AN APPRAISAL OF THE EXTERNAL TRADE IN NIGERIA
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
For the past few years, it is Clearly that the present civil administration is posed to see an improvement in the external trade sector of Nigeria economy. This is geared towards increasing the export activity and reducing to a minimal level, the rate of import transaction as a measure to boost our country’s external reserves. This trend is buttressed by the various policy stipulations and regulation as well, as incentive dished out by the federal government to participant in the external trade sector, most especially the export sector. The owns of this interest by various levels of government is hinged on the need to boost our foreign reserves which was previously depleted by import that swept through the country during oil boom era and second republic . There is also the urge to restage agricultural sector which contributed immensely to our export earnings prior to the oil era, since earnings derivable from oil export can no longer be adequate derivable form oil export can no longer be adequately predicted. The aims and objectives outlined above cannot achieved without adequate participation of financial institution and intermediation most especially commercial banks, thus various government policies are usually implemented through that financial institution in the country. Thus a tight monetary policy disfavour a particular sector of the economy. Also, there is the case of inauguration or enactment of policies, be the government, and their actual implementation by the financial institutions commercial banks. This research will be limited to commercial bank, the live wire of every government in the execution of monetary policies, aimed toward dierent sector within the economy and the external trade sector which is within the economy structure, so the participation commercial banks is very important in the realization of the above objective relating to the external trade sector .
The word financing relates to the provision of fund when and where they are required for the implementation of economic activities of man. Taken the definition into consideration the external trade financing will than porting the technique of providing fund by various financial institutions, individuals corporate bodies and government that engage in external trade business. This financing function comes in different ways and various instrument abound for the smooth facilitation of this financing activity for and the instruments that go with it, is a function of whether we are concerned with import trade financing or export trade financing both of which falls under external trade financing. For the purpose of the project. Work emphasis will be placed on historical analysis of trends in import and export sector of the economy in past five years so as to the determined how vibrant form of financing available for the smooth operation of the sector. This analysis will be done on the basis of economic needs and aspirations of nation in the relevant periods.
1.2 PURPOSE OF THE STUDY
It is established fact that there is need to promote exportation so as to make Nigeria economy export oriented to ensure balance of trade, but importation can not be absolutely discourage because some goods (e.g. heavily duty machine, chemical etc.) have to be imported so as to facilitate produce for exportation.
It is in line with this and the desire to respond to economic problem that this project is set dig deep into roles of universal bank in development of export and import of goods and services to point out the factors or risks militating against the maximization of the objectives or gains arising from international economic activities, and possible solution to these critical budget factors and the trade facilities and incentives put in place by the government in supporting the Nigeria bank in financing international trade.
1.3 STATEMENT OF PROBLEM
The purpose of this study is to ingidre into the Nigeria Economy and in so doing, the following will be analyzed.
Hi: That the value of Nation’s Currency has an impact on the International Trade.
Hi: That a highly international trade financing will be affected by interest rate risks.
Hi: That the exchange regulation of the countries concerned highly affects international trade
finance.
Hi: That these inflation rate and partly conditions have great impact on International Trade
finance.
Hi: That the International Trade finance has effect on the banks.
Hi: That the International Trade finance should be encouraged.
1.3 SIGNIFICANCE OF THE STUDY
This study will go a long way in revealing to the general public/importers and exporters the importance of International Trade finance, to achieve this:
- The research will ensure and facilitate replication.
- It will enlighten the students as well as the general public about the various service that universal have at their disposal in International Trade Financing.
- It will reveal to the general public/importers and exporters of the various risks that is attached to International Trade and how they can get access to these incentives and facilities.
- It will add to the numerous materials in the library as well as widen the horizon of the general public.
- It will cover major aspects of international finance in perspective in order to exposing the major details of international finance activities for the purpose of a systematic appraised of the skills required of an ideal finance mangers that can entrusted with the full responsibilities of the foreign operation of an enterprises.
1.5 SCOPE OR DELIMITATION OF THE STUDY
It is necessary at the on set to delimit the scope of this study. The research work will be careful to the importance of international finance, factors affecting finance of International Trade and the possible remedies, the roles of universal banks in international Trade financing, currency transfer mechanics methods of setting international transaction and inter bank financial instruments.
1.6 LIMITATION OF THE STUDY
The researcher intends to have in the course of the study an over view of finance of International Trade financing and the incentives and facilities provided by the government to facilitating international finance. In the course of carrying out this study, the researches are as follows:
TIME: – The researchers tight schedule which he must also use for the other alternative such as daily lectures and non academic activities count a lot for the researchers ability to get needed materials and information for the research work.
FINANCE: – It is the economic main source of power of everyone in any undertaking owing to financial constraints faced by the researchers hews could not get all the necessary materials.
1.7 DEFINITION OF TERMS
Law of comparative advantage: – this is an economic theory propounded by an ancient economist named David Ricardo. The law of comparative advantages state that a country should concentrate absolutely in the production of goods and services in which she can produce at least or lowest cost, so that she can have advantage (in term of production) over other countries of the world.
COLLECTION: – Collection means the handling by bank of financial and of commercial document in accordance with instruction received. In order to obtain acceptance and payment or deliver document on other terms and conditions.
CLEAN COLLECTION AND DOCUMENTARY COLLECTION: – Clan collection means collection of financial documents not accompanied by universal document e.g collection of proceeds of a foreign cheque or bill of exchange etc. while a documentary collection is the collection of universal documents whether or not they are accompanied by financial documents.
DOCUMENTARY LETTER OF CREDIT: – According to UCP 500, it means any agreement however named or described, whereby a bank (the “issuing bank”) acting at the request and on the instructions of a customers (The applicant”) or on its own behalf.
- Is to make a payment to or the order of third party (the “Beneficiary”) or is to accosts and pay bills of exchange (Draft(s)) drawn by the beneficiary, or.
- Authorizes another bank to effect such payment, or to accept and pay such bill osf exchange (Draft) or
- Authorizes another bank against stipulated documents, provides that the terms and conditions oaf the credit are complied with
Foreign Exchange: – This is mathematical expression of the international medium of exchange and monetary system as a process of setting foreign accounts or debts arising from international economic activities.
Exchange Rates: – These are the rates quoted for the purchase and sales of foreign exchange where delivery is to be made at future date. Forward rates arises under forward exchange contracts and this is a contract entered into between exporter/importer where bank agree to buy and sell the stated quantity of foreign currency at a future date at a rate of exchange determined when the forward contract is made.
Cross Rates: – This is the rate at which price of the currency of one country is quoted viz. another country’s currency but in dealing canter of a third country. Hence, cross rates and rates of exchange which are between two currencies but in a third country.
Forward Exchange Contract: – A forward exchange contract is defined as an immediate film and binding contract between a bank and its customers for the purchase or sale of a specified quantity of a stated foreign currency and payment for it at a future time which is agreed upon making the contract.
Option Contract: – An option contract is a forward exchange contract of which gives the customer the option to call performance of the contract other at any date from the day the contract was made to specified dates both of which are in future. The purpose of an option contract is to avoid having to renew a forward contract through extending it for a few days.
