by their central bank authorities in determining the rates
target (Odizi, 1994). Some countries have persuade dependent monetary policies
changes in their domestic money supplies are geared to changes in their central
bank holdings of international moneys. The domestic money supply increase when
the central bank purchases foreign exchange from exports by issuing more
domestics monetary liabilities, Its domestics monetary liabilities decline when
importers buy foreign exchange and pay with domestic money, the domestic
monetary liabilities of the central bank are constant as long as its holding of
international money are constant.\ Assuming Nigeria is initially in balance of
payment equilibrium, the payment of domestic resident to non-resident for purchases
of goods equals its export receipt from foreigners, so that centrals bank of
Nigeria holding of international money are constant. Where the foreign demands
for Nigeria goods increases,
Nigeria develops a payment
surplus if the central bank of Nigeria
buys dollars from exporters.
Payment
unbalances both deficit and surplus policies. As the Nigeria
money supply falls as a result of its payment deficit, Nigeria demands fewer domestic
goods. Nigeria prices fall,
and Nigeria goods, both in Nigeria
and in various foreign markets. Nigeria
export increase, its imports decline and its payment deficit continue event at
the diminishing level, the Nigeria
money supply declines and domestic prices decline at a lower rate. Eventually, Nigeria
prices fall to the level at which a payments balance is a attained then it
supply remains constant until another disturbance occurs.
Similarly,
as long as Nigeria
follows, a dependent monetary policy, it automatically protested from the need
to revalue its currency as a result of a large payment surplus. The increase in
the domestic money supplies caused by a payment surplus leads to increase in Nigeria
prices. Nigeria
goods become less competitive international markets. Exports from Nigeria
decline while imports increase.
The
increase in our prices relative to would prices leads to diminishing payment
surplus. As long as the payment surplus continues eventually, Nigeria prices increase to the
level at which payment is attained.
Consequently,
as long as countries follow dependent monetary policies and permit their price
levels to be delimited by change in their holdings of international money the
need to change their policy should not follow dependent monetary policies
because they are willing to accept that resulting variations in level of prices
and employment associated with such policies.
An
independent monetary policy on the other hand, means that the central bank
focuses on one or several domestic objectives, like the employment level, the
price rate of economic growth, the level of government expenditure in
determining the rate of domestic monetary expansion. The impact of changes in
the volume of monetary holdings of international money is not given high
priority, yet variation in the of demotic monetary expansion affects the
country payment of balance and its holding of international money by their
impact on domestic prices, income, interest, rates and on the volume of trade
in domestic price.
The
payment deficits and surplus incurred by a country that follows an independent
monetary policy are not self correcting as they are with a dependent monetary
policy. While the payment deficits and the reduction on the central banks
holding of international money means the reduction in the central banks holding
of international money means that the domestic money supply should fall, the
monetary assets to fall and decline in the domestic money supply. As long as
countries fall into independent monetary policies, changes in exchange rate
necessary to restore payment equilibrium (Robert A, 1978).
2.7
EXCHANGE RATE DETERMINATION
If
market participants constantly contrast the option of holding an exchange
position in a give currency with the option of covering it, then in equilibrium
the returns from the two should be similar. If an exchange position in a given
currency with the option of covering it, then in equilibrium the returns from
the options should be similar. If exchange position remains open, its returns
in equal to the interest rate earned in the currency plus the percentage
changes in the spot rate during the holding period. If the position is covered,
the return is equal to the interest rate in the currency plus the forward
premium or discount. This implies that the forward rate is an estimate of the
spot rate expected to prevail in the future.
Given
the existence of interest rate parity, then the forward premium or discount is
equal to the difference between the nominal interest rates according to the
theory are determined by the respective expected inflation rates, then we can
enter that a currency forward rates in different countries.
Market
expectation is a very important factor determined exchange rate since it
constitutes a factor, which affects financial return. These factor include the
forward rate technical and psychology factors and some other factors like
external reserves interest rates political considerations and national hazards
that may directly or may not directly being refereed to in this study. Some
other variable are the gross national product (GNP) or the gross domestic
product (GDP), national income, national expenditure, money supply and
population. Others is technology employment rates peaceful national industrial
relations, moral standard and conduct of political.
THE BALANCE OF PAYMENT APPROACH
The
balance of payment approach on the other hand suggests that it could be used as
a barometer of the force of demand for and supply of foreign exchange in the
market especially, the current account balance is often considered to the a
measure of these forces. For example, in 1980, the US current account balance showed a
surplus of US$3.89 billion. This surplus indicated that the supply of foreign
currency exceeded the demand for foreign currency used to trades goods and
services the united state and the rest of the world. In the absence of any
other transaction in the balance of payments, this balance will tend to put
pressure on the price of foreign currency against the US. Dollar. In other word, there
will be pressure for a depreciation of foreign currencies relative to the US.
Dollar.
PURCHASING
POWER PARITY
The
purchase power parity theory states that the equilibrium exchange rate between
two currencies is the exchange rate which makes the domestics purchasing power
in the country to be equal to the domestic purchasing power parity (PPP) theory
pre-supposes a comparison of relative rates among different countries. It
includes the relationships between prices of goods in different markets. In its
simplest version, if we think of only products, purchasing power parity says
that the price of goods or product (ignoring cost like transportation and local
taxes should be the same regardless of the country where it is purchased. If a
particular car becomes more costly in France
instead of Germany, as many
buyers do this there will be a tendency for car prices to decrease in Germany and increase in France, there will also be tendency for the Germany
mark to depreciate against the French France. Car price and the exchange rate
between the two currencies will continue changing until the price of the car in
the two countries adjustment by the exchange rate are the same.
For
a country as a whole, purchasing power parity (PPP) involves the compassion of
aggregate inflation rate or aggregate changes prices at the inflation rate in a
given country accelerates relative to other countries, the country’s currency
would tend to depreciate relative to the other currencies.
2.8
THE NIGERIA
ECONOMY-AN OVERVIEW
The
foreign market (FEM) become an institution in Nigeria following protracted
economic declines. The 1970s were generally regard as an era of oil boom in Nigeria, when
oil revenue enhanced economic development, the economy become heavily dependent
on crude petroleum exports as the main sources of foreign exchange earnings and
the government revenue (Ntekop, 1992). According to the CBN international
operation (2003) the increased export of crude oil in the early 70s following
the sharps rise in its price enhanced official foreign exchange receipt. The
large inflow oil money encouraged large- scale importation of consumer and
product by 1980s and in the process become a major good importer. Thus the oil
booms witness by the country trigger off a high propensity to import. This
however, exerted much pressure on the demand for foreign exchange as the import
bills characterized by overpricing of imported goods as well as other
malpractice, continued, to rise, especially as the exchange rate was over
valued. It also encourage the over-dependence of manufactures on imported in
puts (Peter, 1990:04). There was also a problem of over-valued naira exchange
rates, which further encouraged importation of goods but was a disincentive to
exporters. About the mid 1981, the world oil market adversely affected the Nigeria
economy. Crude oil prices, which had peaked at US$ 29 per barrel in 1983, had
slumped to US. $14.85 per barrels in 1986. The eight foreign exchange positions
led to the emergence of debt, which the country was unable to settle. The
country became no longer credit- wealthy and all lines of credit in the
international trades were blocked. The economy also experienced high
inflationary pressures fuelled among others by shortage of essential
commodities. Domestic inflation rose from 10% in 1980 to 30.9% in 1984 (Okigbo,
1988).
In
reaction to the downturn in the economy, the economic stabilization measures
involving stringent exchange and trade controls were introduced in April 1982.
When these measures proved effective, more stringent measure were introduced in
1983 and 1984 and later returned in 10985.
In
a continuous effort to revamp the economy, government introduced the structural
adjustment programme (SAP) in 1986 as short term measures to last till 1988.
The core component was what was known as second-tier foreign market. Its commercial
operation in 2gth September, 1986. The market which was essentially aimed at
correcting the over-valuation of the naira exchange rate has the following
objectives:
a.
Achievement of a realistic exchange
rate for the naira through the interplay of markets forces.
b.
More efficient resources allocation
through substantial reduction of fraudulent and wasteful foreign exchange
transactions.
c.
Stimulation of domestic production and
production for exports
d.
Deregulation and liberalization of
exchange and trade controls thereby removing the distortions and abuses
associated with stringent bureau ration control.
e.
Enhancement of government revenue from
crude petroleum, royalty, petroleum profit tax, rentals, gasp flared
etc:(Fubara 1991).
STRUCTURE OF THE FOREIGN EXCHANGE
MARKET
The
Nigeria
foreign exchange market has witnessed tremendous changes since its inception.
The second tier foreign exchange market (SFEM) was introduced in September
1986, the unified official market in 1987, the autonomous foreign exchange
market (AFEM) in 1995 the inter-bank foreign exchange market in 1999 and the
Dutch Auction System (DAS) in 2002.
The
second tier foreign exchange market started with the first biding session hold
on 25th September 1986, in the central bank of Nigeria. On that date, the exchange
rate in the first-tier foreign exchange market was N3.7258 on 01-07-87. The
rate in the second tier foreign exchange market was N3.7373 to a U.S dollar
showing a narrow gap of only 115 rates deemed to have converged. The
convergence led to the statutory termination converged of the first-tier market
and consequently a unified foreign market evolved under a floating exchange
rate system. The market continues to determine exchange rate by the market
force of demand and supply both in the biding session and the inter-bank
market.
2.9
GOVERNMENT POLICIES ON FOREIGN EXCHANGE
A
number of policy instrument were adopted at the inception of SAP and in the
process of programme implementation to attain and diversify the export base was
the abolition of the commodity boards and the export licensing requirements
which was done to encourage more peoples to export. However, companies which
failed to repatriate export proceeds as required are penalized through
curtailment of their use of other foreign exchange facilities. Some
institutional facilities were introduced to support the export drive-age of the
newly established national maritime authority based on a 40-40-20 formula
allowing Nigeria
vessel to lift 40% of the value of trade while trading partners and third party
vessel to lift 40% and 20% respectively. This measures has agreat potential for
enhancing Nigerian’s foreign earning from the maritime trades. Other
facilitates includes those introduced by the CBN such as rediscount and
refinancing facility and the establishment of the Nigeria export credit
guarantee and insurance to include authorized dealers to go into export
financing fiancé loans given to exporter by the dealers can be refinanced by
the CBN at the minimum rediscount rate. The NEXIM was established to give
further incentives to exporter through credit loan, guarantee and insurance.
In
evaluating the effectiveness of the foreign exchange management strategies
adopted since 1986, we intend to identify the achievement of the new system as
well as the outstanding problems. The achievement of the new foreign exchange
management strategies should be based on objective criteria, derived from the
underlying objectives of the programme. In this connection, five aspect maybe examined
as follows deriving a viable exchange rate for the naira, expanding and
diversifying non-oil exporters, reducing non essential importation,
strengthening the balance of payment position and eliminating illegal foreign
exchange management policies in Nigeria
over years includes:
1.
The mobilization of foreign receipts
2.
The efficient allocation available
foreign change in aid of economic growth
3. A viable and favourable external balance and
4.
Diversification and enhancement of
external reserves to achieve reserved adequacy and optimal development
resources.
2.10
HISTORICAL BRIEFING OF UNITED BANK FOR
AFRICA
PLC
The
consolidate united bank for Africa plc is the product of a merger of Nigeria
third and fifth largest banks. UBA and standard trust bank plc respectively and
continental trust bank. The union is the first successful merger transaction in
the history of the Nigerian banking sector and was born out of a desire to
leads the sector to a new era of global relevance by championing the creation of
the Nigeria consumer finance
market and leading a private/public sector partnership aimed at accelerating
the economic development of Nigeria.
The
old UBA had been one of the three largest banks that have historically
dominated the banking industry in Nigeria, alongside first bank plc and union
bank plc and were owned by a broad spectrum of local and international private
and instructional investors including Banque national de Paris, Bankers Trust
(Beutsche bank) Banca National de Lavoro and Monte Pashi di sena.
The
bank was formed to take over the banking business carried on in Nigeria
in 1949 by the British and the French bank limited, and has a legendary and
enviable pedigree as the bank for wise man and woman with strong representative
in the corporate and wholesale market. UBA also has a large and established
retails franchise and two foreign branches in new York
and grand Cayman Island.
UBA
group is known for its innovativeness and creativity. Some of the key milestone
in its history includes:
i. First among international bank to be
registered under Nigerian laws
ii. First Nigeria to offer its shares to the
public following its listing on the
Nigerian stock exchange in 1970.
iii.
First Nigeria bank to introduce a
cheque guarantee scheme known as UBA CARD in 1986
iv.
Won the euro money 2000 award for
excellence as the best domestic bank in Nigeria
v.
First Nigerian bank/company to gain
recognition of the international financial community, through the establishment
global deposit receipts (GDP) programme.
vi.
Consistent and solid financial performance over the past years.
CHAPTER THREE
RESEARCH
METHODOLOGY
31
RESEARCH DESIGN
This
refers to the specification of procedures for collecting and analyzing data.
According to Ahuazu (1996). There are two research, the survey in which a
representation sample of the population is studies and result generalized. The
other is the case study, which involves the study of a group at one point in
time and arriving at conclusion in relation to the situation of the group.
However,
for the purpose of this study, survey research design is used since it focuses
on basic facts and opinion of people through their expression.
3.2
TYPES AND SOURCES OF DATA
The
are two main types of data collected for this research, they include the
primary and secondary data.
Primary
data include those data collected through the use of questionnaire, which
contain well-structured unambiguous questions and has been distributed to the
respondents. Secondary data on the other hand, are facts and past observations
already administered. It was deduced through various related literatures,
textbooks and journals pronouncement of professional bodies and various
economic related data.
3.3
SAMPLE SIZE OF THE STUDY
For
the purpose of this study, the entire banking sector is the population of our
research, the respondent will be restricted to the united bank for Africa (U BA) plc as our sample size of the research. UBA
plc is chosen as our case study because of its long standing in the banking
industry and its ability to sustain itself in the news banking regulation.
3.4
SAMPLING TECHNIQUES
Simple
random technique is strictly adhered to in this research study. According to
Paker and Day (1997),.simple random techniques gives a clear fact of any
survey. Therefore, our adoption of this techniques will enables us compare the
state of affairs to the period of fluctuation in the foreign exchange when
there is a change of policy.
3.5
INSTRUMENTATION
The
instrument used in this research survey is the questionnaire. This was
sub-sectioned into A and part B, the part A contains general data, which ranges
from age, sex, and marital status, while B deals with specific related
questions relating to our research study. These questionnaire are distributed
to selected element of the population using the simple random samplings
technique. The numbers of respondents selected, as representative were limited
to fifty (50).
3.6
METHOD OF DATA ANALYSIS
The
tools are analysis consisted of frequency tables and simple percentage. These
were used to reduce the mass of data to summary statistics tables were used to
thus the frequency tables and simple percentages were used to summarize the
statistic as simple as possible in a bid do enhancing, clarify and easy
comprehensive of data generates over the year. Simple average, percentages and
ranking have proved to be useful mathematically tools in data analysis are
universally applied.
Chi-square
method of analysis was chosen for the study because it facilitates the
comparison of the expected outcome with the observed overcome. The chi-square
is given as;
X2 = ∑(O - e)2
E
Where
x2 = chi-square
O = observed
frequency
E = expected
frequency
CHAPTER FOUR
DATA
PRESENTATION, ANALYSIS AND INTERPRETATION
4.0
INTRODUCTION
This
chapter focuses on the presentation analysis and interpretation of data obtained
from the response to the
questioners
distributed to the staff of united bank for Africa plc, Ilorin branch, Kwara state.
As
indicated in chapter three, fifty questionnaires were distributed and all of
which were returned. Analysis was based on the response to those questionnaires
are presented in simple percentage of tabular form. This allows for an easy
comparison between the various alternative answers and chi-square is used to
test whether the observed frequencies taken as a whole are significantly different
from the frequencies.
4.1
DATA ANALYSIS
The
analysis is Broken into two major sections in line with the research
questionnaire. Section one analyzed the characteristic of respondents in terms
of age, sex and status of the staff. Section two analyzed the relationship
between the management of foreign exchange risk and the reactions of staff UBA
plc to strategies employed and if they are generally satisfied with it.
Table
4.1 Distribution on the Bas of Age
Sources:
field survey (2011)
Table
4.1 shows that 70% respondents were from the age group 20-4oyrs, while 30%
respondents were from the age group 41-yrs and above. It can be deduced from
the analysis that majority of the respondents falls within the age 20-40yrs,
which are the most active working age and data provided by them can be assumed
reliable.
Table 4.2
Distribution on the Basis of Sex
Sources:
field survey (2011)
Table
4.2 shows that 44% respondents were female while 56% were male and this shows
that majority of the staff of UBA plc are male.
Table 4.3
Distribution on the Basis of Status
Sources:
field survey (2011)
Table
4.3 shows that 28% are senior members of staff, 40%s middle members of staff
and 32% junior members of staff.
Table 4.4 Distribution
on the marital status
|
Alternative
|
Response
|
Percentages
|
|
Single
|
30
|
60%
|
|
Married
|
20
|
40%
|
|
TOTAL
|
50
|
100%
|
Sources:
field survey (2011)
Table
4.4 shows that 60% of the respondent were single while 40% where married and
its shows that the majority of the staff of UBA PLC are single
Table
4.5 Analysis on various foreign exchange polices and how its help cooperate
performance
|
Alternative
|
Response
|
Percentages
|
|
Yes
|
20
|
40%
|
|
Indifferent
|
25
|
50%
|
|
No
|
4
|
8%
|
|
I don’t know
|
1
|
25
|
|
TOTAL
|
50
|
100%
|
Sources:
field survey (2011)
Table
4.6 Analysis of fluctuation foreign Exchange Rate and how it affect Income
|
Alternative
|
Response
|
Percentages
|
|
Yes
|
27
|
54%
|
|
Indifferent
|
20
|
40%
|
|
No
|
1
|
82%
|
|
I don’t know
|
2
|
4%
|
|
TOTAL
|
50
|
100%
|
Sources:
field survey (2011)
Table
4.7 Analysis on how Exchange rate and control has impact on profitability
|
Alternative
|
Response
|
Percentages
|
|
Yes
|
20
|
40%
|
|
Indifferent
|
15
|
30%
|
|
No
|
5
|
10%
|
|
I don’t know
|
10
|
2%
|
|
TOTAL
|
50
|
100%
|
Sources: field survey
(2011)
4.3
RESTATEMENT OF RESEARCH HYPOTHESIS
This
hypothesis deals with the impact of an exchange rate on profitability. The
chi-square (x2) is used for the hypothesis testing. The formula for
the calculate of x2 is as follows:
X3 = ∑(0-e)2
Ei
4.4
TESTING OF RESEARCH HYPOTHESIS
Hypothesis
one:
Ho:
changes in exchange rate and controls
have no dramatic impact on profitability
H1:
changes in exchanges rate and controls
have dramatic impact on profitability.
Decision
Rule
If
the computed value Id greater than the critical value x2 at 0.05
level of significance. It would be then concludes that the observed frequency
is different significantly from the expected frequency and as such the null
hypothesis would be rejected. If the computed value if x2 at 0.05 level of
significance is less than the crucial value than the alternative hypothesis
should be accepted.
4.2 OBSERVED RESPONSES FOR HYPOTHESIS
Question: foreign exchange policy
|
|
Yes
|
Indifferent
|
No
|
I don’t know
|
Total
|
|
Male
|
10
|
10
|
1
|
0
|
21
|
|
Female
|
10
|
15
|
0
|
4
|
29
|
|
|
20
|
25
|
1
|
4
|
50
|
Sources:
field survey 2011
Based
on table 1 from appendix 1
Calculated x2 = 15.63
Level
of significance = O.05
Degree
of freedom = (r-1) (c-1)
(2-1) (4-1)
= (1)
(3)
= 3
Critical
value of x2 0.05 at 3df = 7.82
Decisions:
Since
the computed value of x2 is greater than the table value (i.e 4.98
< 7.82) we accept the null hypothesis
and conclude the various foreign exchange polices dones not affect the
organization in its corperator performance
Hypothesis
1
Ho:
various foreign exchange policies does
not positively influence an organizations corporate performance
Hi: various foreign exchange policies positively
influence an organization cooperate performance
Hypothesis
II
Hi;
fluctuation in foreign exchange does
not affect income
Ho: Fluctuation in foreign exchange affect
income:
OBSERVED
RESPONSE FOR HYPOTHESIS
Fluctuation
in Exchange Rate
|
|
Yes
|
Indifferent
|
No
|
I don’t know
|
Total
|
|
Male
|
10
|
12
|
0
|
1
|
23
|
|
Female
|
17
|
8
|
1
|
1
|
27
|
|
|
27
|
20
|
1
|
2
|
50
|
Sources:
field survey 2011
Based
on table 2 from appendix II
Calculated x2 = 3.317
Level
of significance = O.05
Degree
of freedom = (r-1) (c-I)
(2-1) (4-I)
= (1) (3)
= 3
Critical
value of x2 0.05 at 3df = 7.82
DECISION
Since
the computed value of x2 is less than the table value (i.e 3.317<7.82).
We accept the null hypothesis and conclude that fluctuation in foreign exchange
does not affect income.
Hypothesis Three
Ho:
change in exchange rate and controls
have no dramatic impact on profitability
H1:
change in exchange rate and controls
have dramatic impact on profitability
OBSERVED RESPONSES FOR HYPOTHESIS
Impact
of exchange rate and control
|
|
Yes
|
Indifferent
|
No
|
I don’t know
|
Total
|
|
Male
|
9
|
15
|
1
|
5
|
30
|
|
Female
|
11
|
0
|
4
|
5
|
20
|
|
|
20
|
15
|
5
|
10
|
50
|
Sources:
field survey 2011.
Based
on table 3 from appendix Ill
Calculated
x2 = 15.63
Level
of significance = 0.05
Degree
of freedom = (r-1) (c-I)
(2-I
) (4-1)
= (1) (3)
= 3
Critical
value of x2 0.05 at 3df=7.82
Decision
Since
the computed value x2 is greater than the table value
(15.63>7.82), we reject the null
hypothesis and concluded that change in exchange rate and control have dramatic
impact on profitability
CHAPTER
FIVE
SUMMARY,
CONCLUSION AND RECOMMENDATION
5.1
SUMMARY OF FINDINGS
Attempt
has been made in this study to analyze the various policies instruments adopted
by then government through the CBN to manage foreign exchange resources both
before and after the advent of SAP in Nigeria. This research in its
previous chapter has essentially discussed the foreign exchange market in Nigeria
as a core component of the structural adjustment programme (SAP) in the
country. We examined the establishments, structure and operation of the foreign
exchange market. It also addressed the major problem of risk arising as a
result of fluctuations in the foreign exchange policy. Exchange rate policy is
an important instrument in foreign exchange management. During this era, the
exchange rate of the naira was administered and because if tended to be
overvalued if inhabited effective foreign management.
Since
SAP came force, the over valuation of the naira exchange rate has totally been
removed but the naira exchange rate has continued to depreciate vis-a vis other
currencies in the foreign exchange market. This research also carried out an
appraisal, reviewed the benefit and problems that highlighted the prospect of
the foreign exchange market as regards corporate performance in Nigeria.
It
also contributes to the policy of a nation that has some implication for cost
of price, level resources, allocation, profitability, capacity utilization, net
worth and income distribution. Various sources provide advice about how the
firms should evaluate their exposure to losses from changes. It also indicates
how the changes in exchange rates affect the income and net worth. It also
appear that the monetary authorities realized
that the naira was overvalued and that they made adjustments to prevent or
minimize real exchange rate appreciation. This has been the era of the growling
peg tied to a trade weighted basket of currencies as a way of achieving an
equilibrium real effective exchange rate. Consequently, there have been
frequent changes in the normal resulting in the programme depreciation of the
naira.
Lastly,
the foreign exchange market in Nigeria
up to its present state was influenced by a number of factor which include the
change in the economy and structural shifts in production. Before the
establishment of the central bank of Nigeria (CBN) and the enactment of the
exchange control act of 1962, foreign exchange was earned by the private sector
and held in balances, abroad by commercial banks which acted as agents for
local exports. During this period, agricultural exports contributed the bulk of
foreign exchange receipt. The fact that the Nigeria naira was tied to the
British pound sterling at par, with easy convertibility delayed the development
of an active foreign exchange market.
The
following findings were deduced from the research projects.
1.
It was reveled from the study that
changes in exchange rate and control have 40 dramatic impact on the profit of
individual firms their network market values on competitive positions in the
domestics market.
2.
It was revealed from the study that
managers of firms must determine to hold long positions in particular currency
and also when those position should be increased or decreased.
3.
The study also found out the effect of
foreign exchange rate controls associated with currency management in
multicurrency setting.
4.
The research also pointed and revealed
that foreign exchange market in Nigeria
up to its present state was influenced by a number of factor which include the
changing patterns of international trade, institutional changes in the economy
and structural in production.
5.
It was revealed in this project that
the foreign exchange market in Nigeria
is a core component of the structural adjustment programme (SAP).
6.
The study also found that the monetary
authorities realized that the naira was over-valued and that they made
adjustments to prevent real exchange rate appreciation.
7.
It was revealed that foreign exchange
policy as part of an nations policy has some implication for cost of
population, price, level, resources, allocation, profitability, capacity utilization,
net worth and income distribution.
5.2
CONCLUSION
This
study has been able to analyze the policy instruments adopted to manage foreign
exchange risk in the country. It has focused on the cost implication for an
import dependent organization, which is very great. Great in the sense that the
domestic currency cost of their imported raw materials and machinery are bond
to rise
From
ours research, it was discovered that a deal of risk arises from fluctuation of
the foreign exchange rate. The risk also affect major factors that determine
performance of corporate organization, such factors include cost of producing
raw materials and the unit price of goods. It also has negative effect on the
net income of organization and its capacity utilization, It was also discovered
that profitability of organization was greatly threatened due to fluctuation in
foreign exchange rate.
This
major sources of financial uncertainty from firms engaging in international
business arises from changes in exchange rates both from changes in parties
under pegged rates system and fluctuating under a floating rate system are
inherent in a system of a national currencies just as the risk of changes in
exchange control and expropriate are inherent in a system of multiple
sovereigns.
At
the junction, the survival of organization was also discovered to depend on how
well the organization can manage foreign exchange. As it has been rightly
proved, corporate performance of organization in Nigeria is greatly affected by
activities in the foreign exchange market. It therefore implies that for any
organization to perform well, it must adopt the management of foreign exchange
risk strategy that suit their organization most.
5.3
RESEARCH RECOMMENDATIONS
In
view of the above conclusion, the recommendations will be very useful:
1.
To achieve efficient management of
foreign exchange risk and corporate performance in Nigeria there should be
transparency in the system for allocating foreign that is the right to receive
foreign currency exchange in respect of outstanding credits or balance of
payment at bank by an individual in respect of private account or transaction
or by a government in respect of inter-government arrangement.
2.
Exchange rate policies should be
raised and these are various pricing methods that have been used as the
inception of second-tier foreign exchange market (SFEM) in September 1986.
Methods such as moping up excess liquidity in the system and findings of
foreign exchange market.
3.
There should be credibility and
sustainability of the foreign exchange regime. There should be an aggressive
export promotion of the foreign exchange regime. There should be an aggressive
export promotion, more contribution from the non-oil export sector to our
foreign exchange earnings so as to boast the supply side the managers of the
firm must therefore determine to holds long position should be increased or
reduced changes in currency mix of firms assets and liabilities may incur cost
of someone must therefore decide when it Es worthwhile incur these cost
4.
Lastly the need for an effective
demands management policy through appropriate fiscal monetary measures and
above all the need for a good leadership at all levels and a disciplined
citizenry.
All
theses strategies have recommended for a strong self - reliance’s economy in Nigeria.
5.4
SUGGESTIONS FOR FUTURE STUDIES
No
research conducted can claim to have absolutely and conclusively covered the
scope of its studies for the reasons, we would wish to recommend to other
researcher on the topic, the foreign exchange risk and corporate performance in
Nigeria” to conduct a replica and more expansive research on this study n the
light of new ideals.
BIBLIOGRAPHY
Aaker,
(1980): marketing research private and public sector decision New York, John Wily and Sons.
Adebayo
R.O (2008): International Finance Olad
Publisher, Niger
Road. Ilorin
Adedo
M.A (2006): a guide to project writing, an introduction, clad publisher, Niger Road Ilorin.
Adekanye,
F (1984): the elements of banking in Nigeria , 2 edition, UK Graham
Burn.
Adetifa
(2000): international business finance in Nigeria, Ibadan London publication.
Akikan
(1991) research methodology in the behavioural science,
Ibadan:
Longman
Esseine, (1990) the
foreign exchange market in Nigeria
under
structural
adjustment reading materials of national centres for economic management and
administration (ncema), Ibadan
Fubara,
B.A (1991) structural adjustment programme and the
Nigeria
financial sector. A policy auditor Nigeria journal of management
sciences Vol./11 no 1 June 1991.
Lan,
H. G and Gunter, D (2003) the management of foreign exchange risk and hedging, New York university and university of Michigan
Odizi,
M.R (1985) government polices in relation to foreign exchange management
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1994
Okigbo,
P. (1988) SFEM, SAP and development financial intermediaries; Nigeria financial reviews
Ojo,
M,.O (1990): the management of foreign exchange
resources
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Olukole,
R.O (1991)foreign exchanges policy and management (CBN) bullion Vol. 5 no l
June/March page 22.
Robertz,
A (1978): exchange risk and corporate international finance, London, Macmillan press limited
Rita,
M.A (1985) international finance management new Delhi, 2 edition prentice hall.
Salami,
D.K (2001): practice of banking, 1st edition, Lagos Samos educational bookshop
limited
Saliu,
H.A and Oyebanji, J.O (2004): a guide on research proposal report writing, Ilorin, faculty of
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Seun,
A. (2006): the guardian newspaper Lagos:
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Stewark,
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O.A (1086): foreign exchange management: the role of CBN” CBN bullion, Vol. 10
No.3 July, Page 17-22
APPENDIX
1
Expected
frequency for hypothesis
|
|
Yes
|
Indifferent
|
No
|
I don’t know
|
Total
|
|
Male
|
21x20
50
= 84
|
21x25
50
= 10.5
|
21x1
50
= 0.42
|
21x4
50
= 1.68
|
21
|
|
Female
|
29x20
50
= 11.6
|
29x205
50
= 14.5
|
29x1
50
= 0.58
|
29x4
50
= 2.32
|
29
|
|
Total
|
20
|
25
|
1
|
4
|
50
|
The
data above were used to calculate X2
|
0
|
eiI
|
Oi
|
(O-i)2
|
(O-i)2
4
|
|
10
|
84
|
1.8
|
3.24
|
0.386
|
|
12
|
10.5
|
-0.5
|
0.25
|
0.024
|
|
1
|
0.42
|
0.58
|
0.336
|
0.801
|
|
0
|
1.68
|
-1.68
|
2.822
|
1.68
|
|
10
|
11.58
|
-1.8
|
3.24
|
0.275
|
|
15
|
14.5
|
0.5
|
0.25
|
0.017
|
|
0
|
0.58
|
-0.58
|
0.58
|
0.58
|
|
4
|
2.32
|
1.68
|
2.822
|
1.217
|
|
|
|
|
|
X2 =
4.98
|
APPENDIX II
Expected
frequency for hypothesis
The
data above were used to calculate 
APENDIX III
Expected frequency
for hypothesis
The
data above were used to calculate X2
|
|
Yes
|
Indifferent
|
No
|
I don’t know
|
Total
|
|
Male
|
30x15
50
= 9
|
30x15
50
= 3
|
30x20
50
= 12
|
30x10
50
= 6
|
30
|
|
Female
|
20x15
50
= 6
|
20x5
50
= 2
|
20x20
50
= 8
|
20x10
50
= 4
|
20
|
|
TOTAL
|
15
|
5
|
20
|
10
|
50
|
The
data above were used to calculated X2
|
0i
|
eI
|
O-ei
|
(0-ei)2
|
(O-i)2
4
|
|
15
|
9
|
6
|
36
|
4
|
|
1
|
3
|
-2
|
4
|
1.33
|
|
9
|
12
|
-3
|
9
|
0.75
|
|
5
|
6
|
-1
|
1
|
0.17
|
|
0
|
6
|
-6
|
36
|
6
|
|
4
|
2
|
2
|
4
|
2
|
|
11
|
8
|
3
|
9
|
1.13
|
|
5
|
4
|
1
|
1
|
0.25
|
|
|
|
|
|
X2=15.63
|
Kwara State
Po1yechnic, ilorin
Institute of finance and management
Department of
Banking and Finance
The
Manager,
U.B.A
plc.
Ilorin,
Kwara State.
Dear
Respondents,
QUESTIONAIRE
I
am a final year student of the Department of Banking and Finance. Kwara State
Polytechnic, Ilorin, as part of the condition
for the award of higher National Diploma (HND) conducting a study on the
management of foreign exchange risk and corporate performance in Nigerja uses
united Bank for Africa as the case study.
I
shall therefore be very grateful. If you could do me a favour in completing the
attached questionnaire as objectively as possible
Please.
Be assure that any information given in this regard will he treated
confidentially and also used only for the purpose of this academic
exercise. -
Thanks
.for your unreserved assistance.
Yours
faithfully
MOGAJI
BILIKIS 0.
QUESTIONAIRE
TOPIC: THEMANAGEMENT OF FOREIGN
EXCHANGE RISK AND CORPORATE PEREOPMANCE IN NIGERIA
SECTION A: BIOGRAPHICAL DATA
Please kindly
complete the below questionnaire by putting mark ( ) and writing in the space provided.
1. Name of Organization ……………………………………….
2. Qualification (a) HND/ B.Sc (.7)
(b)
NCE/OND ( ) (C) OTHERS ( )
3.
Age distribution (a) Below 20 ( ) (b)
20-4Oyrs ( v) (c) 41 and above. ( )
4. Sex (a)
Male ( )
(b) Female ( )
5. Years of experience (a) Below 4yrs ( )
(b)
4yrs and above ( )
6. Marital Status (a) Single ( ) (b)
Married ( )
7.
Status of staff (a)
Senior ( ) (b) Middle staff ( )
(c) Junior staff ( )
SECTTON B:
8.
Do banks operate in the foreign
exchange markets on behalf of their customers and sometimes on their own
account? Yes ( ) No
( ) Indifferent ( ) I don’t know ( )
9.
Ts there any need for efficient
management of foreign exchange risk? Yes (
) No ( ) Indifferent ( )
I
don’t know ( )
10. Can exchange rate policy depend on the level
of resources at a given period of time? Yes (
) No ( )
Indifferent
( ) I don’t know ( ).
I1. Do the various foreign exchange policies
helps your bank in its corporate performance?
Yes ( ) .No (
) Indifferent ( )
I don’t know ( ).
I
2. Within your knowledge, has
fluctuation in foreign exchange risk affects income in your bank?
Yes (
) No ( ) Indifferent ( ) I don’t know ( ).
I
3.Can your bank manage risk during the foreign exchange fluctuation? Yes ( )
No ( )
Indifferent ( ) I don’t know ( )
14. Does the devaluation of naira against other
convertible currency affect market value?
Yes
( ) No
( )Indifferent ( )
I
don’t know ( )
15. Does the management of foreign exchange risk
has negative implication in your bank?
Yes
( ) No ( )
Indifferent ( ) I don’t know ( )
I
6. Can changes in exchange ate and
controls has dramatic impact on profitability?
Yes
( ) No ( ) Indifferent ( ) I don’t know ( )
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