Denying Treatment To Smokers

Denying Treatment To Smokers For many years, smoking has been one of the most popular topics in our health education. Many people are aware that smoking causes a great deal of diseases ranging form minor cough to deleterious lung cancer. However, many smokers tend to continue their hazardous habit despite advices from health care providers and campaigns from many organisations, hospitals or even local pharmacies. Hence, the question is Should patients who refuse to stop smoking be prevented from getting treatment from National Health Service(NHS) for smoking related diseases? It is a common fact that individuals will take responsibility of their health implications if they have to bear the cost of their own health, but when government body such as the NHS bears the health cost, moral obligations of doctors and NHS are brought to question if they deny these individuals of treatment due to their behaviour. In this discussion we will consider the general outlook of smoking, smokers involved and the pros and cons of denying treatment. Smoking generally has been a norm in our modern culture and is highly popular among men. More interestingly, the practice has begun as early as 5000 BC to 3000 BC in south America when tobacco was first planted [1]. Tobacco is used in medicinal purposes such as analgesic and antiseptic, ritual ceremonies whereby tobacco was offered to the Gods, insecticides in agriculture, drunk as tea, etc [1]. Tobacco was thought to have medicinal properties that can help cure and prevent cancer in the sixteen century. Ironically no one knew of the hazardous consequences of smoking until the early twentieth century. The first evidence of the effects of smoking related disease occurred in 1950 particularly link to lung cancer. Since then more researches and investigations have been carried out on the effects of smoking towards health. By the late twentieth century, much evidence have proven that smoking cigarettes is a major cause of heart disease, COPD (Chronic Obstructive Pulmonary Disease), strok e, numerous types of cancer such as lungs, cervix, oral cavity, penis etc. In addition smoking also increase the impotence rate among men and abortion among pregnant mothers. Since then many health care providers as well as government authorities have begun to take serious measures such as launching anti smoking campaigns, increase of tobacco taxation and educating the public on the dangerous effects of smoking. Before we explore further, we must first ask ourselves another relevant question which is Why do smokers continue to smoke despite knowing the bad consequences that will befall their health? According to a survey, 90 per cent of regular smokers have tried to quit on at least one occasion but only 36 per cent had succeeded in maintaining abstinence for a whole year, while relapse rates after a given period of time are almost the same for nicotine as for heroin [2]. In biological terms, it seems that smoking causes an addition for nicotine in the human brain which is rather difficult to overcome by smokers. Furthermore, in campaigns; smoking related disease are usually related to the dangerous lung cancer and common COPD (Chronic Obstructive Pulmonary Disease) but the risk of circulatory diseases such as Buergers Disease [3] and coronary artery disease are seldom emphasised. For example coronary artery disease patient needs to undergo coronary artery bypass graft surgery [4] where surg eons need to carry out a major operation. In these cases, surgeons usually consider the minimum side effects and maximum benefit of the surgery for a patient. This is rather a tricky part for NHS as major operation usually contributes to a huge amount of medical cost. Apparently NHS spends  £5.2 billion a year to treat smoking related diseases [5]. In addition, circulatory disease also contributes to the highest patient admission in NHS compare to other smoking related diseases with a number of 686,942 patients in year 2007/08 [6]. It is also equivalent to 47.6% of the total admission which is cause by smoking. Furthermore the complications of this surgery are higher among smokers who continue to smoke after surgery than for non smokers. Coming back to the major question, if NHS denies treatment of this kind to smokers who refuse to stop smoking, more opportunities are given to a non smoker with the similar disease to receive treatment as there are more surgeons and hospital beds available to treat them. Moreover the surgery performed is more efficient and effective. In addition, their survival chances are also higher compare to those who continue smoking after surgery [7]. Apparently, smoking at any time of the surgery leads to more infections and impairs tissue healing. Studies have shown that overall complications in knee or hip arthroplasty for those who have quit smoking are 10% compared to 44% in those who continue to smoke [8]. On the other hand, money could be saved and be contributed to other areas such as to the smoking cessation service such as ASH (Action of Smoking and Health). Currently the NHS Stop Smoking Services is spending about  £57.5million in year 2008/09 in pharmacotherapies to help smokers t o quit smoking. Comparatively, 337054 smokers managed to quit smoking by the year 2008/09 through NHS Smoking Cessation Services [9]. Besides, non smokers who are usually the victims in passive smoking may also benefit by getting a cleaner and smoke free environment. However, this move is ethically wrong according to the NHS principles where principle number one states that The NHS will provide a universal and comprehensive service with equal access for all, free at the point of use, based on clinical need, not ability to pay and principle number five states that We will treat every patient with dignity and respect [10]. To summarise both principles, it states that NHS should provide equal treatment to any patient based on their clinical needs and also respect their health care rights regardless of their background to seek medical treatment. Denying treatment from smokers also means that taking health care rights away from them and it is a rather inhuman act to do. Besides, it is also ethically wrong for doctors to deny patients right of treatment as it contradicts with the doctor-patient relationship and it is against the Hippocrates law which states that The health of my patient will be my first consideration [11]. Doctors working under NHS must abide with the oath and carry out their duty to treat their sick patient. Therefore doctors who work for the NHS should not be influence by the situation of NHS to offer treatment to their patients who smokes. In addition, let us view on patients right for treatment; according to the Declaration of Lisbon, The patient has the right to accept or refuse treatment after receiving adequate information [12]. In other words it also means that it is the patients right to decide whether he should receive the treatment and not the authorities such as NHS. In a nutshell, the patient also has the right to be cared for by a physician who is free to make clinical and ethical judgement without any outside interfere nce. Based on the pros and cons, I would like to conclude that it is unfair for NHS to deny treating patients who smoke. This is based on several reasons; firstly, NHS should not discriminate against patients who smoke owing that they knew the health implications of their hazardous habit. Many may argue that smoking related disease is a self inflicted but in most cases the situation is far more complicated than it seems from the surface. For example, smokers may smoke due to several factors such as peer pressure, family problems and cigarette advertisement in the early twentieth century. In addition to that, the addiction to nicotine is similar to heroin. Many have tried to give up smoking but chances of succeeding are slim as they might be shy to consult their health care provider and it is challenging to go against the addiction. Furthermore NHS smoking cessation services was recently set up in the early twenty first century. As humans, we err as well and we should be given an opportuni ty to correct them. Therefore I feel that smokers should be given more time to quit smoking and more anti smoking campaigns should be launched to create more awareness instead of taking a drastic move as to deny treatment to patients who smoke. On the other hand, other alternative ways such as raising tobacco tax is an effective measure to encourage smokers to quit and increases the number of people who never smoked before. Very recently, the UK government is considering to increase the tobacco taxation by 5% and a survey on its effects was carried out by ASH [13]. One of the major advantages in this policy is it help reduce the number of smokers and increase NHS cost saving. In a nutshell, I think it would be better to continue treating patient who smokes as well as to increase tobacco taxation and having more smoking cessation campaigns.

The Merchant Of Venice :: Free Merchant of Venice Essays

In The Merchant of Venice, by William Shakespeare, there appears Shylock. He is a Jew, that much we are told in the cast list. But, as the play unfolds Shylock is seen to be the villian. He is protrayed as being cold, unbending, and evil. But is he? Is Shylock really the antagonist in this play or can he also be viewed as persecuted individual who resorts to revenge only after he has been pushed too far.To fully understand the character of Shylock we must first look at Elizabeathen attitudes towards Jews. In the sixteenth century Jews were rarely if ever seen in England. In the Middle Ages Jews had fled to England to escape persecution in France under the Normans. They were granted charter in England by Henry I in return for a percentage of their profits from trade and moneylending. It is here that the stereotype of Jews lending money was started. Because of the tariffs placed on them by the crown Jews took to charging high interest rates to secure profits for themselves. Here we see echos of Shylock with his usury. Finally the Jews were ordered out of England in 1254 by Edward I. They did not return to England until the later half of the seventeenth century. (Lippman 3-4) Jews were also viewed as devils by Elizabeathan audiences. Old stories portrayed them as "blood-thirsty murders" that poisoned wells and killed Christian children for their bizarre Passover ritu! als. (Stirling 2:1) These were the stereotypes which Shakespeare's audience held in regard to Jews. Shakespeare himself had never seen a Jew but he goes to great lengths to humanize Shylock even while perpetuating the stereotype.In Act 1:3, before Shylock ever says a word to Antonio, he lets the audience know in an aside that he hates Antonio. He hates him for having hindered him in business and for having humiliated him in public by spitting on him and calling him names such as "dog" and "cutthroat Jew". Shylock tells the audience he hopes to exact revenge on Antonio both for his own humiliation and for the persecution that the Jews have long suffered at the hands of the Christians. I hate him for he is a Christian;. . . If I can catch him once upon the hip, I will feed fat the ancient grudge I bear him.He hates our sacred nation . . . Cursà ©d be my tribe if I forgive him (I,iii,40-49) Shylock then tells Antonio that he wants to be friends with him and will conclude the bond for a pound of flesh as a "merry sport.

Marriage Essay -- Literary Analysis, Gary Chapman

Introduction What is needed for a marriage in today’s world to last? Have you all heard the song, "All you need is love? Is that a misconception? After being married for 14 years, I believe so. Author Gary Chapman states that what is the real meaning of love? He examines how we as individuals throw the term around so easily in our everyday lives. He explores how we can love anything from dessert to a favorite rock band. Is the true definition of love, being valued and respected in our marriages today? (Chapman, 2010). Is love a feeling of expression and is there such a thing as love? Couples marry because they love each other correct? Then why are there so many divorces happening everyday. â€Å" What leads a couple to a divorce?† There could be many reasons, for example, the death of a child, infertility, drug/alcohol abuse, or physical abuse. One of the biggest reasons for divorce is Infidelity, which in many instances can lead to divorce and is probably one of the most damaging things that can happen in a marriage. Wilmot & Hocker state, Infidelity is one of the most common problems married couples face today. â€Å"When people experience conflicts, much of their energy goes into emotions related to those conflicts† (Wilmot & Hocker, 2). For example in infidelity, some of those emotions can be stress, sadness, depression, and anger. Statistics may vary, but they show for the most part, that 60% of men and 40% of women will participate in or be faced with an extramarital affair at some point in their marriage. The relationship rapidly shifts from madly in love to signing the divorce paper and sharing custody of the children (Fisher, 2008). The Emotions of Infidelity If you or someone you loved have experienc... ...ch this conflict in a rational and collaborative style. Conclusion I have explored how the emotions of anger, denial, rejection and guilt can save a marriage if approached with the right conversations and clarity. We have learned from the research that peoples perceptions of a conflict like an affair, can lead them to feel negative emotions that can be very difficult to overcome. By understanding the emotions that can enter after infidelity, more people faced with this conflict might be able to save their own marriage. As we know, conflict occurs when people are not capable of controlling their emotions in certain situations (Bell & Song, 2005). Therefore, if a married couple would like to try to save their marriage after infidelity, they should try to better understand what their spouse is feeling and how they can overcome those emotions together.

Half A Day

What does the middle-aged man say to the narrator when they meet? 4. What changes does the narrator notice as he walks home? 5. What happens at the end of the story? 6. Based on the narrator's thoughts and comments as he walks with his father, describe the kind of upbringing you think he has had. 7. What do you find unusual about the narrator's description of his day at school? 8. How does the middle-aged man address the narrator? 9. What does the narrators reaction to the changes in the city suggest about him? 10.What does the boys remark to the narrator at the end of the story reveal to you about what has happened? 1 1. A symbol is an object or action that stands for something else in addition to itself. What does the narrator's half a day at school symbolize? 12. Why do you think that Manful included only unpleasant details of modern urban life in the story? 13. A story told from the first-person point of view is narrated by one of the characters in the story. Why do you think tha t Manful chose to use a first-person narrator for â€Å"Half a Day†? 4. Describe an experience in your life when time seemed to pass more quickly than usual. Define the following words: Unmarred – Throng – Avail Horde – Refuse – Conjurer – Setting – Cairo, Egypt The narrator contrasts the landscape on the way to school with the school building itself. How does the narrator's description of the land contrast with that of the school? What do you know about Cairo, Egypt? What do you want to know? Research to find answers to your questions and other facts about Cairo, Egypt.Include information about the history and culture. Author Research information about Nagging Manful. Record five facts in the table below. Surprise Ending A surprise ending is an unexpected plot twist at the end of a story. The ending might surprise readers because the author provides ambiguous clues or withholds important information. A surprise ending is most effecti ve when it adds to the meaning of a story rather than merely overturning the readers expectations. Such writers as O. Henry and Guy De Unpleasant are famous for their surprise endings. 1.Is the ending of â€Å"Half a Day† a complete surprise, or does Manful provide some clues earlier in the story to suggest how much time has passed? Explain. 2. Do you think that the ending of â€Å"Half a Day† is effective and interesting? How else might Manful have ended the story? Find two quotes about time that are relevant to Mafioso's story. The quotations can come from literary, philosophical, scientific, or religious works, or they can be traditional proverbs. Use Google to search quotations or aphorisms about time. Explain how the quotes are relevant.

Introduction to Statistics and Econometrics Essay

   1. Specialty faces the decision of how many Weather Teddy units to order for the coming holiday season. Members of the management team suggested order quantities of 15000, 18000, 24000 or 28000 units. The wide range of order quantities suggested indicate considerable disagreement concerning the market potential. The product management team asks you for an analysis of the stock-out probabilities for various order quantities, an estimate of the profit potential, and to help make an order quantity recommendation. Specialty expects to sell Weather Teddy for $24 based on a cost of $16 per unit. If inventory remains after the holiday season, Specialty will sell all surplus inventory for $5 per unit After reviewing the sales history of similar products, Specialty’s senior sales forecaster predicted an expected demand of 20,000 units with a 0.95 probability that demand would be between 10,000 units and 30,000 units. Questions 1. Approximate the demand distribution using Normal distribution and sketch the distribution. 2. Compute the probability of a stock-out for the order quantities suggested by members of the management team. 3. Compute the projected profit for the order quantities suggested by the management team under three scenarios: worst case in which sales is 10,000 units, most likely case in which sales is 20,000 units and best case in which sales is 30,000 units Questions 1. One of Specialty’s managers felt that the profit potential was so great that the order quantity should have a 70% chance of meeting demand and only a 30% chance of any stock-outs. What quantity would be ordered under this policy, and what is the projected profit under the three sales scenarios? 2. Provide your own recommendation for an order quantity and note the associated profit projections.

Current Rights of Women in India Essay

In America women have the right to work, vote, and own just about anything that they can afford. The only thing limiting them is their credit score, or the limit that the bank determines. These may seem like rights that are universal because the reality of America is not the dismays that other countries have to deal with. In other countries this luxury of Equal Rights is not common, and is actually rejected and avoided by all costs. Some countries do not believe in these rights because of their religion, and what they’ve been taught. How can a fundamental value not be learned? Other countries just do not know any different than the man as the hunter or provider, and the woman as the caregiver or housekeeper. These roles in America only recently began to be shared amongst the genders, and to this day these roles are not confirmed by any means. Other countries are beginning to open their mind to other policies mostly because of influences of other cultures, and it is about time this happens. Some of the horrifying conditions that women in India have to deal with are issues that no women would ever want to fathom, and is very unfortunate. Not always being granted the ability to gain an education, being married at a youthful age without any say in the choice of a partner, and unwanted abortion of female fetuses are just a few that surface news channels. Those disturbing issues listed above are what these women have to deal with regularly and have no hope of these problems ever changing because of what some people in some cultures call beliefs. Media has placed great emphasis on the stories that depict that the women’s rights in India have been improving over the past few decades. Improvement can be misinterpreted when a third world country is involved, because any change that is not for the worst can be considered an improvement. What has really improved? Is it going to be up to the women to determine at which point they feel like they are an equal gender in this country? Until this point, there is no telling how long this can take. Cultural Belief of Equality The problem lies in the internal practices of the country. India is a country which mainly operates from the religious inclinations of the population. Be that as it may, how can anyone question their beliefs, and furthermore, who is to say that these practices do or don’t work? Shouldn’t the answer of whether or not their current policies are effective come from the source – the women in this country? In 1926 Sarojini Naidu, the first female president of the Indian National Congress party, had helped achieve the right for women to vote along with the men. It had taken, like most political victories in India for women, a great deal of time and patience (Roy, 2012, para. 15). Indian society is also one of the world’s most culturally diverse, with innumerable linguistic, cultural, and religious groups. Due to the diversity of the Indian populace, Indian policy makers have faced a tough challenge in ensuring that the individual rights of its citizens, including women, are protected (â€Å"Balancing Minority Rights and Gender Justice: The Impact of Protecting Multiculturalism on Women’s Rights in India,† 2005, p. 05). This is a country where religion has always ruled their judicial and ethical structure, and because of this it will need to be a common agreement that there needs to be a change from within. The Butalia (1998) website describes a poor woman Rojammas who took a literacy class. She read a story about a woman who had to endure physical abuse from her husband due to his drinking habit. The woman in the story went through the village speaking with the other women to see who had the same problem as her. She determined that the reason for most of the abuse is that their husbands would go to work, and come home and spend all of their money on alcohol. The husbands would get upset when the women weren’t able to feed them because all of their money was spent at the liquor stores. The women rallied and protested at the liquor stores and eventually, in Andhra Pradesh liquor was banned. As a result, families were able to save, violence rates dropped, and life seemed to improve for these people. Unfortunately women are no longer able to be seen in the streets protesting. These brave women were able to make a difference, and had the strength and tools to do so. Since then, their power of protest and voice has been taken. Is this an improvement, and if so, what is next? The nineteenth century was to be considered â€Å"the age of the women†, because all over the world women’s rights and wrongs were the main topic of heated discussion amongst the world. Different countries such and France, Russia, England and Germany began spreading women consciousness, and more towards the mid nineteenth century, Russia began having issues with reformers and anarchist because of the question that was being widely spread across the nations; should women have rights? Although these issues were now arising throughout most countries, in India, the men still see it as men have all power and women obey as they are told. This now brings us with today’s issue that is still being fought in India and even in some other countries. Women now come across broken promises and the â€Å"possibility† of women rights when those rights were already being fought for and stated in the Indian Constitution. In the Constitution it states that â€Å"every single woman’s and girl’s well-being and safety paramount; that their liberties and rights are not to be challenged on the basis of attire or profession; that they are treated equally. † (Women’s Rights in India, 2009) With that being said, this is not the case of what is going on with the women in India; one in particular that was being socially, economically, and politically deprived. This is what is being said about this situation. â€Å"The police commissioner on the other hand has referred to the recent attacks on women as mere incidents of â€Å"eve teasing. † While eve-teasing is itself a term specific to the South Asian region, associated with unsolicited verbal harassment like catcalls, whistles and/or remarks directed towards women, the incidents that he so casually referred to were actual assaults on women for being dressed in western attire. More importantly, even eve teasing calls for action against the perpetrators† (Women’s Rights in India, 2009). It is not ethical for any one person to use their stature for their own personal gain. Although, different countries do have different ethics/cultural ethics, morals and religious beliefs they choose to abide by, does not mean it is not right to degrade women as sexual objects, â€Å"different† because of their personal beliefs, or even their own sense of style. How can one be punished because of the attire they chose to wear? Women have come so far from being just a â€Å"house wife†, to working while World War 1 was taking place, to joining the army to help our fellow soldiers fight for this country, to running as a presidential candidate. Women bleed, breath, think, feel emotion and get hurt physically just like men do, so why do we treat women any differently than a male? If you look back into Egyptian history, Greek Mythology and even some of the â€Å"Gods† that were â€Å"Political† figures to us at one point in time were women: Aphrodite, Artemis, Isis and etc. Women should be granted the exact same rights as the men in this world because they contribute to a lot of the findings we discover, cures we find, the birth our children, some of the things we study and so forth. Will we ever be able to look passed all of the things that we say and do about/towards women? Is it possible to give the rights that we promised for so many years to the women of our country and the other countries that have promised the exact same thing? Discrimination is such a huge discussion amongst our community today because it continues to thrive off of those that are not subjective to change. Change is exactly what we need to bring out the different opinions between cultures, and religious beliefs. Although it is a belief, that does not mean that it is morally right to believe it is ok to treat women in a certain fashion that we see as correct. The mixed bag of laws, bills, commitments, broken promises, new pledges and fresh possibilities for women’s rights comes with its share of anticipation and disappointments. Will promises be converted into laws and will prejudices make way for a little more tolerance and a little less chauvinism? Will social perceptions of women and their traditionally assigned roles in society witness a change under the collective pressure of government laws and social campaigns? And will society eventually look at girls through the same lens that they see boys? And yet hope survives†¦

Strategies for Resuscitating Foreign Exchange Market in a Depressed Economy (a Case Study in Nigeria)

Strategies for Resuscitating Foreign Exchange Market in a Depressed Economy (A Case Study in Nigeria) By Ijaiya Tahir Adeniyi B. sc (Hons) Econs From Lagos State University, Ojo, Lagos State, Nigeria CHAPTER ONE INTRODUCTION 1. 1BACKGROUND OF THE STUDY Exchange rate arrangements in Nigeria have undergone significant changes over the past four decades (Alaba, 2003). It shifted from a fixed regime in the 1960s to a pegged arrangement between the 1970s and the mid-1980s, and finally, to the various types of the floating regime since 1986, following the adoption of the Structural Adjustment Programme (SAP).A regime of managed float, without any strong commitment to defending any particular uniformity, has been the predominant characteristic of the floating regime in Nigeria since 1986 (Alaba, 2003). These changes are not peculiar to the Naira as the US dollar was fixed in gold terms until 1971 when it was de-linked and has since been floated. The fixed exchange rate regime induced an ove rvaluation of the naira and was supported by exchange control regulations that engendered significant distortions in the economy.That gave vent to massive importation of finished goods with the adverse consequences for domestic production, balance of payments position and the nation’s external reserves level. Moreover, the period was bedeviled by sharp practices perpetrated by dealers and end-users of foreign exchange. These and many other problems informed the adoption of a more flexible exchange rate regime in the context of the SAP, adopted in 1986.In theory and practice, a prolonged misalignment of the exchange rate in the foreign exchange market will, in the medium term, tend to impact adversely on economic performance (MacDonald, 1997). Consequently, the authorities should always provide a timely intervention to ensure that the exchange rate is in equilibrium. The monetary authorities usually intervene through its monetary policy actions and operations in the money mark et to influence the exchange rate movement in the desired direction such that it ensures the competitiveness of the domestic economy.In Nigeria, maintaining a realistic exchange rate for the naira is very crucial, given the structure of the economy, and the need to minimize distortions in production and consumption, increase the inflow of non-oil export receipts and attract foreign direct investment. In order to give vent to this, this study shall examine the foreign exchange market in Nigeria with the view of investigating the relationship between the exchange rates and some macroeconomic variables. 1. 2STATEMENT OF RESEARCH PROBLEMThere has been an ongoing debate on the appropriate exchange rate policy in developing countries. The debate focuses on the degree of fluctuations in the exchange rate in the face of internal and external shocks. Exchange rate fluctuations are likely, in turn, to determine economic performance (Kandil and Mirzaie, 2003). In judging the desirability of ex change rate fluctuations in Nigeria, it becomes necessary to appraise the various exchange rate regimes adopted in Nigeria and evaluate their effects on output growth, pattern of domestic prices and some other macroeconomic variables.Their major setbacks would also be identified in order to suggest future course of action. 1. 3OBJECTIVES OF THE STUDY The specific objectives of this study are: i) to Identify the determinants of the foreign exchange rates; ii) to examine the impact of foreign exchange rates on the value of the country’s output; iii) to examine the impact of foreign exchange rates on foreign trade; iv) to examine the impact of foreign exchange rates on external reserve; v) to examine the impact of foreign exchange rates on domestic prices of goods and services. . 4RESEARCH METHODOLOGY The Econometric approach that would be adopted to examine the relevance of the exchange rate in the official foreign exchange market to the economic growth of Nigeria shall be the Ordinary Least Square (OLS) method. This econometric method would be used because it is very reliable and widely used in researches. Simple regression models shall be adopted to capture the effect of foreign exchange rate on economic growth, foreign trade, external reserve and the domestic prices of goods and services in Nigeria.The test of the hypotheses earlier stated would be done at 5% level of significance and as such, the generalization of the study findings would be limited to this extent. Secondary data would be used in this study. The relevant data to be used would be sourced from the Central Bank of Nigeria’s statistical reports, annual reports and statement of accounts for the years under review. 1. 5RESEARCH QUESTIONS The research questions, which would guide this study, are as follows: i) What are the determinants of foreign exchange rates? ii) What has been the impact of foreign exchange rate on the growth of Nigerian economy? ii) How does the foreign exchange r ate impacts on foreign trade of Nigeria? iv) What is the relationship between foreign exchange rate and external reserve? v) How does the exchange rate affects the domestic prices of goods and services in Nigeria? 1. 6RESEARCH HYPOTHESES The research hypotheses to be tested in the course of this study are stated below as: HYPOTHESIS I Ho : That there is no significant relationship between exchange rate and the economic growth of Nigeria. H1 :That there is a significant relationship between exchange rate and the economic growth of Nigeria.HYPOTHESIS II Ho : That there is no significant relationship between exchange rate and foreign trade in Nigeria. H1 :That there is a significant relationship between exchange rate and foreign trade in Nigeria. HYPOTHESIS III Ho : That there is no significant relationship between exchange rate and external reserve of Nigeria. H1 :That there is a significant relationship between exchange rate and external reserve of Nigeria. HYPOTHESIS IV Ho : That th ere is no significant relationship between exchange rate and domestic prices of goods and prices in Nigeria.H1 :That there is a significant relationship between exchange rate and domestic prices of goods and prices in Nigeria. 1. 7MODELS SPECIFICATION MODEL I gdp = a0 + a1 exr + e Where gdp-Gross Domestic Product exr -Exchange rate a0 and a1 -Parameters e -Error term A’ PRIORI EXPECTATION It is expected that a0 > 0 and a1 < O Exchange rate is the price of a currency in terms of another currency while gross domestic product is the value of the goods and services produced in a country within a specific period of time.Exchange rate is expected to affect the gross domestic product negatively. A high exchange rate would not allow for the importation of capital goods that are need for productive activity, thereby impair economic growth. This is based on neoclassical trade models. MODEL II bot = b0 + b1 exr + e Where bot-Balance of trade exr -Exchange rate b0 and b1 -Parameters e -E rror term A’ PRIORI EXPECTATION It is expected that b0 > 0 and b1 > O Balance of trade is the net difference between total export and import.The relationship between exchange rate and balance of trade is expected to be positive negative. This is because a high exchange rate would encourage exportation and discourage importation and thereby making the balance of trade favourable i. e positive (when export is higher than import). MODEL III exrev = c0 + c1 exr + e Where exrev-External reserve exr -Exchange rate c0 and c1-Parameters e -Error term A’ PRIORI EXPECTATION It is expected that c0 > 0 and c1 < O External reserve is the amount of money which a country holds in foreign currency.It represents the savings of a nation. It is often accumulated from the proceeds from external trade. A high exchange rate would mean that a country would have to pay more to pay for the goods and services from other countries and as a result would not have much as external reserve. So the r elationship between exchange rate and external reserve is expected to be negative. MODEL IV cpi = d0 + d1 exr + e Where cpi -Consumer price Index exr -Exchange rate d0 and d1-Parameters e -Error term A’ PRIORI EXPECTATION It is expected that d0 > 0 and d1 > OConsumer price index is a measure of the general price level in an economy and as such an indicator of the standard of living of the people. A high exchange rate would impair production causing the general price level to rise. Therefore, the relationship between exchange rate and consumer price level is expected to be direct i. e positive. MODEL V gdp = e0 + e1 exr + e2 bot + e3 exrev + e4 cpi + e Where exr -Exchange rate bot-Balance of trade exrev-External reserve cpi -Consumer price Index e0, e1, e2, e3 and e4 -Parameters e -Error termA’ PRIORI EXPECTATION It is expected that e0 > 0, e1 < 0 e2> 0 e3 > 0, e4 > 0 According to the neoclassical trade model, exchange rate is expected to affect the gross domestic produ ct negatively. A high exchange rate would not allow for the importation of capital goods that are need for productive activity, thereby impair economic growth. Balance of trade represents the net trade. A favourable balance of trade (i. e net export) would increase the gross domestic product. So balance of trade would vary directly with the gross domestic product.The external reserve is also expected to have positive relationship with the external reserve. High external reserve would stabilize the foreign exchange market which therefore creates conducive environment for improved production and trade. Consumer price index is an indicator of the standard of living of the people. A high standard of living is expected to increase labour productivity and thereby stimulating growth. So consumer price index would vary directly with the gross domestic product. A high exchange rate would impair production causing the general price level to rise.Therefore, the relationship between exchange ra te and consumer price level is expected to be direct i. e positive. 1. 8SIGNIFICANCE OF THE STUDY The significance of this study are as follows: i) It would provide an empirical effect of exchange rate on the economic growth; ii) It would contribute to existing literature by identifying the major factors that are responsible for the spread between the official and parallel foreign exchange market rates in Nigeria; iii) Lastly, it would provide policy recommendations to policy-makers on ways to resuscitate the foreign exchange market in Nigeria. . 9SCOPE AND LIMITATION OF THE STUDY This study would focus extensively on the foreign exchange policies of Nigerian government and how they impacted on the structure of the foreign exchange market. The spread between the parallel and official foreign exchange market shall also be examined with the view of identifying the factors responsible for the differences. In the bid to identify the strategies for resuscitating the foreign exchange mark et in Nigeria, the importance of the official exchange rate in the economic growth process of Nigeria shall be empirically investigated.The influence of the external reserve shall also be given due consideration. Besides, major issues in the foreign exchange policy and current development in the Nigerian foreign exchange market shall be examined. These would enhance the suggestion of the ways to resuscitate the foreign exchange market in Nigeria. 1. 10ORGANISATION OF OTHER CHAPTER: 2-5 The rest of this study shall contain four chapters. Chapter two would present the literature review on the subject matter.The methodology to be adopted in the study would be stated in chapter three. Chapter four shall focus on the presentation and interpretation of the regression results. The last chapter – chapter five, would present the summary of the findings, conclusion and appropriate recommendations. REFERENCES Alaba, O. B. (2003). â€Å"Exchange rate uncertainty and foreign direct inves tment in Nigeria†. Being a paper presented at the WIDER Conference on Sharing Global Prosperity, Helsinki, Finland, 6-7 September. Kandil, M. and Mirzaie, I. A. 2003). â€Å"The Effect of Exchange rate Fluctuations of Output and Prices: Evidence from Developing Countries. † IMF Working Paper, WP/03/200, October. MacDonald, R. (1997). â€Å"What determines Real Exchange Rates? The Long and Short of it†. IMF Research Paper, WP/97/21, January. CHAPTER TWO LITERATURE REVIEW 1. INTRODUTION Exchange rate fluctuations and their effects on macro economic variables have generated an economics debate on the desirability of exchange rate policy. In judging the desirability of exchange rate fluctuations, it ecomes, necessary to evaluate their effects on output, price level and other macro economic parameter. Demand and supply channels determine the effects. The justification for this study was amply exemplified by the observation of the Secretary to the Government of the Fed eration of Nigeria, Ekaette, (2002). According to him, continuous depreciation of the Naira has encouraged currency speculation which unscrupulous individuals would naturally prefer to productive activity, leading to the diversion of invest able funds to non-productive activities.In the same vein, the former Governor of the Central Bank of Nigeria (CBN) Sanusi, (2002) stated that the choice of exchange rate regime is a critical issue. Suffice it to say that the current high interest rate structure represents the opportunity cost which the economy is paying for a misaligned exchange rate regime, indicative of the structural imbalance in the economy. The ultimate aim of this chapter is to present diversified views on the foreign exchange market and its mechanism and to also explain the exchange regimes of Nigeria as well as their effects on macroeconomic variables. 2.VARIOUS VIEWS ON EXCHANGE RATE FLUCTUATIONS IN THE FOREIGN EXHANGE MARKET According to Kandil and Mirzaie (2003), unant icipated exchange rate may be the result of a change in agents’ rational forecast, under a fixed exchange rate regime, or the result of an unexpected movement in the exchange rate, under a flexible rate regime. They noted that in line with theory’s prediction, the effects of unanticipated exchange rate fluctuations on output and prices may be positive or negative across countries, according to the relative effects of currency fluctuations on the supply and demand of the respective countries.On the hand, Kandil and Mirzaie (2003) opined that movements in the exchange rate that are consistent with agents’ expectations have limited effects on the macro economy. They however, noted that in many developing countries, high variability of exchange rate fluctuations around its anticipated value may generate adverse effects in the form of higher price inflation and larger output contraction. Rutasitara, L. (2004) observed that the parallel market exerted greater influenc e on the exchange rate during periods of shortage and controls; it disappeared as further liberalization took hold.He argued that while a more or less â€Å"stable† nominal exchange rate is desirable for trade and investment decisions, it is more important to maintain the rate at sustainable levels. He noted that the level and prospects of the foreign reserves position are important in this respect. He advised that output and export strategies to ensure a well supplied foreign exchange market need to be furthered. The supply of foreign currency would also include foreign grants and/or loans. Cheong, (2004) noted that the higher moments in the exchange rate is non-constantly varied with clustering.He investigated a possible effect of risk in exchange rates on import trade in the UK. The empirical results show that uncertainty in exchange rates negatively affects international trade and, more importantly, the effect is statistically significant. Buffie, etal. (2004) focused on the management of highly persistent shocks to aid flows in three â€Å"post-stabilization† African economies with de jure flexible exchange rates. Such shocks were found to have beneficent long-run effects. He however noted that when currency substitution is high they can produce dramatic macroeconomic management problems in the short run.Alaba, (2003) argued that the parallel market exchange rate is the more important driver of activities in the Nigerian economy. He therefore noted that proper management of exchange rate, to forestall costly distortions, constitutes an important pillar in determining flow of FDI to Nigeria and indeed Sub-Sahara African countries. He opined that it is important that monetary authorities ensure transparency in determining exchange rate process such that various economic distortions associated with exchange rate may be minimized. 3. EFFECTS OF FOREIGN EXCHANGE MARKET INSTABILITYKandil, (2004) investigated the effect of exchange rate fluctuation s on economic performance in developing countries. The investigation presented a theoretical model that decomposed movements in the exchange rate into anticipated and unanticipated components. Anticipated exchange rate depreciation determines the cost of imported intermediate goods and, hence, the output supplied. In contrast, unanticipated currency fluctuations determine aggregate demand through exports, imports, and the demand for currency, and determine aggregate supply through the cost of imported intermediate goods.The first channel increases aggregate demand; currency depreciation increases exports and decreases imports. The second channel decreases aggregate demand. On the supply side, Kandil, (2004) explains that currency depreciation increases the cost to buy intermediate goods and decreases the output supplied. The combined effects of the three channels are indeterminate on output and price. The paper investigates the effects of exchange rate fluctuations (both anticipated and unanticipated) using output and price data for a sample of twenty-two developing countries.Kandil, (2004) concluded that for a varying degree of openness, exchange rate fluctuations generate adverse effects on economic performance in a variety of developing countries. These effects are evident by output contraction and price inflation in the face of currency depreciation. Indeed, concerns about the adverse effects of exchange rate depreciation on economic performance are supported by the evidence of macroeconomic performance for a sample of twenty-two developing countries.For policy implications, Kandil, (2004) suggests that exchange rate policies should aim at minimizing unanticipated currency fluctuations to insulate economic performance from the adverse effects of this variability in developing countries. Osakwe, (2002) examined the choice of exchange rate regime using a speculative attack model that took into account the real effects of unanticipated changes in real exchang e rates. It also incorporated two features that played prominent roles in recent currency crises in emerging markets: currency substitution and volatile capital flows.The two approaches were applied to incorporate the real effects of unanticipated changes in exchange rates into standard models of exchange rate regimes. In the first approach, the effects were introduced directly by assuming that the monetary authority’s loss function depended exclusively on the variance of real output but that aggregate demand or output depended, among other factors, on the deviation of actual from expected changes in the real exchange rate.In the second approach, the real effects of unanticipated exchange rate changes were incorporated indirectly by assuming that the monetary authority’s loss function depended on the variance of real output as well as the variance of the real exchange rate. It was concluded that the traditional models of exchange rate regimes ignore the destabilizing e ffects of sharp and unanticipated exchange rate movements. Odusola and Akinlo, (2001) focused on the link among the naira depreciation, inflation, and output in Nigeria.Evidence from their study revealed the existence of mixed results on the impacts of the exchange rate depreciation on the output. They observed that the impulse response functions exerted an expansionary impact of the exchange rate depreciation on the output in both medium and long terms. The opposite (contractionary impact) was however observed for the short-term horizon. These results tend to suggest that the adoption of a flexible exchange rate system does not necessary lead to output expansion, particularly in the short term.They noted that issues such as discipline, confidence, and credibility on the part of the government are essential. However, these issues are apparently lacking in Nigeria, as partly reflected in several policy reversals. Dekle (2002) developed a model of an exporting firm that experiences fl uctuating exchange rates and shocks to its cash flow. The firm uses its cash flow and borrows from the financial markets to produce for export later in the period. They noted that exchange rate and shocks to cash flows are correlated, but the correlation could be positive or negative.If, for example, they are negatively correlated, then the firm will suffer from low cash flows when its exchange rate is depreciated. That is, the firm’s production will be constrained exactly at the time when its export opportunities are greatest. This provides the rationale for the firm to hedge against shocks to its cash flow. Dekle (2002) related nominal exchange rates to export volumes at the firm level and finds that export volumes are strongly affected by changes in exchange rates. As in earlier work, they too found that prices are sticky in the buyer’s currency.In their model of exports, the strong response of export volumes to exchange rate fluctuations arises not because of chang es in the buyer’s currency prices, but because of a loosening of financing constraints, either through the direct beneficial effect of exchange rate shocks on cash flows, or through hedging activities. Uncertainty in exchange rates which immediately followed the collapse of the Bretton Woods system may be decomposed into two components. The first reflects systematic movement of the exchange rate and the second, exchange volatility (Darby et al. , 1999).Exchange rate volatility is usually taken as some measure of the dispersion of the rate over some period of time. Volatility of the rate impacts on growth through a variety of channels, including investment and trade. Interest in exchange rate uncertainty on investment stems from the standard result in option pricing theory, which suggests that the value of an option increases with an increase in the underlying volatility of the stock (Accam, 1997). Kosteletou and Liargovas (2000) studied the direction of effects of exchange ra te variability on the pattern and flow of investment.The study suggests that in theory, there is no clear cut distinction concerning the direction of such a relationship. It identifies at least six competing models in the literature, categorised under the trade integrated models and models of financial behaviour. The first category according to Kosteletou and Liargovas (2000) distinguishes between the traded and non-traded goods model. The second category distinguishes between the monetary approach to balance of payments, the strategic behaviour of international firms, the imperfect-capital-market theory and relative labour cost theory.The first hypothesis (model) suggests that for a developing country which is a price taker, an exogenous inflow of capital will lead to exchange rate appreciation or depreciation, depending on whether foreign exchange is used to finance domestic spending or capital accumulation in the traded and non-traded sector. The second model is the model of fina ncial behaviour. According to the (portfolio) model, financial and capital liberalisation in countries result in increase in total inflows and outflows.The proliferation of exchange rate systems, especially in developing countries which restricted the forces for long, suggest that further attention should be given to the degree to which these regimes influence the behaviour of economic fundamentals, including the flow of investment. The question of what exchange management strategy a country wishing to encourage foreign flows of investment should adopt is still unclearly resolved in the literature. Accam (1997) reviews the effect of exchange rate instability on macroeconomic performance with specific reference to the effects on investment and trade.In the survey, Fiani and de Melo (1990) found that unstable macroeconomic environment constitutes one of the major impediments to investment in many Less Developed Countries (LDCs). The authors estimate an OLS regression of the fixed coun try effects of total and private investment in 20 countries using the standard deviation of the exchange rate as a proxy for instability. The study finds a negative sign associated with the coefficient of exchange rate uncertainty. Serven and Solimano (1992), also investigates economic adjustment and nvestment performance for 15 developing countries using the pooled cross-section time series data from 1975 to 1988. The investment equation estimated in the study used exchange rate and inflation as proxies for instability, and in each case, instability was measured by the coefficient of the variation of the relevant variables over three years. The two measures were found to be jointly significant in producing negative effect on investment. The same effect was confirmed by Hadjimicheal et al’s (1995) study on growth, savings and investment performance of 41 developing countries between 1986 and 1993.Goldberg (1993) considers the effects of exchange rate uncertainty on investment using conditional measure of volatility. The paper suggests that the sign of the effect of price variability on investment and industry profitability is unresolved in the theoretical literature primarily because the sign of the relationship depends on the balance of (i) negative effects of risk aversion of investors (ii) negative effects from investment irreversibility (iii) positive effects from profit convexity in prices (iv) negative effects from a profit and price uncertainty relationship that is possible under imperfect competition.The author concludes that the direction of effect of exchange rate uncertainty on investment activity remains an empirical question. Agenor (1991) using a sample of twenty-three developing countries, regressed output growth on contemporaneous and lagged levels of the real exchange rate and on deviations of actual changes from expected ones in the real exchange rate, government spending, the money supply, and foreign income. The results showed that s urprises in real exchange rate depreciation actually boosted output growth, but that depreciations of the level of the real exchange rate exerted a contractionary effect.Morley (1992) analyzed the effect of real exchange rates on output for twenty-eight devaluation experiences in developing countries using a regression framework. After the introduction of controls for factors that could simultaneously induce devaluation and reduce output including terms of trade, import growth, the money supply, and the fiscal balance, he observed that depreciation of the level of the real exchange rate reduced the output.Rodriguez and Diaz (1995) estimated a six-variable VAR – output growth, real wage growth, exchange rate depreciation, inflation, monetary growth, and the Solow residuals – in an attempt to decompose the movements of Peruvian output. They observed that output growth could mainly be explained by â€Å"own† shocks but was negatively affected by increases in exchan ge rate depreciation as well. Rogers and Wang (1995) obtained similar results for Mexico. In a five-variable VAR model – output, government spending, inflation, the real exchange rate, and money growth – most variations in the Mexican output resulted from â€Å"own† shocks.They however noted that exchange rate depreciations led to a decline in output. 2. 4EXCHANGE RATE REGIMES IN NIGERIA Ekaette, (2002) noted that one major challenge that had confronted this administration since it assumed office in May 1999 was how to quickly put the economy back on the path of sustainable growth. According to him, most of the banks are suspected to have abandoned real banking for â€Å"round tripping† (the diversion of official Foreign Exchange to the Parallel Market).Soleye, (1985) then Honourable Minister of Finance stated that conscious effort aimed at the management of the Nigerian foreign exchange resources began in 1962 with the inception of the Exchange Control A ct, which was directed at freeing the management of the Foreign Exchange from its erstwhile colonial pattern. Oyejide, (1985) stated that the Nigerian Pound was introduced in 1959. Its external value was fixed at par with the British Pound Sterling which, in turn, defined its United States Dollar(USD) value as $2 . 80.Nigeria joined the International Monetary Fund (IMF) after Independence, and the Nigerian Pound had its parity defined, in June 1962, in terms of Gold at one Nigerian Pound equals 2. 48828 grams of fine gold. This confirmed its original USD par value. Similarly, the exchange rate of the Nigerian Pound for the British Pound Sterling was determined via its gold parity. However, the sterling was devalued by 14. 3 per cent against its gold parity in November, 1967. Since Nigeria did not devalue in tandem, the value of the Nigerian Pound became 1. 17 British Pounds Sterling.The Naira replaced the Nigerian Pound as Nigeria’s currency in January 1973, its par value was set at half that of the pound. Hence the exchange rate became $1. 52 to the naira. The rigid relationship between the USD and the naira was terminated in April 1974; the fixed rate for sterling had been broken earlier in June 1972, when the sterling started to float officially. In February 1978, the system of determining the naira exchange rate against a basket of currencies of Nigeria’s main trading partners was finally adopted. According to Ugbebor (1998), the Oil glut of 1981 led to a crisis in the Foreign Exchange Market (FEM) in 1982.In December 1983 there was a change in government. With effect from January 1984 and again in May 1984 additional exchange control measures were introduced. Another change in government took place in August 1985. In September 1986, the Second-Tier Foreign Exchange Market (SFEM) was introduced. Under SFEM, the exchange rate was floated when it became obvious that a rigid or controlled exchange rate would not ensure internal balance. The prin ciples of the Structural Adjustment Programme (SAP) were adopted leading to a market – oriented approach to price determination.The Second –Tier rate was determined by auction at the SFEM using (a) the average rate pricing method, (b) the marginal rate pricing method, (c) the Dutch Auction System (DAS) which was introduced in April 1987, whereby the CBN bought and sold Foreign Exchange in this market and supplied the demand of the authorized dealers in full. The First-Tier rate was still applicable to Debt Service payments, other public sector disbursements and pre-SFEM transactions. The merger of the two markets in July 1987 to form an enlarged FEM was more technical than real.According to Akinmoladun (1990), the gap between the two rates began to grow shortly after. In January 1989, the DAS was re-introduced and the Dual Exchange Rate system FEM merged with the Inter-bank market to form IFEM. By March 1992 there was a complete floating of the naira. Another change in government in August, 1993 ushered in a new fixed exchange rate. In 1995, the Autonomous Foreign Exchange Market (AFEM) was introduced, under a policy which allowed for Central Bank of Nigeria intervention on a predetermined basis instead of arbitrarily.Under AFEM, Bureaux De Change would buy and sell from privately-sourced Foreign exchange at the AFEM rate. The fixed exchange rate was reserved for public sector use. In 1993, the Parallel Market and Bureaux de Change exchange rates were almost double the devalued First-Tier rate for the naira. The authorities saw this as a signal of a depreciation trend which needed correction. This led to a re-introduction of a fixed exchange rate which pegged the naira at N21. 996 to $1 in 1994. In January 1997, the naira was formally pegged and a pro rata system of FE allocation to end- users was adopted.The Foreign Exchange Market was further liberalized in October, 1999 with the introduction of an Inter-bank Foreign Exchange Market (IFEM). 2. 5STRUCTURE OF FOREIGN EXCHANGE MARKET IN NIGERIA The exchange control system was unable to evolve an appropriate mechanism for foreign exchange allocation in consonance with the goal of internal balance. This led to the introduction of the Second-tier Foreign Exchange Market (SFEM) in September, 1986. Under SFEM, the determination of the Naira exchange rate and allocation of foreign exchange were based on market forces.To enlarge the scope of the Foreign Exchange Market Bureaux de Change were introduced in 1989 for dealing in privately sourced foreign exchange. As a result of volatility in rates, further reforms were introduced in the Foreign Exchange Market in 1994. These included the formal pegging of the naira exchange rate, the centralisation of foreign exchange in the CBN, the restriction of Bureaux de Change to buy foreign exchange as agents of the CBN, the reaffirmation of the illegality of the parallel market and the discontinuation of open accounts and bills for collection as means of payments sectors.The Foreign Exchange Market was liberalised in 1995 with the introduction of an Autonomous Foreign Exchange Market (AFEM) for the sale of foreign exchange to end-users by the CBN through selected authorised dealers at market determined exchange rate. In addition, Bureaux de Change were once more accorded the status of authorized buyers and sellers of foreign exchange. With the failure of the Autonomous Foreign Exchange Market (AFEM), the Foreign Exchange Market was further liberalized in October, 1999 with the introduction of an Inter-bank Foreign Exchange Market (IFEM).The IFEM was designed as a two-way quote system, and intended to diversify the supply of foreign exchange in the economy by encouraging the funding of the inter-bank operations from privately-earned foreign exchange. The IFEM also aimed at assisting the naira to achieve a realistic exchange rate. The operation of the IFEM, however, experienced similar problems and setbacks as the AFEM, ow ing to supply-side rigidities, the persistent expansionary fiscal operations of government and the attendant problem of persistent excess liquidity in the system. The peculiarity of the Nigerian foreign exchange market needs to be highlighted.The country’s foreign exchange earnings are more than 90 per cent dependent on crude oil export receipts. The result is that the volatility of the world oil market prices has a direct impact on the supply of foreign exchange. Moreover, the oil sector contributes more than 80 per cent of government revenue. Thus, when the world oil price is high, the revenue shared by the three tiers of government rise correspondingly and, as has been observed since the early 1970s, elicited comparable expenditure increases, which had been difficult to bring down when oil prices collapse and revenues fall concomitantly.Indeed, such unsustainable expenditure level had been at the root of high government deficit spending. It is therefore important that rese rves be built up when the price is high to cushion the effect of revenue shortfall on government spending when oil price falls in the international oil market. Specifically, the sustained demand pressure and the consequent depreciation of the naira exchange rate under the IFEM were traced to the following causes. ? Limited sources of foreign exchange supply.In particular, the anticipated supplies from autonomous sources, such as oil companies, banks and non-bank financial institutions were significantly below what was required to broaden and deepen the market; ? The excess liquidity in the system induced by the transfer of government accounts from the CBN to banks and the huge extra-budgetary spending in 1999 on unproductive ventures; ? The heavy debt service burden; and ? Speculative demand, driven by uncertainties created by social and political unrest, expectations of future depreciation of the naira, as well as the deterioration of the external sector position.It became a matter of serious concern that despite the huge amount of foreign exchange, which the CBN supplied to the foreign exchange market, the impact was not reflected in the performance of the real sector of the economy. Arising from Nigeria’s high import propensity of finished consumer goods, the foreign exchange earnings from oil continued to generate output and employment growth in other countries from which Nigeria’s imports originated. This development necessitated a change in policy on 22nd July 2002, when the demand pressure in the foreign exchange market intensified and the depletion in external reserves level persisted.The CBN thus, re-introduced the Dutch Auction System (DAS) to replace the IFEM. The DAS was designed to achieve a realistic exchange rate of the naira that will stem the excessive demand for foreign exchange, conserve the dwindling external reserves and achieve a realistic exchange rate for the naira. The DAS was conceived as a two-way auction system in whic h both the CBN and authorised dealers would participate in the foreign exchange market to buy and sell foreign exchange. The CBN was expected to determine the amount of foreign exchange it is willing to sell at the price buyers are willing to buy.The marginal rate, which by definition is the rate that clears the market, represents the â€Å"ruling† rate at the auction. Since its introduction in July 2002, the DAS has been largely successful in achieving the objectives of the monetary authorities. Generally, it has assisted in narrowing the arbitrage premium from double digit to a single digit, until the emergence of irrational market exuberance in the fourth quarter of 2003. Secondly, the DAS has enhanced the relative stability of the naira, vis-a-vis the US dollar-the intervention currency.Specifically, the naira has fluctuated within a single digit band, since the DAS was introduced in July 2002. Thirdly, it has also assisted in stemming the spate of capital flight and curb ing rent-seeking amongst market operators. REFERENCES Accam B. (1997). â€Å"Survey of Measurement of Exchange Rate Instability†, Mimeo. Agenor, Pierre-Richard (1991). â€Å"Output, Devaluation and the Real Exchange Rate in Developing Countries. † Weltwintschaftliches Archiv vol. 127, no. 1, pp. 18–41. Akinmoladun, O. (1990). â€Å"An Appraisal of Foreign Exchange Management in Nigeria since the introduction of the Structural Adjustment Programme†.Proceedings of the 1990 One –Day seminar Published by the Nigerian Economic Society PP 29 – 69. Alaba, O. B. (2003). â€Å"Exchange rate uncertainty and foreign direct investment in Nigeria†. Being a paper presented at the WIDER Conference on Sharing Global Prosperity, Helsinki, Finland, September. Betts, C. M. and Kehoe, T. J. (2001). â€Å"Tradability of Goods and Real Exchange Rate Fluctuations. † Paper presented at a seminar, January. Buffie, E. , Adam, C. , Connell, S. and Pattil lo, C. (2004). â€Å"Exchange Rate Policy and the Management of Official and Private Capital Flows in Africa†.IMF Working Paper WP/04/216, November. Cheong, C. (2004). â€Å"Does the risk of exchange rate fluctuation really affect international trade flows between countries?. † Economics Bulletin, Vol. 6, No. 4, pp. 1? 8. Available at http://www. economicsbulletin. com/2004/volume6/EB? 04F10002A. pdf Darby J. , Hallet, A. H. , Ireland, J. and Piscitelli, L. (1999). â€Å"Exchange Rate Uncertainty and Business Sector Investment†, Paper Prepared for a Workshop on â€Å"Uncertainty and Factor Demand† Hamburg, August. Dekle, R. , (2001). â€Å"Exchange Rates and Corporate Exposure: Evidence from Japanese Firm Level Data†, mimeo.Ekaette, U. J (2002). â€Å"Monetary Policy and Exchange Rate Stability†, Proceedings of a One day Seminar held on 23 May 2002, Federal Palace Hotel, Lagos. Publisher: The Nigerian Economic Society. Pp (ix) – (xi). Goldberg L. S. (1993). â€Å"Exchange Rates and Investment in United States Industry†. Review of Economics and Statistics vol. LXXV: pp. 575-88. Kandil, M. (2004). â€Å"Exchange rate fluctuations and economic activity in Developing countries: theory and evidence†. Journal of Economic Development, vol. 29, No. 1, June. Kandil, M. and Mirzaie, I. (2003). The effects of Exchange rate fluctuations on Output and Prices: Evidence from developing countries. † IMF Working Paper WP/03/200, October. Kosteletou N. and Liargovas, P. (2000), â€Å"Foreign Direct Investment and Real Exchange Inter-linkages†, Open Economies Review vol. 11: pp. 135-48. Morley, S. A. (1992). â€Å"On the Effect of Devaluation During Stabilization Programs in LDCs. † Review of Economics and Statistics vol. 74, No. 1, pp. 21–27. Odusola, A. F. and Akinlo, A. E. (2001). â€Å"Output, Inflation and Exchange rate in Developing Countries†. The Developing Economies, vol. 34 (2), June. Osakwe, P. N. 2002). â€Å"Currency Fluctuations, Liability Dollarization, and the Choice of Exchange Rate Regimes in Emerging Markets†. Bank of Canada Working Paper 2002-6, February. Oyejide, T A. (1985). â€Å"Exchange Rate Policy for Nigeria: Some options and their consequences†. Proceedings of the 1985 One-Day Workshop Published by the Nigeria Economic Society pp 17 – 32. Rowland, P. (2003). â€Å"Forecasting the USD/COP Exchange Rate: A Random Walk with a Variable Drift’ (A paper downloaded from the internet). Rutasitara, L. (2004). â€Å"Exchange rate regimes and inflation in Tanzania. † AERC Research Paper 138, February.Soleye, O. O. (1985). Proceedings of the 1985 One-Day Workshop Published by the Nigeria Economic Society pp. 15 – 16. Ugbebor, C. O. (1998). â€Å"Development of the Nigerian Foreign Exchange Market (An overview)†, an original essay submitted to the Department of Economics, Unversity of Ibadan. CHAPT ER THREE RESEARCH METHODOLOGY 3. 1INTRODUCTION This chapter explains the various techniques used in collecting data for this study. It also provides the background against which the study is being carried out and it also states the extent to which the findings can be generalised. . 2RESEARCH DESIGN This research work intends to empirically examine the Nigerian foreign exchange market. It shall consider the influence of fluctuations in the exchange rate on major macroeconomic variables in Nigeria. The study shall focus mainly on the relationship that exists between exchange rate, economic growth, foreign trade, external reserve and the domestic prices of goods and services in Nigeria. Regression analysis method shall be employed to investigate the relationship between the specified variables with data spanning between 1980 and 2005. 3. RESEARCH QUESTIONS The study shall examine the following questions: 1. What are the determinants of foreign exchange rates? 2. What has been the impac t of foreign exchange rate on the growth of Nigerian economy? 3. How does the foreign exchange rate impacts on foreign trade of Nigeria? 4. What is the relationship between foreign exchange rate and external reserve? 5. How does the exchange rate affects the domestic prices of goods and services in Nigeria? 3. 4RESEEARH METHODOLGY 3. 4. 1 SOURCES OF DATA Secondary data shall be the basis for data analysis in this study.We shall rely much on the various publications of Central Bank of Nigeria (CBN): Statistical Bulletin, Annual Reports and Financial Reports, Federal Office of Statistics (FOS) annual reports (FOS), Conference papers, journals etc. The variables for which data would be sourced include: Exchange Rate, Gross Domestic Product, Balance of Trade, External Reserve and Consumer Price Index. 3. 4. 2 TECHNIQUE OF DATA ANALYSIS We shall employ econometric technique to estimate the parameters of the various economic relationship established in our models.The Econometric approach that would be adopted to examine impact of foreign exchange market operations on macro economic variables in Nigeria shall be the Vector Autoregressive Model (VARM) method. This econometric method would be used because it is very reliable and widely used in researches. The test of the hypotheses earlier stated would be done at 5% level of significance and as such, the generalization of the study findings would be limited to this extent. 3. 5MODEL RE-SPECIFICATION MODEL I gdp = a0 + a1 exr + e Where gdp-Gross Domestic Product exr -Exchange rate 0 and a1 -Parameters e -Error term MODEL II bot = b0 + b1 exr + e Where bot-Balance of trade exr -Exchange rate b0 and b1 -Parameters e -Error term MODEL III exrev = c0 + c1 exr + e Where exrev-External reserve exr -Exchange rate c0 and c1-Parameters e -Error term MODEL IV cpi = d0 + d1 exr + e Where cpi -Consumer price Index exr -Exchange rate d0 and d1-Parameters e -Error term MODEL V gdp = e0 + e1 exr + e2 bot + e3 exrev + e4 cpi + e Where exr -Exchange rate bot-Balance of trade xrev-External reserve cpi -Consumer price Index e0, e1, e2, e3 and e4 -Parameters e -Error term 3. 6A’ PRIORI EXPECTATION Economic A’ Priori Criteria: This refers to the sign and size of the parameters in economic relationships. MODEL I gdp = a0 + a1 exr + e It is expected that a0 > 0 and a1 < O Exchange rate is the price of a currency in terms of another currency while gross domestic product is the value of the goods and services produced in a country within a specific period of time. Exchange rate is expected to affect the gross domestic product negatively.A high exchange rate would not allow for the importation of capital goods that are need for productive activity, thereby impair economic growth. This is based on neoclassical trade models. MODEL II bot = b0 + b1 exr + e It is expected that b0 > 0 and b1 > O Balance of trade is the net difference between total export and import. The relationship between exchange rate and balan ce of trade is expected to be positive negative. This is because a high exchange rate would encourage exportation and discourage importation and thereby making the balance of trade favourable i. positive (when export is higher than import). MODEL III exrev = c0 + c1 exr + e It is expected that c0 > 0 and c1 < 0 External reserve is the amount of money which a country holds in foreign currency. It represents the savings of a nation. It is often accumulated from the proceeds from external trade. A high exchange rate would mean that a country would have to pay more to pay for the goods and services from other countries and as a result would not have much as external reserve. So the relationship between exchange rate and external reserve is expected to be negative.MODEL IV cpi = d0 + d1 exr + e It is expected that d0 > 0 and d1 > O Consumer price index is a measure of the general price level in an economy and as such an indicator of the standard of living of the people. A high exchange r ate would impair production causing the general price level to rise. Therefore, the relationship between exchange rate and consumer price level is expected to be direct i. e positive. MODEL V gdp = e0 + e1 exr + e2 bot + e3 exrev + e4 cpi + e Where exr -Exchange rate bot-Balance of trade exrev-External reserve cpi -Consumer price Index 0, e1, e2, e3 and e4 -Parameters e -Error term It is expected that e0 > 0, e1 < 0 e2> 0 e3 > 0, e4 > 0 According to the neoclassical trade model, exchange rate is expected to affect the gross domestic product negatively. A high exchange rate would not allow for the importation of capital goods that are need for productive activity, thereby impair economic growth. Balance of trade represents the net trade. A favourable balance of trade (i. e net export) would increase the gross domestic product. So balance of trade would vary directly with the gross domestic product.The external reserve is also expected to have positive relationship with the external r eserve. High external reserve would stabilize the foreign exchange market which therefore creates conducive environment for improved production and trade. Consumer price index is an indicator of the standard of living of the people. A high standard of living is expected to increase labour productivity and thereby stimulating growth. So consumer price index would vary directly with the gross domestic product. A high exchange rate would impair production causing the general price level to rise.Therefore, the relationship between exchange rate and consumer price level is expected to be direct i. e positive. STATISTICAL CRITERIA This aims at the evaluation of the statistical reliability of the estimates of the parameters. In this line, the â€Å"t-statistics† will be employed to test the hypotheses concerning the true values of the population parameters a1, a2 and a3. The â€Å"R2 – Statistics is also employed as the coefficient for determination to measure the goodness o f fit of the regression line to the observed samples values of the variable while the â€Å"F-statistics† will also be used to test the overall significance of the regression.ECONOMETRIC CRITERIA It aims at detecting the violation or validity of the assumption of the econometric method employed (i. e. OLS). To test the validity of the assumption of non-correlated disturbances, the â€Å"Durbin Watson Statistics† would be used in the evaluation of the results of estimates. REFERENCES Koutsoyiannis A. (1991), Theory of Econometrics, Hampshire: Macmillan Limited Ogede P. O. (1999), Undergraduate Econometrics, Lagos: Minerib, Accord Limited Robert S. Pindyck and Daniel L. Rubinfeld (1998), Econometric Models and Economic forecasts, Singapore: Irwin McGraw-Hill. CHAPTER FOUR PRESENTATION AND ANALYSIS OF DATA . 1INTRODUCTION The hypotheses were formulated with data spanning the period between 1980 and 2005. All the data for estimation were obtained from the publications of t he Central Bank of Nigeria (CBN) and Federal Office of Statistics (FOS). The choice of statistics adopted in this chapter is the regression and analysis of variance. The variance of the estimate is obtained by multiplying the standard error with the square reciprocal of the derivative i. e variance. The traditional test of significance of the parameter estimates is the standard error test, which is equivalent to the student’s t–test.The correlation coefficient (r) shows the relationship between the variables. The relationship could be of a direct, indirect or an outright zero correlation. The standard error is obtained by taking the inverse of the variance of the estimate. The standard errors for the estimate of a1, b1 etc. will be dealt with in this project. The standard error for the estimates a0 and b0 are left out. The F-Ratio is used to determine the overall significance of the regression models i. e. to determine the extent to which the variations in the dependen t variable can be attributed to changes in the explanatory variables.This test shall be used to measure the extent of the claimed relationship between the exchange rate, gross domestic product, balance of trade, external reserve and consumer price. F-ratio would also be used to test for causality between the variables. The coefficient of determination (R2) is used to determine the overall significance of the model just like the F-ratio. A high coefficient of determination signifies that the regression model is statistically significant, meaning that there is high relationship between the dependent variables and the interdependent variables. 4. 2PRESENTATION OF REGRESSION RESULTSMODEL I gdp = a0 + a1 exr gdp = 81582. 54 + 445. 356ex t – statistic (27. 07) (8. 573)a Std. Error (3013. 762) (51. 946)* F-Ratio -73. 503 R2-0. 762 R2-0. 751 D-W-0. 536 N-25 d. f-N – K = 25 – 2 = 23 * Figures in parentheses are the standard errors a – Significant at 5%. Source: Co mputed by Author from SPSS Regression Results MODEL II bot = b0 + b1 exr bot = -11771. 2 + 8652. 278 exr t – statistic (-0. 129) (5. 491)a Std. Error (91420923) (1575. 762)* F-Ratio -30. 49 R2-0. 567 R2-0. 548 D-W-1. 298 N-25 d. f-N – K = 25 – 2 = 23 * Figures in parentheses are the standard errors a – Significant at 5%. Source: Computed by Author from SPSS Regression Results MODEL III exrev = c0 + c1 exr exrev = -66440. 5 + 11080. 057exr t – statistic (-1. 190) (11. 509)a Std. Error (55854. 58) (962. 729)* F-Ratio -132. 457 R2-0. 852 R2-0. 846 D-W-1. 608 N-25 d. f-N – K = 25 – 2 = 23 * Figures in parentheses are the standard errors a – Significant at 5%. Source: Computed by Author from SPSS Regression Results MODEL IV pi = d0 + d1 exr cpi = 313. 623 + 40. 736 exr t – statistic (1. 69) (12. 737)a Std. Error (185. 548) (3. 198)* F-Ratio -162. 242 R2-0. 876 R2-0. 870 D-W-0. 727 N-25 d. f-N – K = 25 – 2 = 23 * Figures in parentheses are the standard errors a – Significant at 5%. Source: Computed by Author from SPSS Regression Results MODEL V gdp = e0 + e1 exr + e2 bot + e3 exrev + e4 cpi gdp = 77374. 9 + 140. 6exr + 0. 007bot – 0. 061exrev + 10. 28cpi t – statistic(-0. 243) (-1. 364)a (1. 258)a (-0. 013)a (3. 19)a Std. Error (33. 074) (0. 23)* (0. 76)* (0. 000)* (0. 000)* F-Ratio -35. 732 R2-0. 877 R2-0. 853 D-W-1. 082 N-25 d. f-N – K = 25 – 5 = 20 * Figures in parentheses are the standard errors a – Significant at 5%. Source: Computed by Author from SPSS Regression Results 4. 3INTERPRETATION AND ANALYSIS OF RESULTS MODEL I Going by the results of the regression, there is a positive relationship between exchange rate and the gross domestic product (GDP). But this result is not in consonance with the a priori expectation earlier stated. Since the standard error of the parameter estimate S. . (a1): 51. 946 is less than half of the parameter estimat e (a1/2): 222. 678, we shall therefore reject the null hypothesis and accept the alternative hypothesis. This indicates that the parameter estimate is statistically significant. The theoretical t-value at 5% level of significance with twenty-three degree of freedom is 1. 714. The theoretical t-value is less than the calculated t-value (8. 573); we shall therefore reject the null hypothesis and accept the alternative hypothesis. This implies that the parameter estimate (exchange rate) is statistically different from zero i. e. t is a relevant variable for the determination of the gross domestic product in Nigeria. The coefficient of determination gives 0. 762 or 76. 2% meaning that the regression model is 76. 2% significant i. e the variations in the dependent variable i. e. the gross domestic product is 76. 2% attributable to the changes in the independent variable i. e exchange rate. This result confirms the significance of the exchange rate in the determination of the gross domest ic product of Nigeria. The calculated F-value (73. 503) is less than the critical F-value at 5% level of significance with v1 = 1 and v2 = 23 (4. 8). We shall therefore reject the null hypothesis and accept the alternative hypothesis. This signifies that the overall regression or relationship between the gross domestic product and exchange rate is significant. This analysis revealed to us that exchange rate is a major determinant of the level of productivity in Nigeria. Besides, exchange rate was found to vary directly with the gross domestic product. MODEL II From the results of the second regression, it is evident that there is also positive relationship between the exchange rate and balance of trade.This relationship conforms with the a’ priori expectation. The standard error of the parameter estimate S. e. (b1): 1575. 762 is less than the half of the parameter estimate (b1/2):4326. 139. We shall therefore reject the null hypothesis and accept the alternative hypothesis. T his indicates that the parameter estimate is statistically significant. The theoretical t-value at 5% level of significance with twenty-three degree of freedom is 1. 714. On comparing with the computed t-value, the critical t-value is less than the calculated t-value (5. 491).We shall therefore reject the null hypothesis and accept the alternative hypothesis meaning that the parameter estimate i. e exchange rate is statistically different from zero i. e. it affects the dependent variable – balance of trade. In this model the coefficient of determination gives 0. 567 or about 57%. This shows that the regression model is 57% significant i. e the variation in the balance of trade is 57% attributable to the changes in the independent variable. The calculated F-value (30. 149) is less than the critical F-value at 5% level of significance with v1 = 1 and v2 = 23 (4. 28).We shall therefore reject the null hypothesis and accept the alternative hypothesis. This means that the overall regression or relationship between the exchange rate and the balance of trade is statistically significant i. e there is causality between the two variables. MODEL III The result of the third regression was not in consonance with what was expected. The results showed a positive relationship between the external reserve and the exchange rate. This could be attributed to import reduction strategy of the government over the years. For the standard error test, the standard error of the parameter estimate S. . (c1):962. 729 is less than the half of the parameter estimate (c1/2):5540. 02. We shall therefore reject the null hypothesis and accept the alternative hypothesis. This shows that the parameter estimate is statistically significant. The theoretical t-value at 5% level of significance with twenty-three degree of freedom is 1. 714. The theoretical t-value is less than the computed t-value; 11. 509; so that we reject the null hypothesis and accept the alternative hypothesis; implying that the parameter estimate (exchange rate) is statistically different from zero i. . it is a relevant variable for the determination of the external reserve of the country. The coefficient of determination shows 0. 852 or 85. 2% meaning that the regression model is about 85% significant i. e the variation in the dependent variable i. e. external reserve is 85% attributable to the changes in the independent variable i. e exchange rate. The computed F-value (132. 457) is greater than the critical F-value at 5% level of significance with v1 = 1 and v2 = 23 (4. 28). We shall therefore reject the null hypothesis and accept the alternative hypothesis.This signifies that the overall regression between the exchange rate and external reserve is also significant. MODEL IV Like the previous regression results, changes in the explanatory variable (exchange rate) in this model had positive effect on the consumer price index. This result is in consonance with the a priori expectation. The standa rd error of the parameter estimate S. e. (d1): 3. 198 s less than the half of the parameter estimate (d1/2):20. 368. We shall therefore reject the null hypothesis and accept the alternative hypothesis. This means that the parameter estimate – exchange rate is statistically significant.From the t-table, the theoretical t-value at 5% level of significance with twenty-three degree of freedom is 1. 714. In respect of the parameter estimate – exchange rate, the theoretical t-value is less than the calculated t-value (12. 737), we shall therefore reject the null hypothesis and accept the alternative hypothesis. This implies that the parameter estimate is statistically different from zero. The coefficient of determination (R2) gives 0. 876 or 87. 6% meaning that the regression model has a good fit i. e the variations in the dependent variable i. e. consumer price index is 85. % attributable to the changes in the independent variable i. e exchange rate. The theoretical F-value at 5% level of significance with v1 = 1 and v2 = 23 is 4. 28. Since the calculated F-value (162. 242) is greater than the critical value, we shall reject the null hypothesis and accept the alternative hypothesis. This signifies that the overall regression or relationship between the exchange rate and consumer price index is significant so, the changes in the consumer price index can to a certain extent, be attributed to changes in the explanatory variable – exchange rate. MODEL VThe results of the last regression that examined the relationship between the gross domestic, exchange rate, balance of trade, external reserve and consumer price index shows that there is positive relationship between the gross domestic product and the explanatory variables except the external reserve. Also, the standard errors of all the parameter estimates are less than the half of the parameter estimates. We shall therefore reject the null hypothesis and accept the alternative hypothesis. This sh ows that the parameter estimates – exchange rate, balance of trade, external reserve and consumer price index are all statistically significant.This means that they are important factors that affect the value of the gross domesti