CHAPTER ONE
1.0 STUDY BACKGROUND
The exchange rate is an important determinant of world trade, The subject of fluctuating exchange rates came to be a topical issue in Nigeria because it is the goal of every economy to have a stable exchange rate with its trading partners. In Nigeria, this objective has not been achieved despite the fact that they embarked on the devaluation of the naira and adopted the Structural Adjustment Programme (SAP) in 1986. One objective of the SAP was the restructuring of the production base of the economy with a positive bias for the production of agricultural export. The currency reforms that facilitated a cumulative depreciation of the exchange rate were expected to increase the domestic prices of agricultural exports and thus stimulate domestic production. Empirically many scholars as Oyejide (1986), Ihimodu (1993) and World Bank (1994) analyzed the effects of the cumulative depreciation of the effective exchange rate, as it led to the modification of the structure and value of the prices of agricultural exports and the expo result of Nigeria reported an increase in working in the volume of agricultural exports over the years. However, very few of achievements have been made in the stabilization of the exchange rate. Consequently, the problem of fluctuating exchange rates in Nigeria persists to this day.
Fluctuation is a major constraint on the development of an economy that makes more problematic planning and riskier investments. For example, fluctuations in the exchange rate can reduce the activities of potential investors in Nigeria, as it increases uncertainty about the returns of a given investment. Potential investors should invest in a foreign country if the expected returns are high enough to cover the foreign exchange risk (Gerado, 2002). Risk in international trade in raw materials usually arises from two main sources; changes in world prices or fluctuations in exchange rates. Therefore, understanding the behavior of the exchange rate is very important for many reasons. First, the relationship between trade EXH a country is a key issue both in terms of descriptive prescription and politics. As Edwards (1994, 61) as saying that the question of the behavior of real exchange rate now occupies a central rate in policy evaluation and design "is an important determinant of the rate of exports growth and serves as a measure of its international competitiveness (Bath and Amusa, 2003), Chukwu (2007) observed the exchange rate instability as a determinant of trade in Nigeria, having a positive influence on trade and export at other times a negative influence. This suggests an erratic change in the value of having a long term impact on exports and economic growth. This research aims to determine the impact of fluctuations in naira exchange rate performance on Nigerian export.
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